Housing construction and sales have always followed job growth. Looking around and seeing the number of layoffs from companies like Pfizer, Texas Instruments, GM, Boeing, Motorola, Sprint, Microsoft and Webcor one would think that times are grim. I personally think that when companies start to let go of employees, these were a lagging indicator of the current climate.  Even amidst my mild optimism, I realize that many will not feel the same way. Take today’s news stating that more Americans than forecasted filed applications for unemployment benefits last week, indicating firing persists even as the economy rebounds and employment is picking up. My only argument is that many Americans are forced to work for less than what they were making and while they do have jobs ~ getting by is not living.

  Cities like Las Vegas, Riverside. Calif., and Phoenix have seen median home prices fall 50%, 44% and 37% from their respective peaks. If you were to take a look at the jobs that are being posted on Craigslist, jobs are ~ dare I say it truly vanishing and companies are paying less for those once coveted services.

From Redfin to Century Homes what does the future of real estate mean to real estate brokers like myself. My first sale of 2010 was for a friend of mine. After spending 2009 thinking about buying a home, he calls me in January to find him a house. We took one week to find him a home to make an offer on. The nice thing about this offer was I had negotiated the price before we presented the contract. This is one of my favorite things to do. A few years ago I wrote a post about this, but being that I no longer have my old site is no longer live. I am tempted to repost it..maybe.

So as of today, I have begun to repost my work that I have done over the years. It has been a great deal of work but of some of my loyal readers have asked for it so here it is.

Well, after GoDaddy destroyed my content I am now left to rebuild the castle without my foundation. I guess I should start off fresh, but that is a great deal of work now down the drain.

What a difference a couple of years can make? I remember selling real estate in San Francisco back in 2003. Everything was selling. If the property had a parcel number it would sell. The fundamentals were just thrown out the door. Times have changed.

When I moved to Chula Vista in July of 2007, we were very close to buying a home. So much in fact that we viewed at least 20 homes, after some discussion we decided that we would not buy a home here because we were not sure how long we would be in San Diego. I wasn’t sure how long I would be with Redfin after I came here. Well here I am, 14 months later and I am sure glad that I didn’t buy. So many things have occurred, the Southern California Wildfires, the Mortgage Crisis, rising gas prices, and just an overall lull in the economy. After 202 real estate transactions you think you have seen it all, but even today I am still learning new ways to skin that elusive cat my aunt would call real estate.

Today, I re-visited a home that I sold last week. My client had purchased this REO from IndyMac. According to the county’s tax records this is the transaction history of the home:

June of 2003 – $381,000

September of 2005 – $584,000

June of 2008 – $287,000

September of 2008 – $340,000

Negotiating with a REO listing agent has become a specialty of mine, I have found that there are similarities amongst what they are willing to accept. REO properties in the 300-500k points are always listed below market, where the banks are hoping that the property would stir enough interest in the buyer community to drive the sales price higher. This tactic has shown to be very effective. In the case of this property, it was listed at $329,600 and hit the market on July 27, 2008. I showed the property on the 8^th of August, had the property in contract on the 14^th. It was a multiple bid situation – two other offers were involved in the process. Every offer is different but here price and strength of buyer were my tools to winning this one. My client had over 20% in the bank and we had been looking at properties for more than a month. She was pre-approved with Bank of America, which I thought we could use to our advantage. I made it very clear to the listing agent that we had done our homework. Specifically, we knew that the property was listed below market, and were very familiar with all the comps in the locale.  A home across the street for less square footage sold for $370,000 only about a month prior. It was an REO and was owned by Downey Savings. Our property had some nice upgrades and was much larger, so I knew that if we did not go above the list price then my client would probably lose out.

I always make it a habit to know who I am dealing with; I verify how long the agent has had their license. What type of license they have? I also Google them and check them up on LinkedIn. If I can gather any information at all, I will always put my findings into my discussion with them.  People tend not to not think straight if you put them on tilt. I found out that he had in office in La Jolla, been in business about 9 years, and was a salesperson. Just from that, I am able to gauge my approach. Based on those fact, I can determine that he will want a quick escrow, he probably does not do a great deal of work in the property area so he may let go of the property to someone he has confidence in working with. He also may be willing to give up the price out of convenience. I was right on all fronts.

REOs are always trying to get their money fast. My thinking is if they can get this off their book faster, then they move on to the next property.

So we went 11k above list, 21 day close, 12 day contingencies. I also negotiated for 2k in repairs and a home warranty. There were some problems with this home, just like any previously foreclosed homes. Broken windows, a leftover portable spa and no appliances were all evidence to substantiate a credit. I have found that REOs are more willing to credit money than deal with any replacements or repairs. Again I was right. I was pretty happy with that deal. More importantly, my client was even more impressed with the style and efficiency of the process. 

Overall she had seen about 36 or more homes so I think she had a good feel of what the market was. We had written 4 offers, all were short sales except for this one. Three months later all of those properties are still on the market. My client was frustrated and was starting to think that she would not be able to find a home in today’s market. I also learned a little trick about motivation, buyer who are frustrate with short sales often become more motivated to buy REOs. Buyers find that although the market is filled with short sale opportunities, REOs properties are the ones that are actually selling. Therefore, creating two types of buyer for 2008:

1. Buyers that can wait for a short sale and are not necessarily looking to move right away.
2. Buyers that need to move in finite amount of time.

Converting 1s into 2s is the name of this game. If you can learn to identify what will motivate buyers to become 2s rather than 1s then there is a likelier chance that you will consummate a deal.

So will I buy a place any time soon, well I am not sure. We still have our place in Burlingame and a few property investments here and there. I guess only time will tell, after all time is on my side. The market will recover it is just a question of when.

What a difference a couple of years can make? I remember selling real estate in San Francisco back in 2003. Everything was selling. If the property had a parcel number it would sell. The fundamentals were just thrown out the door. Times have changed.

When I moved to Chula Vista in July of 2007, we were very close to buying a home. So much in fact that we viewed at least 20 homes, after some discussion we decided that we would not buy a home here because we were not sure how long we would be in San Diego. I wasn’t sure how long I would be with Redfin after I came here. Well here I am, 14 months later and I am sure glad that I didn’t buy. So many things have occurred, the Southern California Wildfires, the Mortgage Crisis, rising gas prices, and just an overall lull in the economy. After 202 real estate transactions you think you have seen it all, but even today I am still learning new ways to skin that elusive cat my aunt would call real estate.

Today, I re-visited a home that I sold last week. My client had purchased this REO from IndyMac. According to the county’s tax records this is the transaction history of the home:

June of 2003 – $381,000

September of 2005 – $584,000

June of 2008 – $287,000

September of 2008 – $340,000

Negotiating with a REO listing agent has become a specialty of mine, I have found that there are similarities amongst what they are willing to accept. REO properties in the 300-500k points are always listed below market, where the banks are hoping that the property would stir enough interest in the buyer community to drive the sales price higher. This tactic has shown to be very effective. In the case of this property, it was listed at $329,600 and hit the market on July 27, 2008. I showed the property on the 8^th of August, had the property in contract on the 14^th. It was a multiple bid situation – two other offers were involved in the process. Every offer is different but here price and strength of buyer were my tools to winning this one. My client had over 20% in the bank and we had been looking at properties for more than a month. She was pre-approved with Bank of America, which I thought we could use to our advantage. I made it very clear to the listing agent that we had done our homework. Specifically, we knew that the property was listed below market, and were very familiar with all the comps in the locale.  A home across the street for less square footage sold for $370,000 only about a month prior. It was an REO and was owned by Downey Savings. Our property had some nice upgrades and was much larger, so I knew that if we did not go above the list price then my client would probably lose out.

I always make it a habit to know who I am dealing with; I verify how long the agent has had their license. What type of license they have? I also Google them and check them up on LinkedIn. If I can gather any information at all, I will always put my findings into my discussion with them.  People tend not to not think straight if you put them on tilt. I found out that he had in office in La Jolla, been in business about 9 years, and was a salesperson. Just from that, I am able to gauge my approach. Based on those fact, I can determine that he will want a quick escrow, he probably does not do a great deal of work in the property area so he may let go of the property to someone he has confidence in working with. He also may be willing to give up the price out of convenience. I was right on all fronts.

REOs are always trying to get their money fast. My thinking is if they can get this off their book faster, then they move on to the next property.

So we went 11k above list, 21 day close, 12 day contingencies. I also negotiated for 2k in repairs and a home warranty. There were some problems with this home, just like any previously foreclosed homes. Broken windows, a leftover portable spa and no appliances were all evidence to substantiate a credit. I have found that REOs are more willing to credit money than deal with any replacements or repairs. Again I was right. I was pretty happy with that deal. More importantly, my client was even more impressed with the style and efficiency of the process. 

Overall she had seen about 36 or more homes so I think she had a good feel of what the market was. We had written 4 offers, all were short sales except for this one. Three months later all of those properties are still on the market. My client was frustrated and was starting to think that she would not be able to find a home in today’s market. I also learned a little trick about motivation, buyer who are frustrate with short sales often become more motivated to buy REOs. Buyers find that although the market is filled with short sale opportunities, REOs properties are the ones that are actually selling. Therefore, creating two types of buyer for 2008:

1. Buyers that can wait for a short sale and are not necessarily looking to move right away.
2. Buyers that need to move in finite amount of time.

Converting 1s into 2s is the name of this game. If you can learn to identify what will motivate buyers to become 2s rather than 1s then there is a likelier chance that you will consummate a deal.

So will I buy a place any time soon, well I am not sure. We still have our place in Burlingame and a few property investments here and there. I guess only time will tell, after all time is on my side. The market will recover it is just a question of when.

A few days ago, I received an email from a client of mine. I called him to discuss a short sale offer that had recently received an approval for an offer that was submitted almost three months earlier. We were just waiting for the documentation. Our discussion sort of drifted away from our deal-in-waiting and we started talking about what other websites he used to cross reference real estate information. These were the ones he mentioned in order:

 I asked him which site he preferred to use, he told me he actually enjoyed Redfin’s interface, he also mentioned that he visited that site quite often because Redfin did not require him to sign in to view information on the site unlike Zip’s platform. I thought that was interesting. I wondered how many clients were like him. He went on to say that he had seen my name on Redfin’s site and googled me when he was ready to buy. He figured why not talk to a few agents before making his decision; he talked to me (on the phone), a Prudential agent (in person), a Redfin agent (via email) and an agent from San Diego REO Specialists (in person). I prodded him again and asked why he didn’t use Redfin as his broker. What he told me next was just as fascinating, he said, “I wanted a broker not because of his website, or the rebate – the reason I chose to work with you was because we had a certain type of chemistry.” He went on further to say, “I just liked your style.”

Today, I met with another client of mine. I asked her the same question and she answered that the reason she chose to work with was because I offered a rebate. Go figure. Any broker who tells you that they understand all of their clients is just plain lying.

Sometimes clients are just enigmas, wrapped in puzzles, riddled with facts. Truthfully, I spend 50% of my client interaction improving communication, a transaction is difficult to complete when those lines of communication are not established. Know your customer, identify their needs and you will never be hungry.

With all of the fall out that has already occurred with the sub prime mortgage debacle. I wanted to address an old addition that home buyers over the last 7 years typically avoided but had to deal with. Private Mortgage Insurance (PMI) is a premium that can be paid upfront or built into the loan. PMI is an insurance that offsets losses in the case where a mortgagor (borrower) is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property. In 2007, PMI became tax-deductible.

In everyday practice, PMI is necessary when a buyer makes a down payment that is less than 20% of the sales price or appraised value (in other words, if the loan-to-value ratio (LTV) is 80% or more). (Hence the rise of the piggy back loans and 100% financing the thorn in today’s mortgage society.) Once the principal is reduced to 80% of value, the PMI is often no longer required. It can happen as a result of a mortgage pay down or through appreciation of the subject property

The nation’s larges provider is the PMI group (PMI, NYSE) based in Walnut Creek, CA. which services its product for residential mortgages, public finance obligations and our favorite ‘asset backed securities’. In the fourth quarter of 2006 they recorded a net income of $100.5 million or $1.19/share; during the same period in 2007 they recorded a loss of $1 billion or $12.51/share. Here is a snap shot of their stock chart over the last 3 years. The stock was as high as $50/share in May of 2007; the stock is trading at $5.97/share as of May 09, 2008.

According to the PMI Group, they expect to pay mortgage insurance claims for its US operations in an amount of $825 – 975 million; this can only mean that the weather is not going to be changing any time soon. Buyers are going to traverse even more obstacles to procure what once was ‘easy money’ and practitioners like me are going to see a real need for seller financing.

Do your homework? Preparation for the negotiation process

Put together a gameplan

1. Research the property and know the property history
2. Research your opponent
   1. Check how long they have been practicing
   2. Research agency
   3. Probe for insight
3. Identify Goal
   1. Sale
   2. Time (length of contract)

 Negotiating Tactics:

1. Pre-Conditioning

 Established when the other party makes a comment prior to negotiations either to establish a bench mark or set a standard. This can be subtle or obvious.

1. Try not to make the first offer

 Let the other party make the first move, this will allow you to determine the strengths and weaknesses of the other party. It will also allow you to gauge the other parties necessity and willingness to agree to terms.

1. Create leverage

 Probably the hardest thing to do when dealing at arms length in front of a client is to create leverage. However, you will not be able to turn the corner and get an advantage without some form of leverage. Include a third party or another buyer to create this advantage.

1. Avoiding talking too much: Shut your mouth

 One of the biggest mistakes any negotiator makes while working on a transaction is when the person talks too much. Learn to gain insight by listening. Listening can often result in a clearer understanding of the other party’s concerns.

1. Probe for insight, then shut up

 Never be afraid of waiting in silence, if you are uncomfortable with the silence. Generally, the one who speaks first is the one who gives more in a transaction. Here, I would always ask questions for information but be willing to stop talking and listen to what the other party is saying.

1. Nibbling

 This is a tactic where one party throws out numbers or terms to get a reaction from the other party. Generally, a short cut to get to resolution. This tactic is used a great deal in Real Estate.

1. Be realistic but always overshoot a bit

 Used in real estate for low balling, a client will purposely want to write an offer that is below list. This is an effort to gain footing in negotiations and hopefully get a good discount on the price. Can be seen an insult. Must be very careful on how this is applied. If the offer is too low, you run the risk of not be countered. You want to offer just enough to be invited to the negotiations. Also, overshooting price can help you set some parameters on what terms they would be willing to accept and at what level.

1. The power of legitimacy

 If you can produce a current list of sales or statistics about your market use these items to prove your point.  By bringing this evidence to substantiate your offer your opponent will have to consider these facts in making their decision. This will provide legitimacy and credibility to your offer.

1. Never look impressed or eager – the low key approach

 Whether the negotiations are going well or not you must keep in mind that you must not show any emotion. Any inference as to what you are thinking will give your opponent an unnecessary advantage.

1. Always be willing to walk away from the deal

 When you are dealing with an unreasonable opponent and they are unwilling to make any type of concession, test the waters and walk away from the deal. Use this act sparingly; your objective here is to get some type of emotional reaction from your opponent. If your opponent gets upset then you have your opponent where you want them.

Look for a local agent that is familiar with the area.

Find the home either through the use of the internet

• Find a title company that is familiar with international wires.

• If the buyer is looking to get a loan for the purchase the title company does not require anything specifically from the buyer.

• However, the lender may have some additional requirements that it may need from the lender in order to finance the loan.

• If certain deeds need to be signed and notarized, the buyers can make an appointment at the country’s U.S. Embassy and one their representatives can notarize the document.

Differences:

1. Change in time zones – alleviated by in depth emails from title and real estate broker         
   1. This can also be addressed by allowing your client to set up a special power of attorney. Thereby creating an attorney-in-fact to sign and act on their behalf.
   2. This document must be notarized and approved by the title in order to be used in the transaction.

 When representing the buyer, the buyer must be cognizant of the fluctuating currency exchange between the countries.

1. 1. I generally would recommend to my clients to market time their wire, if the exchange was not in their favor to an established dollar account here in the US. Depending on how long the escrow is. When the duration of contract was longer than 6 months, I would dollar cost average their money into the U.S. where they would be getting the advantages of a lower exchange rate.
   2. If they did not want to establish a dollar account, I would recommend wiring directly to the escrow company. Most of the escrow companies that I worked with would pay an interest rate while they had the money on deposit. However, it would not be very much.

 Are mortgages an issue?

           a.    Most of my clients would purchase all cash. However, there are ways to establish a mortgage internationally. You will have to use a major lender (Citibank, Chase, or Banco Popular)

           b.     If your client has enough in deposit with an international bank they can procure a mortgage loan through a major lender.

           c.     If they don’t have the money in deposit, my last option would be to work with a mortgage banker. While I was in San Francisco, I had several contacts that would lend to foreign dignitaries.  The application was different but the loan was possible with proper documentation and assets (land, businesses) abroad.

4.   Time?

           a.    Truthfully, time has never been a factor in my transactions. The key is constant communication sometimes at odd times at night, or early in the AM.

b.    Could take 5 extra days to receive international wires depending on the wire house and from the country that it is being sent from.

That all said, keep in mind other factors may conflict with a proper purchase, be aware of the currency exchange and work with someone you can trust.

 Today’s most popular property is 4010 Villa Vera in Palo Alto. This 3 bedrooms and 2 bathrooms Silicon Valley townhouse features all the ingredients of a Miami South Beach hotel (pools, spas and high-net worth neighbors). Selling at $899,000, this property may be the answer to those late night urges to jump into the pool.

Map

I must admit that I am happily surprised at the activity over the Christmas Holiday. In years past I have found that most buyers stayed away from year end purchases. However, this Christmas l received five wonderful gifts disguised as, “Ask about a listing”, emails. I responded to each of the them with a child like energy between cups of hot apple cider and slices of roast beef. Never mind the last minute shopping and the traffic delays it seems that at least some people think that the “greatest gift” that one can receive this year is the “pride of ownership”.

Living Room