By Joel Persinger
As with congregations all over town, my church got together this past Sunday and held a service in which the minister addressed the tragedy caused by wildfires throughout our beloved San Diego County. Following the service, I had time to visit with some friends, and the subject of the fires and their effect upon the real estate market came up.
This is not my first exposure to devastating wild fires. That came in September of 1970 when I stood on the porch of my parent’s home in Harbison Canyon and watched as the fires, which would eventually kill six people and destroy 175,000 acres, raced threateningly down the mountains some two miles on the other side of the valley toward us. The fire reached our land in less than ten minutes.
We were foolish in the extreme back then. My stepfather and a few of the neighbors decided not to evacuate, choosing to stay and try to save their homes instead. With little knowledge or understanding of wildfires, they tried to clear brush around the houses as my mother and my brothers and I watched helplessly through the picture window from our living room. By all rights, the fire should have burned up the house and the rest of us with it. Miraculously, both my family and our home survived. 382 other homeowners were not so lucky.
Over the almost forty years since that day, I have seen many wildfires in San Diego County. Obviously, none of them have risen to the severity of the Cedar fires of 2003 or the firestorm of last week. But in each case one bit of similarity has held true. Rather than shrink back from the challenge or adopt a “that’s their problem” mindset, the people of San Diego County, as well as many companies and corporations, have rallied around the victims with just about every kind of support. And, in each case, while the real estate market was effected in the short term to one degree or another, it has bounced right back.
I spoke with several clients and business associates on Thursday and Friday of last week. It may be the parent in me, but I just wanted to make sure they were in one piece. During my conversations I was told of the many plans to help the families who have lost their homes or whose homes have been severely damaged. A senior executive at one lending institution told me how frantically her company wanted to help the victims of the fires. I must admit that this response came as a complete surprise to me. It lifted my spirits to see the hearts of those with whom I work day after day and their earnest desire to help following such a tragedy.
There is a lot of bad news out there and we all know that the home loan and real estate markets have slowed to a crawl. It may well be that this past week’s events will slow things down further. But, have faith. The people of San Diego County are resilient and so is the Southern California real estate market.
Monday, October 29, 2007
Will This Week’s Fires Effect Real Estate?
By Joel Persinger, GRI
With San Diego County experiencing the worst fire storm since the Cedar Fires just a few years back, it seems almost mercenary to talk about real estate. A much better thing to be thinking about at present is how to make certain our families are safe and what we might do to support our first responders and those who have lost their homes. Nevertheless, it is important to understand how this tragic event might affect the market for those whose homes are for sale and survive the fire.
As we all know, bad news for the real estate market has been all over the place this past week or two. Just two weeks ago the California Association of Realtors released its California Housing Market Forecast for 2008. In it, the association detailed its prediction that home prices and sales will continue to decline in the coming year, although to a lesser degree that in 2007. In addition, frightening front page articles appeared in both the San Diego Union and the Los Angeles Times detailing this year’s drop in home values and the agonizingly slow speed of the current market.
It is true that the real estate market is not doing well in San Diego and that next year, while expected to be slightly better, is still likely to be quite challenging. The fires probably won’t help matters and are sure to have some effect. Exactly how they will affect the market and to what degree nobody knows for sure.
Loans may be more difficult to cash in on in the short term. For example: I received a call from a mortgage banker this afternoon urging me to take any money I might need from my equity line as soon as possible. I asked why and he said, “Because lenders are freezing equity lines as fast as they can because of the fires.” It seems the lenders don’t want you to take money out since there is a chance that your house might burn down.
Homes sales and prices may decline further. Many folks are put off by natural disasters. Buyers may hold off from moving into an effected area immediately after such an event. People who live in the effected area may move away out of fear or as a result of emotional trauma. Homes may be more difficult to buy. Following the Cedar fire, some insurance companies refused to issue home owner’s insurance in San Diego. If the buyer can’t get insurance, the lender won’t lend and the buyer can’t buy the house.
On the other hand, homes which have been damaged or destroyed are going to need to be repaired or rebuilt, debris will need to be cleared and Infrastructure (such as power and telephone lines, roads, fences and so on) will need to be replaced. This means business for contractors and jobs for their employees. Insurance companies (and perhaps the government) are going to be spending quite a bit of money putting San Diego County back together.
Folks whose homes have been damaged or destroyed will need places to stay. Rentals may be easier to rent and some folks may just buy another house and be done with it, rather than move back to a fire hazard area.
The only thing we know for sure is that, while many of these short term effects may hurt, the real estate market will march on. We are in a down cycle in the market for sure, but, sooner or later it will come back up.
With San Diego County experiencing the worst fire storm since the Cedar Fires just a few years back, it seems almost mercenary to talk about real estate. A much better thing to be thinking about at present is how to make certain our families are safe and what we might do to support our first responders and those who have lost their homes. Nevertheless, it is important to understand how this tragic event might affect the market for those whose homes are for sale and survive the fire.
As we all know, bad news for the real estate market has been all over the place this past week or two. Just two weeks ago the California Association of Realtors released its California Housing Market Forecast for 2008. In it, the association detailed its prediction that home prices and sales will continue to decline in the coming year, although to a lesser degree that in 2007. In addition, frightening front page articles appeared in both the San Diego Union and the Los Angeles Times detailing this year’s drop in home values and the agonizingly slow speed of the current market.
It is true that the real estate market is not doing well in San Diego and that next year, while expected to be slightly better, is still likely to be quite challenging. The fires probably won’t help matters and are sure to have some effect. Exactly how they will affect the market and to what degree nobody knows for sure.
Loans may be more difficult to cash in on in the short term. For example: I received a call from a mortgage banker this afternoon urging me to take any money I might need from my equity line as soon as possible. I asked why and he said, “Because lenders are freezing equity lines as fast as they can because of the fires.” It seems the lenders don’t want you to take money out since there is a chance that your house might burn down.
Homes sales and prices may decline further. Many folks are put off by natural disasters. Buyers may hold off from moving into an effected area immediately after such an event. People who live in the effected area may move away out of fear or as a result of emotional trauma. Homes may be more difficult to buy. Following the Cedar fire, some insurance companies refused to issue home owner’s insurance in San Diego. If the buyer can’t get insurance, the lender won’t lend and the buyer can’t buy the house.
On the other hand, homes which have been damaged or destroyed are going to need to be repaired or rebuilt, debris will need to be cleared and Infrastructure (such as power and telephone lines, roads, fences and so on) will need to be replaced. This means business for contractors and jobs for their employees. Insurance companies (and perhaps the government) are going to be spending quite a bit of money putting San Diego County back together.
Folks whose homes have been damaged or destroyed will need places to stay. Rentals may be easier to rent and some folks may just buy another house and be done with it, rather than move back to a fire hazard area.
The only thing we know for sure is that, while many of these short term effects may hurt, the real estate market will march on. We are in a down cycle in the market for sure, but, sooner or later it will come back up.
Wednesday, October 17, 2007
Everything is negotiable
By Joel Persinger
Many years ago a friend of mine performed what I believed was a minor miracle. He went into a retail store and made a deal. I was looking for a portable keyboard stand at the local music store and had gone in with him to check prices. I had been to the swap meet many times and knew how to haggle, but I was firmly of the belief that such deal making was not possible with firmly established stores. My buddy, on the other hand, was not held back by such belief. Knowing that my birthday was coming up, he went back to the store later that day and purchased the stand as a gift for less than half the asking price. When he told me about the deal I asked how he did it. He said, “Come on, Dude! Everything’s negotiable.”
In the same way that I once believed that haggling with a retail chain was taboo, it is a common misconception in real estate that everything is standard. In fact, almost everything about a real estate transaction is negotiable. Negotiable items include commission paid to the realtors, the price paid for the property and the terms of the agreement. Many sellers seek to negotiate the commission paid to the agent and most everyone haggles over the purchase price of the property, but few buyers or sellers negotiate the terms of the agreement. This is due to the misconception among buyers, sellers and real estate professionals that a real estate transaction is a standardized process and therefore most parts are non-negotiable. Nothing could be further from the truth. The timing of taking a property off the market is one example.
In a standard real estate transaction an offer is made on a home that is for sale. When the offer is accepted or an agreement on price and terms is reached, the home is placed in escrow and taken off the market. The seller’s agent marks the property as “pending” in the multiple listings and all advertising stops. When the property closes escrow and the sale is completed, the sellers move out, the buyers move in and “Everyone lives happily ever after.” But what happens when the escrow doesn’t close?
In a market such as this one, it is common for escrows to “fall out”. In other words, the buyer can’t or won’t continue with the purchase and the escrow doesn’t close. Generally, there are no back up offers because the property was taken off the market when it entered escrow. As a result, the property would be placed back on the market and advertising would have to ramp up all over again. This is less than ideal for the seller since the process of selling the property must start back at square one. One way to avoid this situation is to negotiate non-standard terms.
I recently had a client who received an offer on his property from a buyer who had a large down payment and appeared to be ready to buy. I advised my seller to insist upon terms that would allow him to keep the property on the market to obtain backup offers until such time as the buyer had demonstrated that the loan was firmly in place and that she was ready, willing and able to purchase the home. The buyer agreed to the terms, we placed the home in escrow and the property remained on the market. About a week later the buyer cancelled. But, in this case, the marketing of the property had never skipped a beat. The seller was in a much better position to continue marketing the property because we took the approach that everything is negotiable and in every market there are ways to hedge your bet. This is only one example of many. So, keep an open mind and start haggling.
Many years ago a friend of mine performed what I believed was a minor miracle. He went into a retail store and made a deal. I was looking for a portable keyboard stand at the local music store and had gone in with him to check prices. I had been to the swap meet many times and knew how to haggle, but I was firmly of the belief that such deal making was not possible with firmly established stores. My buddy, on the other hand, was not held back by such belief. Knowing that my birthday was coming up, he went back to the store later that day and purchased the stand as a gift for less than half the asking price. When he told me about the deal I asked how he did it. He said, “Come on, Dude! Everything’s negotiable.”
In the same way that I once believed that haggling with a retail chain was taboo, it is a common misconception in real estate that everything is standard. In fact, almost everything about a real estate transaction is negotiable. Negotiable items include commission paid to the realtors, the price paid for the property and the terms of the agreement. Many sellers seek to negotiate the commission paid to the agent and most everyone haggles over the purchase price of the property, but few buyers or sellers negotiate the terms of the agreement. This is due to the misconception among buyers, sellers and real estate professionals that a real estate transaction is a standardized process and therefore most parts are non-negotiable. Nothing could be further from the truth. The timing of taking a property off the market is one example.
In a standard real estate transaction an offer is made on a home that is for sale. When the offer is accepted or an agreement on price and terms is reached, the home is placed in escrow and taken off the market. The seller’s agent marks the property as “pending” in the multiple listings and all advertising stops. When the property closes escrow and the sale is completed, the sellers move out, the buyers move in and “Everyone lives happily ever after.” But what happens when the escrow doesn’t close?
In a market such as this one, it is common for escrows to “fall out”. In other words, the buyer can’t or won’t continue with the purchase and the escrow doesn’t close. Generally, there are no back up offers because the property was taken off the market when it entered escrow. As a result, the property would be placed back on the market and advertising would have to ramp up all over again. This is less than ideal for the seller since the process of selling the property must start back at square one. One way to avoid this situation is to negotiate non-standard terms.
I recently had a client who received an offer on his property from a buyer who had a large down payment and appeared to be ready to buy. I advised my seller to insist upon terms that would allow him to keep the property on the market to obtain backup offers until such time as the buyer had demonstrated that the loan was firmly in place and that she was ready, willing and able to purchase the home. The buyer agreed to the terms, we placed the home in escrow and the property remained on the market. About a week later the buyer cancelled. But, in this case, the marketing of the property had never skipped a beat. The seller was in a much better position to continue marketing the property because we took the approach that everything is negotiable and in every market there are ways to hedge your bet. This is only one example of many. So, keep an open mind and start haggling.
Avoiding the sharks in real estate waters
By Joel Persinger
My grandfather used to call them, “Snake oil salesman.” My dad’s term of choice was, “Ambulance chasers.” But, the common term that I most often hear applied to such folks is, “Sharks.” They are the opportunists who prey upon those in trouble. They pop up at every disaster or financial downturn. So, it’s not surprising to see them circling the waters of the San Diego real estate market.
I have said many times that the current real estate market in San Diego is not bad; it’s just different. We found ourselves in an unusual market of double digit appreciation for a few years and those of us with short memories took that to be “normal” when it was not. The market we have currently is “normal.”
That having been said, the previous market spurred people to new heights of greed and unrealistic expectations, for which many are now paying the price. Homeowners and buyers leveraged just about every once of equity because money was cheep and easy to get. But that is no longer the case and many “homeowners” owe more on their property than it is worth. They are upside down, frightened and desperately looking for an escape, like shipwrecked sailors clinging to the last vestiges of their sinking vessel. Can you see the sharks circling? I can.
Every day I see the little signs posted on the side of the road here and there offering to help those who are in this unenviable position. In bold letters they announce, “Save yourself from foreclosure” or question, “Owe more on your home than it’s worth?” While some of these outfits might be legitimate, I’d bet my first dollar that most of them are simply opportunists looking for a quick buck from desperate people. In my humble opinion, you’d be wise not to jump into the water with any of them lest you get bit!
So, where do you turn when you’re upside down on your home and feeling like your taking your last ride on a ship called the Titanic? After all, these little signs on the side of the road are offering you a life boat and I’ve just told you not to climb in. The simple answer is to educate yourself by seeking lots of advice and doing your homework.
The first thing to remember is that there are no magic solutions, no matter what the “sharks” may claim. You probably didn’t get yourself into a financial mess without working at it and, like it or not, you’re going to have to work to get yourself out. The second thing is to get advice. If you owe more on your home than it’s worth, you should seek advice from a qualified attorney, a CPA who has direct experience helping people in your situation and a real estate broker whom you know well and trust to be honest and to tell you the hard truth.
As you pull these professionals together to work on your behalf, it is important to remember that, while it is helpful to delegate to people with greater experience and knowledge, it is never a good idea to abdicate your responsibility of taking care of your own affairs. It has been my experience that nobody cares more about your finances than you. My advice is to roll up your sleeves and stay actively involved. When it’s “sink or swim”, the only way to keep your head above water is to keep treading and the only way to keep from being eaten is to avoid the sharks.
My grandfather used to call them, “Snake oil salesman.” My dad’s term of choice was, “Ambulance chasers.” But, the common term that I most often hear applied to such folks is, “Sharks.” They are the opportunists who prey upon those in trouble. They pop up at every disaster or financial downturn. So, it’s not surprising to see them circling the waters of the San Diego real estate market.
I have said many times that the current real estate market in San Diego is not bad; it’s just different. We found ourselves in an unusual market of double digit appreciation for a few years and those of us with short memories took that to be “normal” when it was not. The market we have currently is “normal.”
That having been said, the previous market spurred people to new heights of greed and unrealistic expectations, for which many are now paying the price. Homeowners and buyers leveraged just about every once of equity because money was cheep and easy to get. But that is no longer the case and many “homeowners” owe more on their property than it is worth. They are upside down, frightened and desperately looking for an escape, like shipwrecked sailors clinging to the last vestiges of their sinking vessel. Can you see the sharks circling? I can.
Every day I see the little signs posted on the side of the road here and there offering to help those who are in this unenviable position. In bold letters they announce, “Save yourself from foreclosure” or question, “Owe more on your home than it’s worth?” While some of these outfits might be legitimate, I’d bet my first dollar that most of them are simply opportunists looking for a quick buck from desperate people. In my humble opinion, you’d be wise not to jump into the water with any of them lest you get bit!
So, where do you turn when you’re upside down on your home and feeling like your taking your last ride on a ship called the Titanic? After all, these little signs on the side of the road are offering you a life boat and I’ve just told you not to climb in. The simple answer is to educate yourself by seeking lots of advice and doing your homework.
The first thing to remember is that there are no magic solutions, no matter what the “sharks” may claim. You probably didn’t get yourself into a financial mess without working at it and, like it or not, you’re going to have to work to get yourself out. The second thing is to get advice. If you owe more on your home than it’s worth, you should seek advice from a qualified attorney, a CPA who has direct experience helping people in your situation and a real estate broker whom you know well and trust to be honest and to tell you the hard truth.
As you pull these professionals together to work on your behalf, it is important to remember that, while it is helpful to delegate to people with greater experience and knowledge, it is never a good idea to abdicate your responsibility of taking care of your own affairs. It has been my experience that nobody cares more about your finances than you. My advice is to roll up your sleeves and stay actively involved. When it’s “sink or swim”, the only way to keep your head above water is to keep treading and the only way to keep from being eaten is to avoid the sharks.
Subscribe to:
Comments (Atom)
