Best Place Real Estate

Lake Forest consistently ranks as one of the safest cities in America. According to a survey done by CQ Press City Crime Rankings, Lake Forest is the 8th safest city for cities with populations of 75,000 to 99,999 and 10th safest city overall.

At the time I saw this article in the city’s newsletter, I was reading The Tipping Point by Malcolm Gladwell. If you have not read The Tipping Point, I highly recommend it. In one chapter, Gladwell discusses the “Broken Windows” theory and the sudden drop in crime in New York City that occurred in the 1990’s. In essence, the theory is that if a city does not address seemingly minor problems, such as graffiti, panhandling, and buildings with broken windows, it is giving the impression that no one really cares and that no one is in charge. A city that can’t control minor crimes may give criminals the idea that they have less of a chance of getting caught in that city for more serious crimes. While it seems that concentrating on serious violent crimes is more important, getting control over minor crimes can be the “tipping point” for controlling a city’s crime overall.

It is this theory that is credited for significantly reducing crime in New York City. In about 1994, New York City started to really crack down on minor crimes and the overall crime rate dropped dramatically. (For a more in depth explanation, refer to The Tipping Point.)

As I read the article in The Leaflet, I couldn’t help but think that part of the reason that Lake Forest is consistently one of the safest cities is because our city is clean and well-maintained. In addition, minor crimes such as graffiti are not tolerated. While I can not say that we have no graffiti, I can say that when it occurs, it is removed promptly. (Graffiti Hotline)

Lake Forest never had the severe crime rate that New York once had and I’m not comparing New York and Lake Forest. They are like apples and oranges (excuse the pun) in many ways. But after reading The Tipping Point I think the “Broken Window” theory has merit.

Earlier today I was searching the MLS looking for condos to show a client. I came across one that looked particularly nice and, from the photos, appeared to have a very spacious living room. But as I looked closer, I realized that I have seen this floor plan many times and the living room isn’t that large. In fact, it is rather small. But the picture had been taken in such a way that it made the room look much bigger than it really is. Had I not been familiar with that particular floor plan, I would have wasted my buyers’ time showing them this unit. I know they want a bigger living room.

Another time I was looking for a house for a family who wanted a large kitchen and family room. I pulled up one listing that in the photos looked like it had a huge kitchen. It was quite believable as this was a fairly large home, almost 4000 square feet. Fortunately, I previewed the home before taking my buyers out and found that the kitchen really wasn’t all that big. Other photos of the same home made the entry hall look spacious and very elegant when it actually wasn’t anything to write home about. So, needless to say, I did not show this home to my buyers.

Having pictures of your home is a must when you list it for sale. Most potential buyers searching the Internet will just skip over listings that do not have photos. But be careful not to make your house look better than it really is. If so, when buyers actually come to see the home, they will be upset and disappointed that the house isn’t what they thought. It is hard to get an offer from an upset and disappointed buyer.

Make sure your pictures look like what the buyers will see when they view your home. For example, my backyard is really pretty (at least in my opinion) and this could be a plus if I ever decide to sell my house. I have a beautiful picture of the yard that was taken from just outside the dog-run at the side of the house. But how many buyers are going to look at the yard from the dog-run? My back porch looks really nice when you stand at the back fence, but again, are buyers really going to stand at the back fence when they are considering my house? No. Buyers are going to first look at the yard while standing in the house looking out a window.

The point is, don’t let your photos mislead buyers because you will lose buyers. Try to reach a happy medium. Have photos that will entice buyers to want to see your home but not disappoint them when they get there.

There are two upcoming workshops for people who are worried about foreclosure or are going through the foreclosure process. The event is presented by OC HOPE (Orange County Home Ownership Preservation Collaborative) and sponsored by the Orange County Association of REALTORS. The workshops are free and will be in both English and Spanish. You will have an opportunity to speak to lenders and housing counselors in a confidential one-on-one meeting.

Please refer to the event notice to see what documents you should bring to the workshop. Also, please note that they will only assist the homeowner whose name is on the loan. Therefore, please do not send someone else in your place.

The workshops are open to Orange County homeowners and reservations are recommended. RSVP by emailing myhousingforall@aol.com.

When you make an offer on a house, make it contingent on the seller providing a C.L.U.E. report. Comprehensive Loss Underwriting Exchange, hence the name C.L.U.E. report, is an information exchange insurance companies use to obtain prior claim history of personal property as well as automobiles.

Why is the claim history on the house important to a buyer? For one, it will give you an idea of past damage to the home and the probability of it occurring again. If the insurance company paid on a claim, you should check with the seller to be sure the repairs were actually made and the homeowner didn’t just pocket the money.

Another very important reason for getting a C.L.U.E. report is that it will help you determine if you, as the new homeowner, will be able to get insurance on the house. Even though past claims were submitted by the previous owner or owners, the damage was to the house. So when you are applying for insurance on that house, the property’s claim history is what the insurance company will look at. The claim history could affect the cost of the insurance or even if you will be able to get coverage at all.

It is really important that you get the C.L.U.E. report during your contingency period because if for some reason you are not able to get insurance on the house, you will also not be able to get financing. The lender will not fund without confirmation of insurance. You do not want to find out a day or two before escrow is suppose close that you have lost your financing because you can’t get insurance. The C.L.U.E. report is easy for the seller to get through Choicetrust.com and it can save you as the buyer a lot of headaches.

I have had this conversation with several clients recently regarding bank owned listings. When you make an offer, it must be your “highest and best”. While it is understandable that buyers do not want to pay more than they have to for a property, the old days of making a low offer and expecting a seller to counter do not apply in today’s foreclosure market. A good percentage of foreclosures are in the lower price tier and first time buyers and investors are all over them. Most listings receive multiple offers shortly after they hit the market and sell for at least full list price if not over.

There is so much in the news about the terrible housing market, all the foreclosures, and declining prices. So it is very understandable that many buyers think they can come in way lower than the asking price. But the truth of the matter is that usually the asking price is the low price. Some of the comments I get from many buyers are:”Is the listing agent lying about having all those offers just to apply pressure and make you offer more?” or “What if the lender would have taken less than my offer and I end up paying more than I needed to?”

REALTORS are required to abide by a Code of Ethics and lying about multiple offers, or anything for that matter, is unacceptable. And, I can tell you from experience, multiple offers on bank owned properties is common place in today’s market. As far as the purchase price the lender will accept, the bank’s goal is to get the highest price with the best terms. That does not mean that the highest offer always gets it. In addition to price the bank considers the terms of the offer as well as the financial soundness of the buyer.

My advise is to offer a price you feel the property is worth to you, but it should be the highest price you feel you are comfortable with for that property. Offering a lower price and expecting the bank to come back with a counter is usually a waste of time. It really wouldn’t make good business sense on the part of the bank to spend time countering one buyer when they already have a better offer from another buyer. Your offer should be contingent on an appraisal, so if the appraisal comes in much lower you can renegotiate.

With home prices down and interest rates really low, most first-time buyers know this is a great time to buy.  But with the constant news of job losses, many are hesitant to make the move.  To help relieve the pressure, the California Association of REALTORS has started a new mortgage protection plan to benefit first-time buyers.
C.A.R. president, James Liptak, sent an email to all C.A.R. members describing the program.  He states: “Through the C.A.R. Housing Affordability Fund Mortgage Protection Program (C.A.R.H.A.F. MPP), first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month for up to six months to help make their mortgage payments. A qualified co-buyer also can participate in the program, for a reduced monthly benefit of $750 per month for up to six months in the event of a job loss. Program benefits also include coverage for accidental disability and a $10,000 death benefit. C.A.R. €™s Housing Affordability Fund is dedicating $1 million to the program this year, and estimates that as many as 3,000 families will benefit from the program throughout 2009.

To qualify for the Mortgage Protection Program, applicants must:
. Be a first-time home buyer someone who has not owned a home in the last three years
. Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009
. Use a California REALTOR  in the transaction
. Purchase the property in California
. Be a W-2 employee (cannot be self-employed or military personnel)

First-time home buyers must request an application for the H.A.F. Mortgage Protection Program from their REALTOR “.

There is no cost for this program. To learn more, visit the CARHAF website.

Buying a fixer can be fun and very profitable, but it can also be a financial disaster and very stressful. Here are some tips to keep in mind when you are looking at homes:

Know what you are buying.  A “fixer” can mean a lot of different things, from a cosmetic fixer in need of only carpet and paint to a total dump that needs a complete renovation. Seriously consider how much work is needed. Has the house been well maintained and just needs updating or does it have some serious problems like a leaky roof and structural issues? Always, always, always get a professional property inspection!
Know yourself. If you are planning on doing the work yourself, do you have the skills needed? Many first time buyers or even experienced homeowners have started a project just to find out it is way over their head. It ends up costing them even more because an experience contractor has to do it over or fix what went wrong. Sometimes it is better to do some of the work yourself and contract out other projects. Also, do you really have the time to do it?

Know what it will cost. Whether you plan to do the work yourself or pay someone else to do it, check into the cost  of materials and labor before you buy the house. Getting more than one estimate is also a good idea.  Then add 10 to 15 percent to the total cost.  I have remodeled several homes and they always take longer and cost more than anticipated.

Know why you are doing it.  It depends on whether you are buying the house for a rental or if you plan on living in it yourself.  Fixing up a house to be a rental means bringing it up to par with other comparable rental property.  But if it is a house that you are going to live in, you will want to fix it up just the way you like it.  In either case, don’t over do it.  It is really easy to get caught up in the moment and upgrade more than necessary.

I love buying fixers but I have learned to seriously evaluate what I am buying.

It is already bad enough to have suffer through the heartache and stress of the foreclosure process and the possibility of losing your home. But to be the victim of a scam that takes advantage of you makes it even worse.

The increase in the number of foreclosures has also increased the number of predators preying on vulnerable homeowners.  These unscrupulous people try to convince desperate homeowners that they can rescue them from foreclosure.

The California Association of REALTORS has provided member REALTORS with a document for us to share with consumers regarding foreclosure rescue scams.  It provides some of the warning signs and red flags of a foreclosure scam as well as some resources for homeowners who are already victims of such scams.  Click on Foreclosure Rescue Scams below.

Foreclosure Rescue Scams

I must add that there are a number of very ethical professionals who are seriously trying to help homeowners facing foreclosures.  But, just like everything else, beware of the scam artist.

In a recent Orange County Register article, “O.C.’s Expert Observers Tell What’s Scary“, REALTOR, Steve Thomas comments on “herd mentality”.  This is similar to what Donald Trump refers to as “group think” in his audio book, Why We Want You To Be Rich, co-authored with Robert Kiyosaki.  Herd mentality or group think is when people do things because everyone else is doing it. Trump encourages people to “think for themselves” rather than just following the herd.

A few years ago when the market was rapidly appreciating, it seemed like some people were buying just because everyone else was.  Many didn’t do their homework and just assumed the market would continue to appreciate indefinitely.  They just figured it was the right thing to do because the rest of the herd was doing it.

But, the real estate market is cyclical. It has its ups and downs, just like most everything else.  Now that we are in a down market, I think that much of the herd of buyers think that prices are going to continue to go down indefinitely. After all, that is all you hear about in the media. Now it seems that a lot of buyers are actually waiting for the prices to start going up before they are comfortable buying. In my article, “Should I Buy Now Or Wait for Prices to Go Down More?“, I discuss trying to time the exact bottom of the market.

However, some people, particularly investors, are taking advantage of our current market.  Those who have strayed from the herd and who can “think for themselves” understand real estate cycles. They know that this down market will not last forever and that we are now somewhere near the bottom.

When the market turns around and starts to appreciate again, people who buy early will eventually make money.  But the buyers who strayed from the herd and bought when others were afraid to buy will be the ones who profit the most.

The steep decline in housing prices has brought investors to the market in full force. Many are buying in the bottom price range of the market. In Orange County that consists of primarily of low to mid-priced condominiums. These homes were hit really hard by the demise of the real estate market. Now we are seeing tons of short sale and bank-owned condominium listings and investors are scooping them up as fast as they can. While many buyers and real estate agents do not want to bother with short sales, bank-owned listings are receiving multiple offers and many of the offers are cash offers. Remember, this is Orange County and despite what you read in the papers about all the job losses and foreclosures, there are still a lot of people here with a lot of money.

The opportunity we have now is that the decline in prices combined with very low interest rates has made single family detached homes possible for many investors who otherwise could only purchase condos. When I make an investment decision, I like to look at the long term and I think that in the long run, a single family home is a better investment than a condo.  Therefore, I believe that the current market is not only an opportunity for investors, it is also an opportunity to make a really good long term investment. Consider these points:

• In many areas, like Lake Forest, Mission Viejo, and Laguna Hills, you can now buy a single family house for about the same price as some of the condos a few years ago. These are generally small entry level homes, but ones that would make excellent rentals.
• While single family detached homes lost value in the market down-turn, they weren’t hit quite as hard as a lot of condos and therefore I think they will recover more quickly.
• When real estate is in an upward cycle, detached houses typically appreciate at a little higher rate than condos. So this is something to look forward to.
• Interest rates. What an opportunity, low prices and low interest rates! You must be able to qualify for the loan and provide documentation supporting your income and assets, but it should have been that way all along.
• Again, looking into the long term, when the market does turn around, we will probably reach a point where first time buyers will again be priced out of the market. (History has a way of repeating itself.) This will keep the rental market strong and I think single family houses will be more appealing to families than condos.
• As I mentioned above, investors are all over the bank-owned condos, particularly in the lower priced complexes. This could be a potential problem down the line. Lenders do not like to make loans in complexes that have a high percentage of absentee owners. Therefore, units in these complexes may be harder to sell in a few years because it may be difficult for buyers to get financing.

Please note that I am not suggesting that condos are a bad investment. They can actually be very lucrative. What I am suggesting is that the current market has given us other opportunities to consider.  As with any investment, you need to do the research and do the math, and I suggest doing it for both the short term and the long term.