If you are thinking about buying an REO or tackling a short sale then this video is for you! 

The video may be a bit  over the top but  it does reflect the frustrations of many buyers who are trying to work with banks on short sales and REO's.    I have a client who submitted an offer on an REO almost 6 weeks ago.  His first offer was over the listed price and  was not accepted.  He  resubmitted a new offer that is  higher then his previous offer.  In the meantime the price has been lowered but the listing agent says that the bank hasn't made a decision about  accepting any offers even though his offer is now 10% above the  current asking price.  Needless to say he is very frustrated.

 At least the listing agent on the above property will communicate with me.  In many instances listing agents will not give out any information and only put a fax number on the listing.  They will not answer questions or speak with other agents about the status of offers.  It is not unusual for a lender to take 60 days before giving a reply on an REO and even longer on a short sale.  Often by the time the lender finally responds the initial buyer has found another property and is no longer interested.


 Last week a home sold as a short sale in the Tree section of Manhattan Beach at a price that was the same as the price on an offer my clients made over 9 months ago.  Had the lender accepted the offer from my clients back in February they would have closed escrow in  40 days and been done by April 2009.  Instead they  horsed around  and ultimately wound up losing an even larger chunk of cash by waiting another 6 months to take the same offer they could have received in the Spring.


And just to make things more interesting on properties with conforming loans backed by Fannie Mae and Freddie Mac some new rules are about to be implemented across the country under the Making Homes Affordable Program.  As of September 23, 2009 over 60 lenders  have signed on to be part of the program.  Basically it means if you can't make the payments or sell your home for more then you owe,  you can't just decide to offer your home as a short sale.  You must talk with the bank about modifying the loan first and if that doesn't work then the bank will make the decision about offering the home as a short sale to the general public not the owner.  We live in interesting times...






****A big thanks to Laurie Manny at Long Beach Real Estate for finding this gem!

Have you ever wondered what happened to the inside of some of the smaller homes that have sold  in the last few years and were not torn down... well here's your chance to find out.  

A little over a year ago I sold a little tree section fixer at 3612 Poinsettia, Manhattan Beach. In prior years this house would have been torn down the day escrow closed as it was only two bedrooms, less then 900 square feet with a single car garage and needed work. In fact it had been sold to a builder who backed out just before closing as he had a lot of inventory that hadn't sold.


3612 Poinsettia was a probate sale. I listed Poinsettia around Thanksgiving in 2007 with a starting price of $929,000 which was actually lower then the value given by the appraiser for the state of California. After a few adjustments the price was reduced to $849,000 in March of 2008. Along the way there were many comments about the price and condition. In May 2008 this little home found its place in the market and after receiving multiple offers (7 of them) entered escrow and closed in mid July 2008 at $849,000 with a small credit to the buyer.



Since escrow closed I have driven by and noticed a number of changes. Last weekend I was able to see what the new owners had done to the inside as well as the outside... what a difference a year makes. This was always a sweet house... but now it is charming. They did a number of things I would have done and others I didn't consider. French doors were added to both bedrooms which really opened up those rooms. The new kitchen is stunning and the living room is warm and inviting.



I thought it would be fun for those of you who followed the story of this listing to see the before and after views of this lovely home. If you are considering buying a small "fixer" you will find some great ideas. The exterior was repainted and flower boxes added. They tore out the old kitchen cabinets, etc and redid everything while staying within the same footprint. They made few structural changes other then widening the doorway into the kitchen and closing off the back door by the garage. They scraped the ceilings and revamped the fireplace. Most of the flooring is the original, sanded and stained a darker color. The kitchen flooring was added and is a perfect match to the existing floor. They tore out the old tub and vanity in the bath and put in a double sink and a claw footed tub/shower. French doors were added to both bedrooms. New moldings around the doors and new doors for the closets finished off the project. The backyard and patio area are their next project.


3612 Poinsettia, Manhattan Beach: Before and After....


Before....



After......




All it takes is a little imagination.....and a bit of help from some friends to make a fixer into something special. In the last two years a number of homes that would have been lost to the bulldozer a few years ago are being bought and updated. I think this is great. Many of these older and smaller homes have good bones but need a little fixin' to show off their charm. For awhile there it seemed as if we were becoming a Stepford community of McMansions. It's nice to see a mix of homes around town... this is what adds character and charm to our City by the Sea. .



The new owners are willing to share information about the folks who helped them transform the house. Email me off line if you would like the information.

I've always said that real estate values in Manhattan Beach and the Beach Cities would hold up better then in other parts of Southern California ... and so far this has been true. I also said that all bets were off if we hit a recession. There is no question that we are in a very bad recession... with no end in sight. Today the stock market went where no one wanted to see it go. Unemployment in California jumped to 10.5% and we are going to see hikes in both Federal and state taxes. The South Bay may still be a bit better off then other parts of the state, but the outlook isn't pretty.

I thought we might squeeze by with another 10%-12% decline in home values this year but after hearing about the Administration's plans to increase revenue over the next few years coupled with the massive tax hikes in CA, and a complete lack of confidence in the market... it looks as if I was wrong. Yep... that's right... I was Wrong and I admit it.

I don't know how far prices will drop, and neither does anyone else, but the handwriting is on the wall that prices are moving lower and much faster then expected. A number of builders are in serious trouble. There are still new homes that have been on the market since 2007 without finding a buyer. Other projects didn't get off the ground until well into the market decline and are facing stiff competition for buyers. A number of homes that were rented may be hitting the market again as investors want to get their money out of the projects. You are going to see more short sales and REO's pop up on new construction. As prices on new construction float down that will put pressure on older homes.

In addition, if the recession continues much longer, a lot folks may be facing some real financial hardship over the coming year. As more people lose their jobs or have their income reduced many will opt to sell their homes in order to relocate to another area or state in search of employment. As inventory increases and buyers have more choices prices are going to fall... supply and demand on the other end of the spectrum.

A third factor in the Beach Cities might be because of the planned increase in the capital gain tax that the President wants. If I had owned a large home for a long time and planned to move to a smaller home or even out of the area I would definitely put my property on the market. There is a big difference between a 15% tax on gain and a 20% tax if you saw some major appreciation in the value of your property.

I've talked to a number of buyers in the last month or so who just don't know what they want to do. Some are dropping out of the market for a few months or a year. Others are still ready to buy but are very cautious about price. Today's low rates are enticing for those who plan to own for a long time. If you are in a quandary the best thing to do is pull out a pencil and see what the difference in your payment would be if you bought today at a low fixed rate vs if you wait and prices drop another 15% but rates move up 1%-2%.

All of these issues will put increased pressure on the South Bay-Beach Cities housing market. When you add tougher lending underwriting and down payment requirements, the pool of truly qualified buyers gets smaller. Homes are selling but at lower prices as buyers maneuver through a dicey market. Buyers are in the drivers seat for this ride and they are going to make payback rough for sellers.

In this market we are so concerned with how low will it go... that we forget that there are buyers who will pay a high price for a property they feel has value. A lot of people who live in Manhattan Beach don't realize that there are some truly spectacular homes in our town. They rarely come on the market and were generally owner built. They are not all found on The Strand or in the Sand. There are a number of them in the Hill section and in parts of East Manhattan that most residents don't realize exist.

I'm not a big fan of contemporary architecture and I never blog about another agent's listing...in this case Bob Lane of Shorewood and Julie Lyon of RE/MAX Beach Cities... but  I'm going to make an exception for 218 Anderson, Manhattan Beach,  as most residents will never view this home or even realize just how lovely it is.

This is what a home in this price range should be. The views and the grounds are splendid. It really does remind you of a fabulous vacation spot.... but you know this a place where a family can live. It is adult and kid friendly. There are wonderful spaces that make entertaining a snap for adults. Kids of any age would love inviting their friends over to shoot hoops, swim in the pool or watch movies in the home theater. There is a separate suite for older parents if the need arises or guests.

As you would expect the home is large... 8500 sq ft on a 13,000 sq ft lot. There are 8 bedrooms, 8.5 baths, formal living and dining areas, a gym, home theater, a couple of family rooms, a caterer's kitchen and more. The home is incredibly light with windows galore and spaces that are open to indoor/outdoor living. You have fabulous ocean and PV views while maintaining your privacy. The home generates a sense of serenity. If you haven't guessed by now I really loved this home.

                                       The property is being offered at $9,988,000

While the price limits the number of buyers, I suspect that those in this price range will not be disappointed. As for me... if I win the lottery this would be first on my list of things to buy!

If you are in escrow or thinking of buying a home in the Manhattan Beach or the Beach Cities then financing is of utmost importance. Shopping rates and getting pre-approved is something all buyers should be doing before they step foot in a home that is for sale. Last week conforming** 30 year fixed rate loans of $729,750 or less were around 6.3% with 0 points or 6.125% with 1 point. My... my... how life has changed.

If you are a buyer in escrow or thinking about making an offer... lenders are tripping over themselves to give you a good rate. My buyers that were looking at 6.125% with 1 point on Friday are now looking at 5.75% with 1 point. One of my lenders tells me he can do 5.675% with 1 point. I'm getting rate quotes from every lender I know. This is great news if you are within conforming limits.**

But as with life in general... while some things are sweet... others can be a bit bitter. If you are not within conforming limits the news is not so hot. Jumbo loans over the $729,750 limit are still stuck in no man's land. A fixed rate jumbo ($729,750 +) 30 year loan is 7.75%-8.3% depending on the lender... while a fixed 5/1 ARM is 6.125%-6.25%. However it looks as if some lenders may be thinking about going back to giving customers of their bank a break.

Craig Filson of Wells Fargo tell me that Wells has a new approach for their clients who need larger loans. Wells is going to offer borrowers who maintain accounts with $50K + at Wells, have a Fico score of 720+ and who are looking for a loan to value(LTV) of 75% or less some very good rates. They are offering a jumbo 30 year fixed at 6.875 with 0 points and a fixed 5/1 ARM at 6.50% with 0 points. It you are willing to pay a point you may get a better rate.

I'm sure BofA and others will follow suite in a very short time. Many years ago it was standard procedure for banks to offer their customers with larger accounts a better rate on home loans then they offered non-customers or those with less money in the bank.

I suspect that we will see a number of old ideas resurface in the coming months. I think you are going to see sellers offer to pay points on a loan to buy down the rate for buyers. I fully expect to see some homeowners offer to take back second trust deeds or even carry the first trust deed if a buyer has a large enough down payment. You can expect to see the Bank of Mom & Dad make a comeback as buyers realize they need more money down. FHA loan limits have gone up making these the perfect vehicle for buyers looking at less expensive property who don't have much down.

Buyers are realizing that buying a house takes more preparation today then it did a few years ago. They need to get their credit score in order. They need to start saving money or save more money for a down payment. Expectations will change as buyers realize they can only buy so much house and no more. The idea of a starter house will not be looked down on but rather become a sensible choice once again.

** Just a reminder... As of January 1, 2009 the conforming loan limit will be reduced to $625,000 from the current level of $729,750.