Wants verses needs

By your real estate dude

When I was a kid my mother used to say that my eyes were bigger than my stomach. I was constantly piling more food on my plate than I could ever possibly have eaten. It was never more evident than during the holidays, which is probably why I thought to write this. Thanksgiving and Christmas dinners were feasts at which every member of my family was magically transformed into a glutton, often with a bellyache not far behind.

Over the years since, it could arguably be said that I have spent most of my adult life working with people, many of whom suffer from the same disparity between desire and necessity. Consequently, I have come to the conclusion that most of us have an almost uncontrollable desire to have more than we really need. I have not yet decided whether we are born with it. However, I do know that our culture teaches us to be materialistic to the extreme and often to our own detriment. I see this phenomenon regularly in real estate.

Earlier this year I received a call from a young lady who stated with some urgency, “We need a bigger house. I’m having a baby and we need more space.” Naturally, I asked, “How big of a house do you have in mind?” Without hesitation she announced, “At least 3,500 square feet with no less than 5 bedrooms.” It seems that her current home was about 2,800 square feet in size with 4 bedrooms and 2 and one half baths. I was thinking to myself that this new child must be her fifth or sixth when I asked, “How many children do you have?” As if it should have been obvious to the most casual of observers, she replied, “Oh, this is our first.”

After I recovered my composure, my next leap in logic was that she must have some elderly parents or other family members living with her that would account for such an urgent need for a 3,500 square foot house. In fact, her family consisted simply of her husband, herself and the child she was about to deliver.

I inquired about her financial picture briefly and it became quickly apparent that she and her husband were going to be stretched to the absolute limit if they purchased the new home she was describing. In fact, they were already uncomfortably tight in their finances. Frankly, I was very concerned for their welfare and spent the next few minutes explaining my concerns and trying my best to talk her out of it. No deal. She was dead set on making the purchase and insisted that her husband was as well.

Obviously, this is an extreme example, but it is one of many I could cite and they all have the same theme. The couple’s desires far out stripped their needs and their finances, in many cases to their own detriment. You might say their material eyes were much bigger than their financial stomachs. The result is often a bellyache of a situation in which the house they buy owns them rather than the other way around.

In spite of the strong desire for “more” and “bigger”, there are some ways to keep from finding yourself in such an unenviable position when buying a home. One is to make a list of your needs and your wants with the understanding that the two are not the same. I generally suggest to my clients that they make two columns: one entitled “must haves” and the other “would be nice”. It is most important that you be honest with yourself and that you write in the “must haves” column only those things that you absolutely need. Everything else goes under “would be nice”.

The result will be a more focused and honest appraisal of your situation. You will be able to review every interesting property based upon the bench mark you have created with your list. Most likely, you will end up with a home that fulfills all of your needs and has some of the characteristics that “would be nice”. At the same time, you may save yourself from a financial disaster. Unlike many who do not use this process, you will own your home instead of it owning you.

Home Buyers Face Decisions that Affect Their Long-Term Financial Picture

By Shanne Sleder (the loan dude)

Taking the step into home ownership is one of the most important financial decisions a person will make in their lifetime. There are many factors to consider when embarking on this venture. Literally hundreds of loan programs are available, and it is important to find the one that best fits your personal long-term goals.

First and foremost, you must have a mortgage consultant in your corner that is willing to take the time to know what your long-term goals are. Communication is the key factor here.

Curious prospective home buyers sometimes turn to Internet-based services just to see what current interest rates are. But a faceless web site will not take the prospect’s future financial planning into consideration or guide the potential borrower through the many nuances of the loan process. When shopping for a home loan, be wary of web-based services that offer programs to reel prospects in with attractive rates that are based upon unrealistic time frames.

If a lender is offering a terrific rate based on a 10-day lock-in period, it is unlikely that the potential home owner would actually be able to find their dream home, get through the negotiation process and win approval from a lender within such a short period of time. This is called short-pricing, and when it comes time to close the transaction, the rate that was originally offered is simply no longer available. As a result, the unfortunate prospect is bulldozed into a loan program with a higher interest rate.

It is highly unlikely that a qualified loan originator whose business is based upon referrals will use unscrupulous tactics such as this to get new customers in the door!

Once you have found a mortgage consultant that you feel comfortable working with, lay your goals out on the table because it will have a tremendous impact on choosing a loan program that meets your specific needs. One of the most important factors to consider is how long you wish to borrow the money for. For example, if you know you will only be in the home for five years, it wouldn’t make sense to opt for a 30-year loan program or pay points up front to secure a lower interest rate. You would not be in the home long enough to benefit from such action.

Your mortgage consultant should be able to narrow down a selection of programs based on the information that you have provided, and present you with an easy-to-read spreadsheet that clearly defines viable options for your interest rate and amortization schedule, monthly payment and any potential savings you may realize by paying points up front.

Moreover, a reputable loan originator will not hesitate to share this information with your tax consultant or financial planner so they may offer additional feedback on your behalf.

Home ownership imparts a rewarding vehicle for building wealth and a strong financial future. The mortgage consultant that you choose should be there not only when your loan closes, but should also provide you with ongoing service to assist you in managing that debt over time.

Leverage in real estate

By your real estate dude

Ever since one of my grade school teachers taught the class about the power of the lever, I have been fascinated by the basic physics of leverage. As a matter of fact, I found leverage to be quite useful as a young man while working as a construction laborer. It took me no time at all to realize it was a lot easier using leverage when shoveling dirt than it was muscling through it and straining my back. But it wasn’t until I began my carrier in real estate that the idea of leverage took on an almost miraculous meaning.

The term “leverage” as it is used in investing, is a fancy way of describing the use of other people’s money to purchase investments rather than using your own. If I take out a loan in order to purchase a rental property, I am using the bank’s money rather than my own. I am using “leverage”. The use of leverage is very common in real estate. If you own a home, you probably used leverage when you bought it. However, it is not quite so common in other types of investments.

At one time in my life, I tried my hand at the stock market. I took a stab at various stocks, traded here and there and even made a little money on an IPO. Like many of my peers at the time, my eyes were glued to the pulsating values of my meager holdings as I tried, in vain I might add, to turn my little sow’s ear of a financial picture into the proverbial silk purse. The problem was I didn’t have enough capital to start with. If I wanted to purchase $100,000 worth of stocks, I had to cough up $100,000. I didn’t have that kind of money, so my gains in the stock market were small at best and I soon lost interest.

It was about that time that my wife and I purchased our first rental property. My grandfather had been a very successful real estate investor and I felt that perhaps I might be able to recreate his success. The market seemed to be on an upward track, so we took the leap and bought the property in San Diego for the sum of $135,000. We got it rented the first month and crossed our fingers. Two years later, we sold the property for $185,000 to the tenant. After all was said and done and the costs of the sale were subtracted, we had made about $45,000. Taking our net gain of $45,000 into account, our $135,000 property had appreciated by about 33%. That’s a pretty good return in itself, but it doesn’t include the magic of leverage.

You may remember that in order to purchase $100,000 worth of stock, I would have to come up with $100,000. By contrast, using the magic of leverage we purchased $135,000 worth of real estate with an initial investment of only $27,000. We were able to use “leverage” in order to take our light investment of $27,000 and do the heavy lifting of buying an investment worth much more. Just like shoveling dirt as a young man, I discovered that investing was a lot easier using leverage than it was trying to muscle my way through it using my own limited funds. Leverage also had the almost magical ability to increase the amount of money that we made on any given investment. For example: we spent $27,000 and in two years time made an additional $45,000. That was a return on our investment of 166%!

So, what’s my point? If you have not considered the advantages of using leverage in your investment plans, you may wish to do so. Real estate offers a tremendous opportunity in this regard and may well be the investment vehicle you’ve been looking for.

New Home Construction Continues to Decline in California

California housing starts fell for the seventh consecutive month in September 2006, declining 46.6 percent compared with the construction pace recorded one year earlier, the California Building Industry Association (CBIA) recently reported. Based on the number of building permits issued, 11,590 new housing units were started throughout the state in September, the fewest starts during a September since 1996, according to the report.

Despite the decline, California builders are on track to produce 180,000 new single-family and multifamily units this year. CBIA anticipates multifamily construction to remain strong in most markets for the remainder of 2006 but expects single-family starts to fall by 20,000 to 30,000 units compared with 155,000 single-family starts in 2005. "As expected, the single-family sector remains challenged as homebuilders work toward reducing their year-end inventory," said CBIA Chief Economist Alan Nevin.

For more on the story click on the headline!

Association of Realtors Supported Ballot Measures Approved, Proposition 90 Defeated

From the California Association of Realtors Newsletter:

Four statewide ballot measures supported by C.A.R. were approved by voters during yesterday's election. Propositions 1A, 1B, 1C, and 1E passed, authorizing bonds for highway rehabilitation projects, state housing initiatives, flood protection, and levee repair. The Association supported these public works measures because they are consistent with C.A.R. policy and stand to benefit the real estate industry.Voters also voted against two measures C.A.R. opposed. More than 75 percent of voters said "no" to Proposition 88, the measure to increase property taxes by $50 a year to raise money for schools. Proposition 90, which aimed to prohibit the government's right to seize real property, also failed to pass. C.A.R. opposed Proposition 90 because it would limit the government's authority to adopt certain land use, housing, consumer, environmental and workplace laws and regulations, and would eliminate all redevelopment in California.

Real estate statistics: Are we fishing in the wrong pond?

By your real estate dude

In a recent meeting at my office, the subject of “real estate market statistics” came up. What was said might surprise you. But, before I launch into the story, let me take a moment to establish the background.

San Diego County experienced a “seller’s” market for several years. There were a great many buyers (high demand) and very few available properties (low supply). This shift in the supply and demand ratio meant that seller’s had the advantage, and that buyers were forced to compete for the few homes that were available. Consequently, prices went up. Low interest rates, high consumer confidence and a desire on the part of many to move their money out of the sagging stock market accentuated the upward price trend, and the real estate market boomed. The key phrase here is: “buyers had to compete”. If there were concessions to be made, it would be the buyers who made them.

Since that time, the real estate “tide” has turned. Consequently, we find ourselves in the middle of a buyer’s market. There are very few buyers (low demand) and a zillion homes for sale (high supply). The buyers are now in the driver’s seat. It is now the buyers who have the advantage and the sellers must compete for the few buyers available. Thus, prices have stabilized and in many cases come down.

No doubt you have scoured the business news and knew all of this even before I got the bright idea to write about it. But, what you may not know is what Paul Harvey calls “the rest of the story”. Remember, statistics can be misleading. Quite often, they do not contain all of the information necessary to paint a complete picture. As a result, the potential for coming to an incorrect conclusion based upon them is quite real, which brings me back to the meeting at my office.

The subject at hand was the frustration felt by many agents as they have attempted to explain to “buyers” that this truly is the time to buy. In the face of the media barrage of “statistics”, buyers are often reluctant to accept this advice. I experienced this myself in a similar conversation with one of my clients just two days ago. We were having a cup of coffee and talking about this very subject when he said, “People are trying to time the market. They want to wait until prices come down.” He was right, but what he had forgotten was the key to the story. Remember earlier when I said, “The key phrase here is: buyers had to compete”? But the tide has turned, hasn’t it? In our current market, buyers have the upper hand. Today’s key phrase is: “sellers must compete for the few buyers available”. Unlike the previous market, if there are concessions to be made, it is the seller who is going to have to make them.

To drive home the point, we did a little “poll” during our office meeting. Here is what we found. The agents in the office reported that the average concessions given by sellers recently, ranged from $10,000 and $30,000. The vast majority of these concessions were given as “credits” back to the buyer through escrow. For example: the sellers may have agreed to pay the buyer’s closing costs, give the buyer a credit toward repairs or pay for the first year of home owner’s association dues. In each case, the money was paid by the seller out of the proceeds of the sale of the house, rather than simply reducing the price. So, if you buy a home for $500,000 and the seller agrees to give you $20,000 in concessions through escrow, you have really only paid $480,000 for that home. Since you rapped those concessions into the purchase price, the statistics do no report the concessions. Therefore, according to the statistics the home you purchased in this example would have sold for $500,000.

Let’s take it one step further and say that the home in question would have sold before the market changed for $550,000. But, the market has shifted. You paid $500,000. Statistically, we would conclude that the price of that home dropped 10%. But, remember, the seller gave you $20,000 in concessions. Even though you financed these costs by paying $500,000 for the home, the effective purchase price of the house was actually $480,000. That equates to an actual price reduction of 12.7%. So, if you’re sitting back waiting for prices to drop, which is more exciting to see: a ten percent price reduction or a drop of twelve percent or more?

The point is simple: statistics do not always represent reality. When you take seller concessions into consideration, it becomes clear that home “prices” have come down far more than the statistics and the news media report. If you’ve been waiting for home prices to drop before you buy, this is something to consider in your decision making process. When you do the math, you may find that the time to buy is now.

California Association of Realtors Reports Home Sales Are Down, But Prices Are Up!

LOS ANGELES (Oct. 25) – Home sales decreased 31.7 percent in September in California compared with the same period a year ago, while the median price of an existing home increased 1.8 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

“We expected a fairly steep decline in sales last month compared with a year ago, when sales were near their all-time record,” said C.A.R. President Vince Malta. “Unsold inventory is holding steady, and is close to the long-term historic average typical of a more ‘normal’ market.”

Click hear to read more http://www.car.org/index.php?id=MzY3MjQ=

Association of Realtors Expects Cooling Home Sales, Modest Price Decrease Next Year

From the California Association of Realtors newsletter:

The rate of home price appreciation will post a modest decline next year following several years of steep increases, while the sales pace will decrease as the market stabilizes throughout 2007, according to C.A.R.'s "2007 California Housing Market Forecast," presented today during the California REALTOR® EXPO 2006, running from Oct. 17--19 at the Long Beach Convention Center. The median home price in California will decline 2 percent to $550,000 in 2007 compared with a projected median of $561,000 this year, while sales for 2007 are projected to decrease 7 percent to 447,500 units, compared with 481,200 units (projected) in 2006.

"Although the 2007 sales decline is not expected to be as steep as what we experienced this year, the psychology of the market -- matching the differing expectations of sellers and buyers -- will continue to be a factor as REALTORS® help consumers navigate their way through a changing market," said C.A.R. President Vince Malta. "While we're projecting a modest decline in the median price of a home, over the long term, residential real estate in California has been and will continue to be a solid investment. Since 1968, the long-term average price appreciation is 9.1 percent."

"While we recognized that the frenetic sales pace of the past four years could not continue indefinitely, the housing market in 2006 did not fare as well as we initially expected," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The anticipated slowdown that began in October 2005 was heightened by dual natural disasters in the Gulf Coast, a significant drop in consumer confidence, rising energy and raw materials costs, and a series of Federal Reserve interest rate hikes that began in June 2004. Fixed-rate mortgages also hit and passed the psychological threshold of 6 percent, while adjustable-rate mortgages passed 5 percent, ultimately causing a decline in affordability. Affordability concerns also will continue to constrain sales for many households in California throughout 2007, especially for first-time home buyers."

A Tax Law Change You Should Know About!

From the California Association of Realtors News Letter:

“Tax alternative to 3.33 percent California withholding: Effective Jan. 1, 2007, sellers required to have 3.33 percent of the sales price withheld for income tax purposes may elect an alternative withholding. The alternative withholding is an estimate of the seller's tax liability calculated by multiplying the recognized capital gain by the highest state tax rate for individual taxpayers (or the corporate tax rate for corporations), regardless of the taxpayer's actual tax bracket. Under existing California law, a buyer must withhold 3.33 percent of the sales price from the seller's proceeds unless an exemption applies, such as when the property is the seller's principal residence, the property is in a 1031 exchange, or the seller will not realize any capital gains. The new law applies to non-exempt sellers who may now elect to have less than 3.33 percent withheld. A seller opting for this tax alternative withholding must certify the amount to be withheld in writing under penalty of perjury.”

Halloween Safety

We hope you and your family will have a safe and fun Halloween. With that in mind we've put together this list of websites where you can find great safety tips.

• National Safety Council http://www.nsc.org/library/facts/halloween.htm
• Academy of Pediatrics http://www.aap.org/advocacy/releases/octhalloween.htm
• Red Cross http://www.redcross.org/services/hss/tips/october/octtips.html
• Children's Safety Zone http://www.sosnet.com/safety/halloween.tip.html

Have a happy and safe holiday!

Protecting Your Credit During Divorce

By Shanne Sleder (The loan dude)

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.

Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.

The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)

Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you have this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common securedaccounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.

In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.

Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.

Landlords look out! 60-day notice to terminate revived

Flash! A news release from the California Association of Realtor.

Beginning Jan. 1, 2007, a residential landlord must generally give a 60-day notice to terminate a month-to-month tenant. However, a 30-day notice to terminate is permissible if any tenant or resident has lived in the property for less than one year, or if the landlord has sold the property in the manner specified by law. The 60-day notice does not apply to fixed-term leases (e.g., a one-year lease). It also does not apply if it is the tenant, not the landlord, who terminates a month-to-month agreement, in which case the tenant may give a 30-day notice. To comport with this new law, the California Association of Realtors will release a new standard form "60-day notice of termination", which will also set forth the requirements for the 30-day exception when landlords sell their properties. This law will sunset on Dec. 31, 2009.

Mortgage Applications Decrease in Latest Survey

WASHINGTON, D.C. (October 11, 2006) - The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 6. The Market Composite Index, a measure of mortgage loan application volume, was 599.1, a decrease of 5.5 percent on a seasonally adjusted basis from 633.9 one week earlier. On an unadjusted basis, the Index decreased 5.3 percent compared with the previous week and was down 13.3 percent compared with the same week one year earlier.

To read the entire story, click on the headline above...

National Foreclosures Remain Elevated in September

IRVINE, Calif. – Oct. 11, 2006 – RealtyTrac™ (http://www.realtytrac.com/), the leading online marketplace for foreclosure properties, today released its September 2006 U.S. Foreclosure Market Report, which shows 112,210 properties nationwide entered some stage of foreclosure during the month, a decrease of less than 1 percent from August, and a 63 percent increase from September 2005. The report also shows a national foreclosure rate of one new foreclosure filing for every 1,030 U.S. households, the third highest monthly foreclosure rate reported this year.

To read more click on the headline above...

The Real Estate Time Machine

By your real estate dude

Time has always fascinated me. One of my favorite movies when I was a kid was H.G. Wells “Time Machine”. If you’re old enough to remember it, you probably liked it too. It was full of adventure and, besides, there was just something cool about the idea of controlling time. Ah, the freedom I would have if I only had the chance to move through time and control the events that so often seem to have control over me. I think it’s a safe bet that most people feel that way. If we didn’t, there wouldn’t be so many movies about controlling time.

As you grow older, the reasons for wanting to control time change. When I was a kid, I wanted to slow time down so I could have more of it in which to get my homework done or speed it up so the school day would go by quicker. As an adult, I have dreamed of more time with my wife and kids and that sort of thing. But mostly, my desire to take a crack at the old time machine has applied to my business life where investments are concerned, which brings me to the subject of time where it applies to real estate.

In real estate, as in most other kinds of investing, time takes on new meaning and can be broken down into two basic parts: time and timing. Timing is easy to imagine. It’s simply a matter of being in the right place at the right time and taking the correct action in order to bring about the desired result. Like I said, it’s easy to imagine. Unfortunately, it’s a lot easier to imagine than it is to do, which explains why I’ve always wanted a time machine! Time, on the other hand, can be defined as how long you hold a property or other investment between the date on which you purchase it and the date on which you sell it, at least for the purpose of this discussion. So then, as my wife would say, timing is the “when” and time is the “how long”.

I had a client recently who bought a house when homes were selling faster than you could put the “For Sale” signs up. She, like many others, figured that prices would just keep climbing. A year or so later she wanted to sell, but by then, the market had softened and she couldn’t sell it for what she owed on it. You might say that she had been hoodwinked by “time & timing” simply because she didn’t quite understand how they worked.

Another client also purchased a home at a time when prices were high. He and his wife had just come to town and needed a place to live, so they bought a home even though prices were high and the timing was not the greatest. I just sold their home a couple of months ago. The current market had softened, but they still walked away with a serious profit on the sale of that house. Both these folks bought a house when prices were high. In both cases, the “timing” of the purchase was poor. The only difference was “time”. While one owner had lived in the home for a little over a year, the other had lived there well over a decade. “Well obviously,” you say. But there is a lesson in this. The hard fact is that “timing” leaves little room for error, but “time” is much more forgiving. Let’s explore why this is the case with real estate.

Taking a look at the pricing trends of real estate in San Diego County over the past 100 years, we find that prices have consistently increased over time. Certainly, the market has taken some dips along the way, even some serious ones. However, on balance, it can be said that if you had purchased property anywhere along that one hundred year track and held it long enough, its value would have increased significantly. Depending upon when you purchased the property, you might have had to hold it only a year or two to get the appreciation you desired. On the other hand, you might have purchased it at a time in that hundred year span which required you to hold the property for a period of five, seven or even ten years to see the appreciation. But, either way, if you held it long enough the value when up!

The moral of the story is this: when you’re investing your hard earned money in a home or rental property, it’s important to understand that in general, real estate investments perform best over the long term. So, take this tip from a fellow time traveler and remember the old adage: “He who has the time wins”. Set yourself up for the long haul just in case something unforeseen comes your way. That way, even if you plan to sell the property in the short term to make a quick buck, you’ll be prepared to hold it for the long term if the market changes and you won’t get stuck.

Mission Federal Sponsors FREE "dude" seminar for home buyers!

The next FREE “dude” seminar “7 Steps to successfully buying a home” will help home buyers achieve their goals in this changing market.

You’ll learn what’s involved in:

• Deciding to buy
• Choosing a realtor
• Finding an area
• Identifying prospective homes
• Analyzing the purchase
• Making an offer & putting the deal together
• And managing the close

The seminar is sponsored by Mission Federal Credit Union.

Date: October 21, 2006
Time: 9:00am - 11:30am

Location:
Mission Federal Credit Union
5785 Oberlin Drive
San Diego, Ca 92121
(800) 500-6328

We'll have Coffee and stuff to munch on.

Remember, it’s FREE.

RSVP by clicking on “Ask the dude experts”.

See you there!

East County Newspaper Signs Your Real Estate Dude To Write Weekly Column!

FLASH! STOP THE PRESSES! EXTRA, EXTRA, READ ALL ABOUT IT!

This week, the East County Californian, a leading newspaper in San Diego’s beautiful East County has agreed to publish a weekly real estate column by your real estate dude.

If you live in East County, please take a look at the column and tell us what you think!

Should I stay or should I go?

By your real estate dude

This may sound like an old song from The Clash, but it truly is a dilemma for many when it comes time to decide whether to sell or buy a home. It’s quite common for this simple question to lock people in the limbo world of analysis paralysis. This occurs when too much information, conflicting opinions and fear leave the person completely absorbed in the information but unable to make any sense of it all.

The other day I had a client look at me over the top of his newspaper as I walked up to meet him for coffee. He had the most exasperated look on his face as he announced, “Every time I read the paper, I’m more confused than I was when I started.” In his case the conundrum is whether to sell his home now or hold.

I was at a church event recently when a fellow I’ve known for many years asked the age old question “so, how’s the market?” This gentleman has been asking me if he should buy a house for years. I keep saying yes and he keeps putting it off and asking me the same thing at the next available opportunity. So, I took a couple of minutes to explain the current “buyer’s” market, the low interest rates, the reduction in prices and the deals that many sellers are willing to make in order to sell their homes. He looked at me as if I had ten heads and said, yet again what he always says, “I’m going to wait to see if prices come down.”

Almost without exception the struggle over “should I stay or should I go” revolves around home prices. Let’s face it, if you have a job transfer and have to move, the question is moot. Likewise, if your finances are in disarray and you must sell or are forced to wait until things improve in order to buy, the “should I” question never comes up.

After years of witnessing this struggle to understand what to do when prices change, I have come to the conclusion that it all stems from a misunderstanding of an old, but tried and true rule “buy low and sell high”. I first heard of this rule when I was a kid. My grandfather was quite the real estate investor and rattled this rule off to me on a number of occasions when I was a small boy. One day he asked me to repeat it. When I did he said, “Now remember, the rule is buy low and sell high. It’s not, buy lowest and sell highest”. This meant nothing to me at the time, but much later it was quite a revelation. I came to understand that if I bought when prices were low and sold when prices were high, I made money. It didn’t matter that I never seemed to catch the absolute bottom or top of the market. This may seem so simple as to be hardly worth mentioning, but I have witnessed many an enterprising individual lose money trying to hit the absolute high or low. Does this remind you of the fellow I mentioned earlier who is always waiting for the bottom of the market? If he had purchased a home the first time he asked me, “so, how’s the market”, the home he would have purchased would now be worth a fortune and he would be much better off.

Given the current “buyer’s market, if you are thinking about buying, the “buy low” rule is in full effect and now is the time. Prices are lower, interest rates are still low, lots of properties are for sale and sellers are willing to make deals. On the other hand, if selling is on your mind, it may not be the best time unless you purchased the property some years ago and have significant equity. In that case, you bought low and even though the market has softened you can still sell high because of time. If the equity isn’t there, my advice is hold off for a while. Time will tell, but the chance to sell high may come your way sooner than you think.

Chicken Little Is Crying Again

By your real estate dude

Today's San Diego Union article by Dean Calbreath is another example of doom and gloom. Check out the lead to this story:

"The California real estate market will remain sluggish through at least 2008 and spark widespread layoffs among construction and financial firms, according to the latest UCLA Anderson Forecast."

This article says nothing more than what everyone knows already. What amazes me is that it took all the brainiacs at UCLA to state the obvious. The simple facts are:

• Markets go up and markets go down.
• When markets go up lots of people make money and when markets go down lots of people have to find other ways to make money.

The fact that a slow down in real estate sales may cause a slow down in building of new properties is obvious to the most casual of observers and doesn't require a university study. The question is not if things are slowing down or if jobs will be lost, but what do we do about it?

In general in a buyer's market if you own property and do not have to sell for financial or other reasons, hold. This is particularly true if you are living in the property or if its income property that is generating positive cash flow. If you have to sell the property, price it aggressively so it will sell. There’s nothing more painful that sitting in your house waiting for buyers who never come.

If you are thinking of buying a home remember that it's called a buyer's market for a reason. The buyer's hold all the cards. Remember the keys to investing are time and timing. If you're a buyer, the timing may be right. The question is how long you will be holding the property (time). Historically, southern California property appreciates over time in almost any market. If you are planning on holding the property for enough time buying may be a no-brainer.

If you got into the real estate, mortgage or building profession during the boom you may have to make some changes in the way you do business in order to survive. You may need to explore new approaches to your business marketing and structure. For some it will simply amount to stepping out of the business during the slow down and moving back in when it’s booming again. This has been going on for at least 50 years that I know of.

So, don't let Chicken Little freak you out. The sky is not falling. The real estate market is not bad. It's just different and it requires that we approach it from a different point of view.

Do you need a power of attorney? Let’s see.

By Your Real Estate Dude

There are times when a power of attorney can keep an escrow going that would otherwise come to a halt. But perhaps we should start by explaining what the heck a power of attorney is in the first place. Not being an attorney myself, I will give you the “average joe” description of a power of attorney and maybe we can sweet talk the Lawyer Dude into explaining it more clearly later. For the moment let’s just say that a power of attorney is used to give permission for one person to sign for another. For example: I might sign a power of attorney giving my wife the power to sign my name to documents if it were difficult for me to sign for various reasons. She would then be able to sign documents and make agreements for me. So how is this useful in real estate?

There are many circumstances in which a power of attorney can be very useful. Here are a couple of examples:

Recently, I represented sellers who used a power of attorney to complete the escrow in the sale of their home. During the escrow the wife became quite ill and had to be hospitalized. I made trips to the hospital to go over various documents with them, but it became very clear that this was a tremendous strain on her. During one of my visits I suggested that she sign a power of attorney so that her husband could take care of the paperwork and she could get some rest and concentrate on getting well. Frankly, she was feeling miserable and was overjoyed at the prospect of not having to sign or fill out any more paperwork. She signed a power of attorney that day. Her husband took care of the escrow, the doctors took care of her and I was able to take care of some running around for him so he was able to spend time with her doing something other than signing paperwork.

I have represented military families on many occasions. Quite often one of them is on deployment, out to sea or otherwise unavailable for signatures. In one particular case I showed homes to the husband who took pictures which he emailed to his wife who was out to sea. When we found a home that both of them liked, I drafted an offer which he signed using a power of attorney. The offer was accepted and escrow closed without his wife ever seeing the house in person. When she returned from deployment, I visited the couple. To be honest, I was kind of worried that she might be disappointed having only seen the house in pictures to that point. She was not! She loved the place. Yet another instance in which a power of attorney made things possible that otherwise may not have been.

If you’re in a situation in which one of you is unable to deal with the paperwork, a power of attorney may be the way to go. But, let’s not forget that when you sign a power of attorney you are giving someone else the right to make legal commitments for you. So, before you sign make sure you have talked to a good lawyer and gotten the advice you need.