Boy, it is rough out there for anyone who bought a house in the last 12-18 months and now has to sell. Whether because of a job relocation, or simply to get out from under unexpectedly high loan payments, or a job loss, etc, a lot of sellers are seeing a big drop in their home values.

Some clients of mine bought a house last year for $1,382,000 but decided to move back to their old house that they had rented. We listed it for $1,399,000 but had no action. It wasn’t until we dropped the price to $1,349,000 that we got an offer for $1,300,000. After a few rounds of negotiations, we settled at $1,340,000. The sellers weren’t happy, but at least it wasn’t any worse.

Another client of mine didn’t do so well. She bought her house from another agent just 10 months ago for $599,000, with a $500k first loan and a $100k loan from her mother. But due to some change in life circumstances, she found the monthly payments too stressful. I listed it for $575,000 but there was absolutely no action. Then, the house right next door to it came on the market as a REO, a property owned by a bank after having foreclosed on the prior owner. . It wasn’t as nice a house architecturally but it wasn’t horrible. But it had almost twice the square footage and was listed for just $550,000. Bad news. So we dropped our price to $545,000 but still no action.

After commission and closing costs, even a $545,000 sales price would have meant the seller’s mom would have lost her entire $100k investment. But it was clear that the market in this neighborhood was really suffering. I gave the listing back to the seller, who relisted with a family friend for $499,000, subject to short sale approval. But now 4 weeks later, at a price 20% lower than what she paid, she still has no offers.

A Short Sale is when a lender agrees to accept less than what is owed on a mortgage instead of having to foreclose. Given the huge rise in foreclosure rates across the country, and the fact that home values have fallen, lenders realize that it is in their best financial interest to accept 80-cents on the dollar, or some other percentage, just to avoid the also costly foreclosure process.

You can be assured we will be seeing a lot more of this in the months to come.

Brett Weinstein

Here’s a frustrating circumstance: I get an offer on one of my listings but one of the two seller clients has seemingly gone out of town without telling anyone and is not picking up his messages! It’s a perfectly good offer, by which I mean it is counter-able, and the one seller I’ve been able to reach is ready to sign. But without his partner, we are dead in the water! I’ve asked the buyers to be patient and that I do expect to give them a formal response. I just can’t say when.

This is very off-putting to the buyer because it reminds him of what happened on the last offer he made on a property: the seller’s agent stalled giving the buyer a response while “shopping” their offer around to other prospective buyers, i.e. telling other buyers how much the received offer was for, with the idea of getting even higher bids. The buyer got wind of this activity (which is perfectly legal but not particularly nice) and decided to pull his offer altogether.

In this case, no such thing is happening. One of my sellers is simply AWOL. But I can understand the buyer’s frustration and realize that unless we respond soon, he may very well move on to another property. All I can do is ask for his patience.

Of course, I hope that everything is ok with my client. Ah, just another day in the life of a real estate broker.

Brett Weinstein

Optionee Remorse

You’ve probably heard about buyer remorse, where at some point in the purchase of a home the buyer regrets their decision to either buy, or not buy. Optionee remorse is similar, but drawn out over a much longer time frame.

An optionee, in this discussion, is a person who has negotiated a purchase price today for a purchase they will make sometime in the future, say, a year from now. In an appreciating market, setting a price today can potentially mean you will be buying below the then-market value, assuming the market continues to go up. In a declining market, negotiating a price today, trying to take into account what might happen in the future is an obviously risky thing. How risky depends on the terms of the option.

Last year in August, I negotiated a $2.3m home purchase to take place one year later, now in mid Aug 2007. During this yearlong period, my client would rent the house, with 100% of the rent ($9k/mo x 12 months) applied towards the eventual purchase. There was also an up-front payment to the seller of $48k, also to be applied to the purchase.

Now, by definition, an option to purchase is just that, an option. The buyer can choose not to go through with the deal (i.e. not exercise the option). But in this case, not exercising the option meant the buyer would walk away from a total of $161,000 in credits towards the purchase (all the rent, plus a $5k security deposit, plus the $48k option money).

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A Nicely Updated Duplex in East Oakland, Perfect for Owner-Occupant or as Straight Income Property

9603 Olive Street, Oakland Offered at: $399,000
Each unit features:

• 2 bedrooms/one bath
• Approx. 797 sq. ft. living space, each
• Hardwood floors
• Tile countered kitchen
• Laundry room

There is a two car garage, and driveway that can accommodate up to 6 cars.

One unit is currently owner-occupied.
Both units will be vacant at close of escrow.

Oakland Duplex for Sale Photo Tour