Oscar Myer Weiner

Oh, I wish I was an Oscar Myer weiner,
that is what I truly want to be, ee, ee,
oh, if I was an Oscar Myer weiner,
then everyone would be in love with me. 

Are you old enough to remember the advertising jingle “I wish I was an Oscar Myer weiner”? This comes to mind when thinking about putting a house on the market right now, the first week following the Labor Day weekend. This is the traditional start of the Fall real estate season, when the market wakes up after its two month (July and August) holiday. But there is a big cloud hanging over the market, in the form of low consumer confidence and the still-lingering effects of the sub-prime mortgage collapse. Many neighborhoods have experienced near-zero sales in July and August, so the backlog of unsold houses will join the numerous new listings that are likely to come on the market in the next two months. By definition, when supply is high and demand low, prices get very soft. So it’s not exactly a great time to sell. Unless….

Unless you live in one of the few neighborhoods in where demand has kept steady and prices continue to rise, even dramatically. Yes, they do exist. I’m speaking of the North Berkeley flats, as well as lower Rockridge. These two neighborhoods have defied all reports of doom and gloom, with multiple offers and huge overbids reminiscent of the glory days of the not-so distant past.

So instead of wishing to be a hot dog, but to the same tune: “I wish I was a North Berkeley or Rockridge listing….”

-Brett Weinstein

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

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).

(more…)

With daily headlines in the major newspapers alternating between a confirmed
decline in the state market followed by statistics reporting a rise in median
prices in many cities in the Bay Area, one can’t help but wonder what really
is going on? Is it is good time to buy? Is it a good time to sell?

Like the famous saying from former Speaker of the House Tip O’Neil: “all
politics is local” , the truth about the real estate market is very
neighborhood specific. Even city-wide statistics don’t tell a very accurate
picture. It’s the neighborhood. Sometimes even the block.

For instance, we just had 673 Alcatraz Ave, near Shattuck Ave, on the
Oakland/Berkeley border, listed for sale. It was a beautiful house, with a
detached inlaw cottage, all in excellent condition. Our asking price was
$629,000, which would have been low except for the busy street. At the same
time, just 2 blocks away, we also had 473 North St on the market. This was a
smaller, not nearly as charming a house, but located on the end of a
cul-de-sac. The asking price was $679,000.

Both homes received multiple offers. Alcatraz, on the busy street, received 8
offers, and ended up selling more than a $100,000 over its asking. Quiet North
St received only 3 offers and sold for only slightly more than asking.

Now move a short distance away to the North Oakland/Emeryville border. Here,
we have a cute 2Br/1Ba on the market for $469,000 (993 Arlington Ave). On our
2^nd Sunday open house, not a single person came by! As of this
writing, its been on the market almost 4 weeks without a single offer. The
asking price was based on numerous recent sales “comps”, even adjusted
downward for today’s slower market. But I guess I didn’t get it right. This is
reinforced by the fact that a house just 2 blocks away, on Aileen St, of
similar size and condition, but asking only $429,000 went “pending sale” right
away.

In Rockridge proper (zipcode 94618), since January 1, 07, there were only 4
sales of 2Br/1Ba homes, and only one of them sold for over its asking price
($719,000 to $750,000). The other three sold for list or slightly under.

In North Oakland (94609), there were just 6 sales of 2Br/1Ba’s. The prices
overall are lower than Rockridge, as one would expect. But 4 of the 6 sold for
slightly over asking. The price range was $441,000 to $661,000.

  View Data on all sales in these two zipcodes for the 1^st Quarter of 2007 here: