builders don't want people to flip houses

Lately, I have had a couple of people ask me about selling new houses that they'd just bought recently. In both instances, when I read through copies of their trust deeds, I found where they had promised not to sell the property for at least a year. In one case, where the owners had borrowed about 95%, they had also promised to move into the home within several months of its completion. This type of verbiage is becoming more and more common as builders try to prevent investors from flipping houses in new tracts.

I asked both sets of owners if they were aware of this wording. The first group said they were, and when I asked if they had a strong reason to get out of the agreement, such as a job relocation, they said, "no." They just wanted to flip the house. I advised them to talk to the lender and find out if it was even possible for them to get around the limitation, such as by paying a penalty. But I also told them there'd be substantial tax consequences, and that they should talk to their tax preparer. I suggested that, since they'd put a large deposit on the property, they go ahead and rent it out for a year in the meantime, so that they'll be able to do a 1031 tax exchange later.

As for the other people, they never responded to my questions but just went ahead and listed with someone else. I wish them luck. They'd just gone through a 6-month listing without a single offer, and it probably had to do with their house being priced about 80k over 3rd phase houses that the builder was closing out.

best tacos in Riverside

Our favorite taco, burrito, and torta stand in Riverside is inside a small market at 6024 Magnolia near Jurupa (between Pep Boys and Tuxie's Drive-in). Up until recently, it was called Cazares, but at the moment, there's no name over the front door (which is actually in the parking lot in back rather than on Magnolia). The new owners' name is Bark, and the business cards on the counter say "Bark's Carniceria." The guys behind the counter told me the new owners are Korean, but they haven't changed much that I can tell. The menu and all the workers seems to be the same.

My husband and little girl always get the carnitas. My husband likes their red salsa so much that he often asks for some extra on the side. (If you're not sure how hot you want it, tell them only to put it on the side, so you can control the amount.) Our 4-year-old is still too young to handle salsa and onions, so she just has the meat in her tacos. I usually get the carne asada with some avocado thrown in.

They have lots of other cuts that you try out and see what you like, plus shrimp, ceviche, and fried fish.

San Bernardino housing statistics from the last 60 days

Since my last report on San Bernardino (3/20/06), there’s been an increase both in inventory and in the number of single family residences sold as one would expect during the spring. Values are holding fairly steady across categories with the biggest change being a 23k jump in the average sold price of 4+ bedroom houses. Unlike in Riverside, the average list price of available single family residences has only increased slightly.

There has been a noticeable decrease in the average values of 1-2 bedroom condos that have sold. 3-bedroom condos show a marked increase in pending values over that of solds, but there are so few units involved that the information is merely anecdotal and doesn’t offer a real trend.

Note that pending, expired, and sold data are as of 3/28/06. The back-up category would not allow me to limit the time period, so there may be some false figures if any agents haven’t updated their listings. As always, incorrectly input codes and figures may have skewed the numbers.

Houses
2 or fewer bedrooms:
Available: 215 Avg. Price: 298,992 Avg. Days On Market: 55
Pending: 71 Avg. Price: 279,831 Avg. DOM: 32
Back-up: 14 Avg. Price: 265,707 Avg. DOM: 87
Sold: 90 Avg. Price: 263,406 Avg. DOM: 47
Expired: 38 Avg. Price 283,187 Avg. DOM: 36

3 bedrooms:
Available: 518 Avg. Price: 353,602 Avg. DOM: 53
Pending: 156 Avg. Price: 326,929 Avg. DOM: 47
Back-up: 45 Avg. Price: 336,105 Avg. DOM: 80
Sold: 233 Avg. Price: 322,685 Avg. DOM: 48
Expired: 169 Avg. Price: 357,976 Avg. DOM: 35

4+ bedrooms:
Available: 306 Avg. Price: 466,469 Avg. DOM: 57
Pending: 49 Avg. Price: 371,597 Avg. DOM: 53
Back-up: 3 Avg. Price: 389,738 Avg. DOM: 72
Sold: 81 Avg. Price: 419,515 Avg. DOM: 50
Expired: 94 Avg. Price: 436,779 Avg. DOM: 31

Condos:
2 or fewer bedrooms:
Available: 26 Avg. Price: 204,272 Avg. DOM: 65
Pending: 17 Avg. Price: 189,761 Avg. DOM: 43
Back-up: 4 Avg. Price: 219,475 Avg. DOM: 66
Sold: 18 Avg. Price: 213,438 Avg. DOM: 40
Expired: 11 Avg. Price: 209,790 Avg. DOM: 47

3 bedrooms:
Available: 4 Avg. Price: 263,449 Avg. DOM: 60
Pending: 4 Avg. Price: 247,425 Avg. DOM: 20
Back-up: 0
Sold: 7 Avg. Price: 207,714 Avg. DOM: 35
Expired: 2 Avg. Price: 249,000 Avg. DOM: 103

Moreno Valley Statistics from the past 60 days

Similarly to Riverside, the recent figures for Moreno Valley show stable prices in general since my last report (3/22/06). The average of available prices is higher than that of expireds but are much closer than in, say, Riverside. The much higher number of closed sales are in keeping with the typically more active spring market. Pending, back-up closed, and expired figures are from 3/27/06 through the present.

In the single family residence category, 1-2 and 3-bedroom houses in escrow show an average lower list price than closed sale prices. However, a number of these properties may end up closing higher as there’s room for buyer’s to stack costs.

As always, the data may be thrown off by agents who input codes and prices incorrectly. I had to leave out the average price of 3-bedroom properties taking back-up offers as the figure was too high—one house was listed for about 3.2 million more than it could possibly be worth.

Houses
1-2 bedrooms:
Available: 63 Avg. Price: 315,156 Avg. Days On Market: 49
Pending: 34 Avg. Price: 295,508 Avg. DOM: 48
Back-up: 4 Avg. Price: 304,000 Avg. DOM: 44
Sold: 43 Avg. Price: 299,127 Avg. DOM: 31
Expired: 18 Ave. Price: 301,316 Avg. DOM: 94

3 bedrooms:
Available: 463 Avg. Price: 390,068 Avg. DOM: 48
Pending: 155 Avg. Price: 360,869 Avg. DOM: 44
Back-up: 36 Avg. Price: (data too skewed by incorrect entry)
Sold: 236 Avg. Price: 366,690 Avg. DOM: 45
Expired: 102 Avg. Price: 384,506 Avg. DOM: 47

4+ bedrooms:
Available: 649 Avg. Price: 465,197 Avg. DOM: 55
Pending: 121 Avg. Price: 452,511 Avg. DOM: 58
Back-up: 37 Avg. Price: 451,860 Avg. DOM: 74
Sold: 226 Avg. Price: 424,746 Avg. DOM: 48
Expired: 172 Avg. Price: 458,179 Avg. DOM: 68

Condos:
1-2 bedrooms:
Available: 1 Avg. Price: 210,000 Avg. DOM: 4
Pending: 4 Avg. Price: 254,750 Avg. DOM: 30
Back-up: 0
Sold: 3 Avg. Price: 201,333 Avg. DOM: 37
Expired: 0

3 bedrooms:
Available: 1 Avg. Price: 229,900 Avg. DOM: 4
Pending: 5 Avg. Price: 242,500 Avg. DOM: 48
Sold: 2 Avg. Price: 213,500 Avg. DOM: 3
Expired: 0

4+ bedrooms:
Available: 0
Pending: 0
Back-up: 0
Sold: 0
Expired: 0

Riverside housing statistics from the last 60 days

Here are today’s numbers for the City of Riverside and the surrounding unincorporated areas. For pending, back-up, sold, and expireds, the data is from 3/26/06 through today.

Overall, the upward trend continues for new listings while homes that are in escrow are noticeably lower in listed value. In fact, the average value of available listings is higher than that of expired listings with the exception of 3-bedroom single family residences. The sold prices are generally lower than the pending and back-up list prices with the exception of 3-bedroom condos.

What I find interesting is that while the average price of sold 2 (or fewer bedrooms) and 3-bedroom single family residences dropped several thousand dollars, that of 4+ bedrooms actually rose since my last report (3/18/06). And the market is definitely more active than it was a couple of months ago with many more properties closing this spring. So despite the very large inventory, the real estate market in Riverside is actually proving rather stable.

As always, the data may be skewed by the occasional listing agent who inputs the wrong code, price, etc, though I must say there’s been a marked improvement since the board has begun fining people.

2 and less bedrooms:
Active: 124 Avg. Price: 392,759 Avg. Days On Market: 44
Pending: 46 Avg. Price: 354,377 Avg. DOM: 36
Back-up: 12 Avg. Price: 338,133 Avg. DOM: 65
Sold: 63 Avg. Price: 328,470 Avg. DOM: 34
Expired: 29 Avg. Val: 336,906 Avg. DOM: 53

3 bedrooms:
Active: 800 Avg. Price: 459,405 Avg. DOM: 52
Pending: 156 Avg. Price: 412,015 Avg. DOM: 47
Back-up: 67 Avg. Price: 416,979 Avg. DOM: 74
Sold: 297 Avg. Price: 411,142 Avg. DOM: 46
Expired: 188 Avg. Val: 460,991 Avg. DOM: 66

4 and more bedrooms:
Active: 1036 Avg. Price: 641,325 Avg. DOM: 53
Pending: 172 Avg. Price: 555,357 Avg. DOM: 52
Back-up: 69 Avg. Price: 600,165 Avg. DOM: 64
Sold: 293 Avg. Price: 550,767 Avg. DOM: 53
Expired: 251 Avg. Val: 627,826 Avg. DOM: 48

Condos:
2 and less:
Available: 36 Avg. Price: 268,028 Avg. DOM: 32
Pending: 8 Avg. Price: 279,587 Avg. DOM: 37
Back-up: 4 Avg. Price: 263,997 Avg. DOM: 66
Sold: 17 Avg. Price: 282,811 Avg. DOM: 39
Expired: 10 Avg. Val: 250,680 Avg. DOM: 38

3 bedrooms
Available: 21 Avg. Price: 372,576 Avg. DOM: 27
Pending: 10 Avg. Price: 316,389 Avg. DOM: 52
Back-up: 1 Avg. Price: 324,900 Avg. DOM: 1
Sold: 17 Avg. Price: 336,811 Avg. DOM: 28
Expired: 5 Avg. Val: 360,578 Avg. DOM: 31

4 and above count:
Available: 7 Avg. Price: 446,714 Avg. DOM: 59
Sold: 3 Avg. Price: 379,000 Avg. DOM: 120
Expired: 0

If they want to pay an extra $100,000...

My broker recently announced a scam to watch out for. If the buyers want to pay an extra 100k or so, and they ask the sellers to pay them about half of it outside of escrow (or say, take back a 2nd loan without expecting it ever to be paid), they're defrauding the lender. Such amounts are way over lender limits for seller help with closing costs and/or allowances. To accomplish this, the buyers need the help of the appraiser. Of course, the buyers are going to be stuck with a sizable payment for some years (unless the house goes up significantly in value), so they don't get off completely. If prices dip and a life change forces them to sell, they're in real financial trouble. Moreover, these kinds of sales are also bad for the neighbors because they produce comps that then justify bigger debt when other home owners in the area decide to refinance. If these other owners then get into a situation where they need to sell, they won't be able to cover their debts.
So who benefits? The buyers might at first because they get the house and money to fix it up (hopefully to the point where it actually approaches its supposed worth.) The sellers obviously get their price and then some. The appraiser may profit beyond the usual fee. And then the real estate agent who is also the loan officer fares well because s/he is the person who is making the commissions off the overvalued property. If this person also manages to represent both the buyer and the seller, s/he could be getting an extra 10k. But is that enough money to justify putting so many others at risk?
So if one house in your neighborhood suddenly sells for 100k or so over anything else in the neighborhood, don't jump for joy because your house is suddenly worth more. And please don't use it to take out a bigger loan!

The Final Walk-Through Isn't a Contingency

I had a bizarre experience last week where the buyer's agent told her not to sign the final walk-through form (Verification of Property Condition) because the sellers had left a bit of a mess in the garage and the grass needed to be cut. The agent, who was also the loan officer, actually threatened to hold up funding until the place was cleaned up.

First, the final walk-through isn't a contingency. It's a piece of paper on which the buyer can note down any repairs that haven't been made and any new problems. It has to be done shortly before closing, and the seller also signs it. Basically, it provides a paper trail should the buyer wish to take legal action (usually of the small claims variety).

Second, as I explained to the buyer, delaying funding would only hurt her. My sellers would have been well within their right to dump her at that point. They would have lost time and money, but they could have put their house back on the market. After all, they had something to sell.

As my sellers had already moved, their gardener had disappeared, and their friends had run out of room in the dumpster, I hired some help and participated in the clean-up. The loan funded, title recorded, all before the clean-up could finish. So the buyer never got to sign a final walk-through at all, and now she doesn't have that paperwork.

In the meantime, I'm still trying to get a waiver signed, saying that she had been advised to have a final walk-through. I have a check that the sellers had agreed to give her outside of escrow for some repairs that her lender wouldn't allow them to pay for earlier. Once I get the waiver signed, I'll give her that check.

Keys will be given after title records

Lately, I've had trouble with buyers trying to get keys before title records. I've even had one buyer's agent give his client the key that was in the lockbox. He sent me an email, but I didn't receive the email until after I went to take the lockbox down and discovered that the key was missing.

The reason why is that the buyer is still not technically the owner (at least, not according to county records) before title records even after the loan has funded. So I can't hand over the keys until then, and the residential purchase agreement allows for possession at close of escrow or within three days after but not before. A separate agreement has to be made to allow the buyer to move into the property ahead of title recording.

On the RPA, the buyer can put down what time of day they wish to get possession, but this is at best an ideal schedule. I've seen agents put down 10 am on close of escrow. That's nice, but confirmation can take hours, and if it's a special afternoon recording on a Friday afternoon or at the end of the month, confirmation may come after 5 pm.

As for the agent who took the key out of the box ahead of time, I chose not to complain because my seller had already moved out months before and it was a special recording on a Fri. afternoon. I had planned on taking the lockbox down the previous weekend but had left it up to accomodate the buyer who had to reschedule the final walk-through at a time that I couldn't make. But from now on, I'm taking the lockbox off after the inspections and will be leaving them at my office, just in case.

Zillow.com: A Quick Review

A couple of months ago, a friend of ours told us that Zillow.com had told her that her family’s home was worth about 580k. I was surprised as I knew their home and the neighborhood, and I would have ballparked it at 620k. My husband tried running our own home, and he got a value that was about 60k under what I would have thought. That’s when I knew I had to try out the site.

The first of my closed listings that I ran on Zillow.com was so close, it almost scared me. It was within $50 of what my sellers netted after paying for the buyer’s closing costs of 10k. The property appraised easily at the total amount, making the Zillow.com estimate very reasonable.

However, I then ran another of my closed listings, and the Zillow.com estimate was about 60k under what it appraised and sold for. Curious, I checked the comps and discovered that they were mostly from about 6 to 7 months before. Last year, there was an overall increase in residential property values of 30% in the Inland Empire, and the time factor for figuring value was and is vital. The comparables were generally within a couple hundred square feet and located nearby, but none were from within the last 60 days, so the values were really off. An appraiser would prefer to use more recent sales and add or subtract for differences between the subject property and the comparables.

What is amazing about Zillow.com site is how fast it comes up with an aerial view of the area even with an incomplete address. The photo of one my listings was so clear that I could see the play house in the backyard and the sod (which was only put in a few months ago).

I went ahead and doublechecked the MLS for comps for our friend’s home and found that there were 2 closed sales since 3/1/06 at about 557k and 687k. There’s one pending sale just 2 blocks from them at 579k. Her house is just a couple of years older than both of the solds, and while she doesn’t have granite counters or hardwood floors, her property has additional amenities such as a covered patio, a spa, and a pool with a waterfall. The lot is as large as that of the higher-priced house. If I wanted just to use the average of the 2 solds, neither of which has a pool, I’d come up with 622k, which isn’t too far off from my original guesstimate. So if she really wanted to sell, I’d recommend some extra weeding, decluttering, and deep cleaning. Then I’d price it at 630k with a 6-month listing, 6% overall commission, and lots of advertising.

Zillow.com has a lot going for it, and if it satisfies the curious, that’s fine by me because it’ll keep more people from asking me for CMA’s. Not that I mind finding comps for the curious as I’m rather addicted to doing them.

To check out Zillow.com yourself, go to:
http://www.zillow.com/

Don't Sign that Blank Contract!

It's just not a good idea to sign any forms that haven't had all the dates, dollar amounts, and commission percentages filled in. If your agent says that he or she can do it later, ask, "Why not now? I'm not in a hurry."

A few weeks ago, the front desk at my office buzzed me to come and help translate for a Spanish-speaking woman. Her story was a sad one.

She wanted to list her mobile home, which had previously been listed. However, the carbon copies she had of the contracts were all blank except for her signatures, dates, and initials. She told me that the agent had "cancelled" the listing at her insistence because she'd never received a single offer. However, the "cancellation" consisted of the agent's signature on the back, a date, and a "K" in a circle.

I explained to the woman that a cancellation form does exist, and she should get the agent to sign it since, if she listed again with someone else and the property sold, she might be liable to pay 2 commissions. Unfortunately, she told me that agent had changed companies, and no one seemed able to find her.

I also told her then that her agreement had originally been with the company that the agent had worked for. While many companies (but not Tarbell) allow agents to take their listings with them when they leave, the office should nonetheless have some documentation regarding the listing. Also, I told her, the agent's current company would show up on the Department of Real Estate website, and the former broker should at least help her get that information.

Hopefully, she'll never sign a blank form again. Who knows how the agent might fill in the blanks? A 12-month listing with a 50% commission? And be sure to get a link to see the listing on the public site of the MLS. You won't be able to see the commission, but you'll see if the price changes without your signing a listing amendment.

Fox News segment on gas prices and inland empire real estate

I finally got to see the segment that aired last week on Fox News about gas prices and inland empire real estate. It was rather embarrassing. The interview with the producer and the cameraman lasted about 10 minutes, and I made what I thought were important observations about debt-to-income ratios and foreclosures. However, my bit was reduced to a laugh, and the reporter who never even came out that day incorporated a lot of the information that I gave them without attributing any of it to me. Oh, well... I understand now that most people who give interviews are probably brighter than they appear in the clips.

This is a really big file and takes 4 minutes to download with our cable modem connection. You're probably best off right clicking on your mouse and selecting "save as".
http://www.riverside-real-estate.us/videos/Alma-FOX.mpg

A Day Without an (Immigrant) Agent

I had one escrow that I couldn't open and another that I couldn't close today because both buyers' agents/lenders are Latinas, and their companies are completely shut down. Wow. After fielding desperate phone calls from clients and a non-boycotting agent, I gave up and went home.

I actually should have been out marching today. My mother's father was an illegal alien his entire time in the U.S. He was a merchant marine who jumped ship in Seattle in the '20's. My father's mother never became naturalized. Since her husband became a citizen, it wasn't really an issue, and some years after my grandfather's death, we realized that no one had gotten around to registering grandma for a while. Luckily, the INS never came after her.

Anyway, I do hope these agents and their coworkers are out demonstrating today and making a powerful statement, at least for their clients' sakes. A majority of the San Bernardino and Moreno Valley buyers that I've been seeing in the past year, along with their agents and their lenders, is Latino, and it would definitely cripple the U.S. real estate market if these immigrants were to disappear.

Press Enterprise article about immigration protest in Riverside today:
http://www.pe.com/breakingnews/local/stories/PE_News_Local_D_web_boycott2.10020631.html

Gas and Inland Empire Real Estate

Several days ago, I got a call from a producer at Fox News who was putting together a segment on gas prices and Inland Empire real estate. I connected him with the buyer of a house I had listed a few months ago, and he interviewed both of us that afternoon.

I’d been thinking for a while about gas and how it’s affecting people who are commuting to the coast, and the interview gave me a chance to articulate some of the concerns I’ve had.

1) People who are looking to buy shouldn’t charge their gas as this will affect their debt-to-income ratio.
2) People who have bought high and have big mortgage payments need to cut their gas costs or the increase may push them over the edge into foreclosure.
3) Increased gas prices will eventually affect all segments of new construction.

I’ve begun asking buyers from LA and Orange Counties if they’re figuring gas into their new home budget. The answers are varied. One person told me that his company pays for his car and gas. What a lucky guy! Other people are telling me that they’ll start looking for a local job as soon as they’re out of escrow.

Riverside has a bright future in terms of growth, but fuel prices will have a dampening effect unless individuals and government can come up with a variety of solutions. We’re certainly weak when it comes to mass transit. Trains are expensive, few, and unreliable. Bus rides are interminable.

In addition, car pool lanes on the freeway appear and disappear randomly, and when I was growing up, no one would have thought 2 people sufficient to call a “car pool.” And the complete lack of a car pool lane wherever there are toll lanes is nothing short of bizarre.

I made the decision to get a Honda Civic Hybrid now that their safety standards are approaching the Volvo I’d been driving the last few years. My clients are cramped, but they don’t seem to mind my doing the driving and paying for the gas. However, while the mileage is terrific, I do have a heart attack every time I go to the pump and see the huge leap in price from two weeks before.

Since I bought a hybrid that also has low emissions, I was able to get car pool stickers, so I can use the HOV lane even when I’m alone. I’m also getting a nice tax refund—but nothing compared to the amazing write-off that Hummer owners get.

So all those wonderful lobbies have helped push us to the edge of suicidal consumption. If you’re serious about getting the home of your dreams, you’re going to have to start making some difficult choices. Your beloved SUV may be costing you as much as the tax payment on a house. If 3 of your coworkers could cram into an economy car with you, all of you could cut your commuting costs to 25%, and then you might be where you were a few years ago… Oh, except that, in addition to their delivery to the local store, all that plastic in our shampoo, mouthwash, and water bottles requires fossil fuels.

Here’s a recent article on the history of write-offs for gas-guzzlers:
http://moneycentral.msn.com/content/Taxes/P97282.asp

Here’s a pro-hybrid site:
http://www.hybridcenter.org/hybrid-vs-hummer.html