What Could I Buy With Barry Bond’s Record Breaking Home Run Ball?

San Francisco Giants outfielder Barry Bonds is only two home runs away from tying Hank Aaron’s career home run title.  As fans file into a sold out AT&T Park tonight in hopes of witnessing the blast, I thought it would be interesting to see what I could buy if I caught the record breaking ball and sold it. 

It is has been estimated that the record breaking ball could fetch as much as one million dollars at auction if Barry wasn’t linked to a steriod scandal.  Currently, most memorabilia experts expect the ball to sell for closer to $500,000.  Still a huge amount for a baseball, but far less than it could have if not for the scandal.  So I have a cool 500k burning in my pocket.  What can I buy?

Since I love real estate and I love where I live, I want to invest in another piece of real estate.  Given that the average sales price for a single family home (in June) in Los Altos was $1,851,840., I could use the 500K as my down payment.  The only problem is I would need to come up with an additional $11,000 per month (for 30 years) to cover the mortgage, taxes and insurance.  Since there are only 44 homes available (in June) and the average time a home is on the market in Los Altos is 33 days, I may need to act quickly.  Maybe I shouldn’t be quite as aggressive and buy a condo or townhome in Los Altos?

Given that the average sales price for a condo/townhome (in June) in Los Altos was $1,155,000., I could use the 500k as the down payment and have a reasonable monthly payment covering my mortgage, taxes and insurance of $5,500 (for 30 years).  Since there were only 17 available and they sell on average within 16 days (in June), I will have to act quickly.  Unfortunately, neither option has me really fired up.  I guess I’ll have to turn the game on and continue to dream about what could have been.  And for the fan who eventually gets the ball, I only hope that Barry’s record breaking home run ball appreciates as well as our local real estate has.

Its hit high, its hit deep, its in McCovey Cove, another splash hit……

Real Estate Can Be An Excellent Investment But Sometimes There Can Be Unforeseen Problems

A client of mine who owns several small multi-unit properties recently passed on a story about some of the problems that he has had with one of his properties.

The investment looked good and the return on the investment looked strong.  The property was located in what appeared to be a good area.  The complex had a good rental and occupancy history and rents were substancially below market.  In general, real estate in this area was appreciating at about a 4% rate.  The investors bought the complex at a discount with the intention of rehabing the units and raising the rents to the current market rate.  However, during the rehab, several small problems came up:  supplies, tools and appliances were taken from the job site; illegal substances were found in some of the units; and lastly,  incompetent tradesmen created more “issues” than they resolved.  It was beginning to look like this investment would not be as strong as expected.

Over a period of several months, as each unit was completed, they were rented out.  Unfortunately, this took a little longer than anticipated.  But, not too out of line.  After 5 months, the complex was creating a positive cash flow and after 8 months all the units were rented and things looked good.  Over the next several months things went smoothly.  The investor only had to deal with the usual problems associated with owning a 15 unit building (ie snaking a toilet every now and then, landscape maintenance etc.).  Jump forward to month 15…

The investor gets a panicked phone call from one of his tenants and later that day, the police.  According to the tenant, two masked men broke into his unit wanting money (more likely drugs).  There was a scuffle and several gun shots were fired.  Fortunately for the tenant, he survived with only a small head wound.  Unfortunately for the investor, several walls had bullet holes and the brand new refrigerator took one for the team and went to the appliance heaven in the sky.  The gunmen left without getting what they had come for and the tenant (in fear that the gunmen may return) never came back.  Soon, other tenants gave their notices.  Now the occupancy rate is back down to around 60% and the rental market has become a little softer.

Nightmare on Elmwood Street. A Real Estate Deal Gone Bad in Just So Many Ways!

Although this event didn’t actually happen on Elmwood Street, it did actually happen…

A few years ago, I represented a buyer in a multiple offer situation on a nice starter home in the 95129 zip code.  The listing agent owned a small local firm and after several discussions, I learned all I could about what the seller needed.  I learned that there were 6 confirmed offers (in her hand) and that all offers were to be presented to the listing agent (I hate this senario).  Later that evening, the listing agent would review the offers with her client.  So my client and I put together the best offer possible.

Upon arriving at the listing agent’s office, I learned that there were only 2 offers.  Apparently, the other 4 offers that she had in hand (only 45 minutes earlier) had somehow disappeared.  Odd isn’t it.  Having known this agent for some time, the buyer and I had prepared several different offers given the probability that “real estate is always in flux.”  After presenting my client’s offer, the listing agent asked if we could increase our purchase price (this was a normal question given the market but somewhat aggressive given her previous misrepresentations regarding the number of offers).  I said “no,” but indicated that the listing agent should put her request in writing and I would present it to my client.  The listing agent declined so I figured that my client’s offer was dead.

Flash forward to late that evening when I get a call from the other agent representing the other buyer on this home.  She wanted to see if my client was going to respond to the seller’s counter-offer.  Apparently, the listing agent told the other buyer’s agent that the seller had countered both buyers (hers and mine) and that we were in a multiple counter situation.  The listing agent had specifically told the other buyer’s agent that I had received a counter-offer.  Note: I never received a counter and there were no other agents/offers involved.  I told the other agent that my buyer wasn’t comfortable with the way the listing agent represented things (how an agent represents himself/herself also reflects on the consumers image of the property) and had decided not to pursue the home.   Then something bizarre happened.

The other buyer’s agent wanted me to advise her on what to do?  Hello, I don’t work for you or your company, I’m not your manager and I’m not your legal advisor (although she needed one).  In short, get a clue!  She wanted to know if she should tell her client that there weren’t any other offers on the house.  Or should she keep quite and have her buyer sign the counter as it is and get the house.  My advice was to let her client know all the facts and let him/her decide and/or at least she should talk with her manager.

Flash forward another 6 weeks.  I run into the other buyer’s agent at the Thursday broker tour and ask her what she eventually did.  Can you guess what she did?  Yep, she didn’t tell her buyer anything.   In the end, the buyer got the house but over paid for it.  What makes matters worse is that the buyer’s agent told me that her client was so ecstatic  to have gotten the house that she had referred her another buyer. 

I wonder how that client faired?

What I learned About Writing Real Estate Contracts From Gumby!

You may wonder how playing with a rubber Gumby toy relates to real estate contract negotiations.  In one word….Flexibilty!  When a buyer writes an offer on a home with multiple offers, the flexibilty of the terms that the buyer can offer can have a profound affect on the seller’s final decision.  The more flexible, the better the shot at getting the home…Go Pokey!

Make it as easy as possible, given your needs, for the seller to accept your offer.  Find out as much information possible about the seller’s needs and how the offers will be presented by asking the seller’s agent.  This is just plain common sense, but you would be surprised how many agents don’t take the time to talk to the seller’s agent.  Examples of content related questions include: Does the seller want a quick or long close?  Do they need a rent back?  If so, for how long?  Note: check with your lender to determine the length of rent back the lender will allow.  Is the seller willing to allow you to have further inspections.  Is the agent?  Don’t be surprised if the agent recommends that his/her seller reject offers that request further inspections.  This is short sighted advise, but it happens.  I’ll address this topic in a later blog.  If the seller is comfortable with allowing further inspections, is it likely that the other buyers will be waiving this right (ask).  

Some questions pertaining to the offer presentation could be:  How many confirmed offers does the agent have in hand?  FYI, some of these may turn out to be phantom offers.  How many disclosures have been reviewed (since most agents put their clients disclosures online, this number is easily identified but can get lost in translation).  Will the listing agent and/or his/her office be writing an offer on this property?  If so, how will it be handled?  Will the seller entertain sharp bids or relative offers?  Back in 2000 these were very popular, but some questioned their legality and they became out of fashion.  We are seeing a little resurgance in these types of offers recently.  Lastly, and this is where experience really helps, what is the reputation of the listing agent?  In short, if the agent is unethical, its likely your not going to get the house.  This is a touchy subject but you can probably find in every real estate company, agents who live on the ethics edge.  Most are good, but some cross those boundaries.  And given a reduction in the overall number of homes sold this year, the climate is ripe for an increase in unethical behavior.

Lastly, and ending on a positive note, when your offer is presented, make sure you include all of the signed disclosures (including your agent’s due diligence inspection) that the seller has provided.  This shows your serious intent on purchasing the home and will be appreciated by both the seller and his/her agent.  It also increases the comfort level of the seller because in the seller’s eyes, you have reduced the odds of legally backing out of the contract. 

 Good luck!