My friend suggested that since I lived in Los Altos, I should file a police report with the LAPD. So I did.  I met with officer Scott Sweezey.  He ask some questions and took some notes but until I had the actual credit card bill detailing the unauthorized charges, he wouldn’t be able to investigate much.   Officer Sweezey suggested that I contact the three credit companies (TransUnion, Experian, Equifax) to put a flag on my account.   I also went to annualcreditreport.com where I ran a free check on my credit.  This is the best site if you have questions about your credit…..and you’re allowed one free credit check per year.   The site also allows you to place a “fraud alert” on your credit cards which lets potential creditors and others know that you may have been a victim of identity theft.  I also found a link to the FTC consumer protection website, where I learned even more about how to protect myself from identity theft.  There is a good video that details victim’s horror stories as well as showing consumers how to protect their indentity.

Meanwhile,  I am still waiting for my monthly statement to see what “I purchased.”

That call came from my credit card company asking me if I could locate my credit card.  I pulled it out of my wallet and she proceeded to quiz me about my recent purchases.  “Did I make a charge for one dollar early Sunday morning?  Did I make a $90 charge from a web retailer? Did I Purchase a $400 Palm pilot just after midnight? Did I Purchase tickets from Jet Blue for $600?  As more and more questions were asked, the more upset I got.  Some #^%& has my credit card number and is running up my card big time.  I immediately cancelled my credit card. 

Now you have to see that I had always prided myself on being very safe with my personal information.  I never responded to any inquiries about personal information over the phone.  I rejected all the e-mail phishing scams that “suspicious activity was occuring with my bank account” or “paypal had suspended my account and by just “clicking here” I could update all my information online.”  I even got cocky once when I was contacted by that ever popular Nigerian attorney who had tons of free money but needed an account in the US to wire the money to.  Oh yes, he would even split the money 50/50 if I helped him!  I replied that I had forwarded his e-mail to a friend of mine who works for the FBI in the White Collar Crimes Division.  Yes, I do have a friend in the FBI who does white collar crime but no I didn’t forward it to him.  Funny, after I sent the reply, I thought what an idiot I am…if anything, I might have just got this guy more upset.  Next time….What do I do?

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……

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.

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?

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!

Unfortunately, when the seller underprices a home, offers come in from buyers who realistically can’t afford that home.  This creates added pressure on qualified buyers to increase their offer price.  In an appreciating market, if a house is priced in line with recent sales, it might receive 4-6 offers.  But when it is underpriced… by say 5% (or more),  there usually are many more offers.  These additional offers create a frenzy, substantially inflating the home’s final sales price.   That is why so many agents recommend a low list price.  Price em’ low and watch em’ go!  Buyers can combat this somewhat by doing their homework.  Learn the recent sales prices for homes that are comparable in style, size, location and condition.  Try to find out how the transactions went down.  Were there six offers with one clearly overpaying or where all six close in price/terms?  Try to learn everything about the offers on the homes that are currently sale pending.  These offers and how they were packaged will give buyer’s their best market information.

More often than not, buyers involved in multiple offers are not including a financing contingency in their contracts.  Buyers better be comfortable that the property will appraise at or above its purchase price or they will need to increase the down payment to match the appraisal shortfall. 

Typically a buyer will also need a substantial down payment.  The reality is that seller’s prefer an offer that has at least 20% down.  Anything below 20% down makes the buyer look weak and anything above 20% shows good financial strength but may not be necessary.  Note:  One strategy that we’re seeing more and more of is the use of writing in a large down payment into the contract (say 40 % down, 60% financing) and then once the loan is in place the buyer uses a smaller down payment (20% down, 80% financing) to complete the transaction.  This gives the appearance of financial strength, yet allows the buyer to maintain cash reserves.   Note to buyers: make sure that what ever one writes into the contract, one can perform.  Otherwise, one could be in a heap of legal trouble.  Can you say fraud!!! I can hear it now… “Honest Judge,  it was my agent who told me that it didn’t really matter what I wrote in as my down payment.”

Lastly, one should include a 3% initial deposit check with the offer.  This is the minimum that a seller will look for as a deposit.  On the flip side, I’ve seen huge deposits, non-refundable deposits and even option money used as a deposit.  It depends on how desperate the buyer is and how “desirable” the home is.  Buyers should make sure that any representations about finances can be backed by third party sources.  Include a pre-approval (not pre-qualified, which means nothing in the real world) letter showing a loan committment from a reliable lender.  Not your cousin who also happens to do loans part time!  Unfortunately, experience has proven that I’m not a huge fan of online lenders.  Most (although not all) of the deals that we see go bad are from online lenders.  Most (although not all) tend to be online lenders not being able to meet the deadlines written into the contract and/or who never really had the buyers pre-approved in the first place.  This is when we have to pull in our local ”brick and morter” lenders to close out the deal.   Include bank statements and/or a bank letter indicating where the souce of the down payment is coming from (ie. that the buyer doesn’t have to liquidate 100,000 shares of “fly-by-night” web company to make the transaction work”).  If a buyer has done the above, he/she just might make it past the first cut. 

When a property comes on the market, immediately contact the listing agent or homeowner (if they are representing themselves) and ask when offers will be addressed.  Will they take a pre-emptive offer?  A pre-emptive offer is just that, pre-empting the offer process by attempting to get your offer ratified before the rest of the real estate world wakes up.  It appears that some agents (funny, it always appears to be the same agents) list homes that are priced way below the recent sales comparables.  This usaully happens in an appreciating market.  This also ensures a multiple offer situation.  Hmm … mighty suspicious.  I find it odd that, even if the Seller would take an offer immediately, the Seller has gone on vacation and/or had to visit their dying aunt and/or they themselves have just passed away and the executor is unavailable. 

Financing -

Get pre-approved  on your loan prior to looking.  Its pretty basic stuff.  But you would be surprise that even today, many buyers assume that since they checked their credit online and were told that they could get a loan, they were good to go.  They were “pre-qualified and would work out the details” once they found the ideal home.  Well, after losing their first “perfect” home to stupidity, having a loan committment from a reliable lender is starting to sink in.

99% of all local listings will have some sort of disclosure package about the property available to prospective buyers.  READ IT and SIGN IT!!  It should include the mandatory disclosure documents as well as a property inspection and termite inspection.   Additional inspections may also be included.  If anything looks odd or you don’t understand anything, have it checked out by professionals.  “But Dave, offers are in two days.  We don’t have the time…we work.”  This typically is the largest investment that one will ever make.  Make the time.  At least contact the inspectors, call the city, verify school attendance boundaries (which are changing as I type), check the Meagan’s law website (if you dare).  Remember to check about the home’s current condition as well as for future use.  Do you plan on building a two story?  If so, is the home in a single story overlay zone?  Does the C, C,& R’s restrict two stories?  What are the design and building codes?  Find out as much as you can before you commit your money.

 Next time …… part 2  Packaging the offer.

On the flip side, it appears that there are some houses that just will never sell.  They’re the same old dogs that stay on the market for what seems like an eternity.  There are 7 homes that have been on the market for over 80 days and 3 have been on the market for over 130 days.  These homes are listed and re-listed with apparently nothing done to the home’s condition and/or its price.  Just relist the house and shazaam it will sell!  I don’t think so.  One would think that Sellers and/or their Agents would get a clue that there is something wrong with their marketing efforts if their home hasn’t sold in 3 or 4 or 5 or 6 or “fill in the blank“ months.  Statistically, if it takes on average 30 days to sell a home in Los Altos and your home is on the market for 4 months….  Hum, I wonder what’s wrong? 

An unintentional side effect with these ”vintage” or “career” listings is that they skew the statistics that everyone (including me) love to quote when we analyze the market.  If  5%-10% of active listings have been on for an eternity, the average days on the market doesn’t really reflect the true time it takes to propery market and sell a home.  I would argue that these homes aren’t really for sale because they aren’t at a price point (given all other factors) that a sane buyer would put an offer in.   Then again we’ve all heard stories about a few insane buyers out there.