What got us talking about this recently was how we sometimes see a short sale listing come on MLS that is either already contingent with an accepted offer, or that goes contingent right away, and then ends up closing a few months later with the listing agent (or another agent in that same office) representing the buyer too. That means the property wasn’t exposed to the market and other buyers weren’t given a chance to make offers, and the offer that’s being sent to the lender for approval may not be the strongest that might have been out there.

Lenders don’t generally scrutinize the marketing of short sale listings like they do with foreclosures. For example, with an REO they often require the agent to expose the house to the market for a minimum number of days before taking offers, in an effort to ensure they’re getting the best offer rather than taking the first one that happens to come in. This isn’t normally the case with short sales. The lender might require the property to be listed on MLS, but it’s not common for them to ask for specifics about when the offer came in or how much actual market exposure the property was given.

Of course, with an REO the bank is actually the seller of the property, whereas with a short sale the owner of the home is the seller and the bank is just approving the sale, since they’re the ones taking less money than they’re owed when the lien is payed off at closing. This is an important distinction since it brings up the question of fiduciary duty and who’s calling the shots.

Agents have this fiduciary duty to their clients, meaning an obligation to represent their clients’ interests above all others, especially including their own. And in a short sale since the client is the homeowner, not the bank, the listing agent’s duty is to help the seller get the short sale approved and avoid foreclosure. In many cases the seller doesn’t really care what price the house sells for as long as the bank approves it and the deal closes (assuming they have no tax consequences or deficiency judgement), so it may seem like a good idea to just take whatever offer the agent has and send it off to the lender for approval to get that process underway, which can take months. But we think it’s fair to question that strategy.

Barring special circumstances, like an imminent auction date, we think it can be in the seller’s best interest to see what might be out there by putting the home on the market, at least exposing it on MLS for a week let’s say before accepting anything, rather than letting the listing agent pre-sell the home to his or her own buyer client. The strongest offer will have the best chance of getting approved by the bank, and that offer from the agent’s in house client might be “good enough” in the agent’s eyes but might not be the strongest. We’re not fans of agents “double ending” their own listings in general, but there seems to be even more potential for conflict of interest where a short sale is concerned. And if the listing agent has a willing buyer all ready to go, then it’s likely that buyer will still be there a week later if it turns out he’s actually bringing the best offer.

Short sale sellers are typically in stressful situations and just want to get the house sold and move on, and we don’t like to see agents taking advantage of the situation, either out of laziness or because they want to get a good deal for a buyer they’re also working with. There is also the neighborhood to think about. If you sell a home for less than it would be going for on the open market then that can affect prices in the area, as that sale will be used as a comp for other homes. Some sellers may not care, but we’ve worked with many who don’t want to hurt their neighbors’ home values if they can help it. Why not expose the property to market for even a minimal number of days if you have nothing to lose by doing so, and potentially much to gain for you, the neighbors, the bank, and the housing market in general?

As expected, Existing Home Sales fell in February, slipping 30,000 units versus January’s numbers. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.

An “existing” home is one that is previously owned and lived-in (i.e. not new construction).

Existing Home Sales peaked in November 2009, just as the First-Time Home Buyer Tax Credit was set to expire. Immediately thereafter, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.

Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend.  The real estate market is rediscovering its normal.

But “normal” may not last for long.

When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money.  That deadline is approaching and many markets –parts of Marin included — are experiencing a surge in buyer traffic as April 30 nears.

The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.

For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check.

Existing Home Sales should gain through March and April, theoretically pressuring home prices higher. Consider acting sooner rather than later as interest rates are also expected to rise later this spring.

If you are unable to see the video above, please click here

According to the the National Association of Realtors®, “distressed homes” represented nearly 2 of every fifth home sold in January 2010.  Clearly, real estate investors in Marin County and around the country are taking advantage of good deals on inexpensive property.  But there’s risk involved.

This NBC Today Show interview first ran in March 2009, featuring real estate expert Barbara Corcoran. Despite its age, the message remains relevant. Today may be a terrific time to buy a bank-owned home — just make sure you do your research first.  There’s plenty of ways for investors to get burned.

Some of the tips in the video include:

• Buy in your own backyard
• Start small, then build to a bigger portfolio
• Watch receipts — rent rolls don’t matter if tenants aren’t paying rent

Corcoran also gives pointers on how to evaluate a prospective tenant.

Foreclosures may represent a significant number of 2010′s total Marin County home sales and will offer interesting opportunities to bona fide real estate investors.

Remember, the stats and the data are from 12 months ago, but the advice stays meaningful.

While previous market swings (such as around the .com bust) have not made a huge impact on wealthy Marin County and the Marin real estate market, this one definitely has.  Marin has a large number of residents who work in financial services and they are losing their jobs.  The wealthy have lost huge percentages of their wealth in their portfolios.  While many of the wealthy may not lose their homes, they are definitely holding tight to what they do have.  The charts below show the dramatic difference in the lower end Marin real estate market vs. the upper end. The number of Marin homes sold under one million dollars is actually up.  The over a million stats?  Down 63.3%! 

Marin Real Estate Sales Stats for homes under $1,000,0000

Marin Real Estate Sales Stats for homes over $1,000,0000

Clearly the luxury real estate market in Marin County is hurting, and I anticipate this trend to continue in 2009.

1. Create curb appeal.  First impressions can be everything.  If it doesn’t look good out front, potential buyers may never enter the front door.  Cut back overgrown landscaping, put fresh pots of flowers by the front door.  Replace your exterior light fixtures if they are rusted and dirty.
2. Paint.  It is amazing how much a coat of paint can change the look and feel of a home.  Use neutral colors but don’t go all white inside.  Use paint to make your home feel warm.
3. Clean, clean, and clean again.  Make your home sparkle. 
4. Organize your closets, buyers will be looking in them.
5. Remove excess furniture, clutter, and toys but don’t just move it to the garage, buyers look there too.
6. Remove valuables, prescription medicine and personal items that should remain private. 
7. Eliminate odors.  Bad pet smells can send a potential buyer running almost immediately.
8. Have professional inspections before you put it on the market.  Buyers are picky in today’s market and inspections are one of the primary reasons buyers back out of transactions.  Know of any potential roadblocks before you put it on the market and eliminate those problems in advance.
9. Consider professional staging.  Staging works!  Want more information about why you should stage?  Read this excellent article about why to stage.
10. Don’t spend a lot of money renovating without first consulting a Marin real estate professional.  Renovating that kitchen before you put it on the market may not make sense.

In Marin County, a HUGE number of home are for sale, but are not on the MLS.  Tons of homes are coming on the market or are staying on the market, but you won’t find a good chunk of them on whatever search engine you might be using. 

Home sellers and agents are afraid of the all important DOM- Days on market.  Fearing a high number, they are withholding the listing from the MLS. This skews the stats for both real, accurate days on market numbers and also for market absorption rates. 

I believe keeping listings off the MLS is a bad for everyone, even sellers fearful of too many days on the market.

Marin home sellers- listen to me now, most buyers are smart enough to know that the days on market stats aren’t accurate.  The tradeoff of being off MLS is that you miss a huge portion of buyers.  Suddenly, you rely on agents, many of whom may not know that your home is for sale.  What if the home buyer happens to have an agent who isn’t connected?  This also assumes active buyers are working with an agent.  There are tons, and tons of home buyers doing their initial research on their own.  Those buyers are very real, and they aren’t being exposed to your property.  As much as high days on market may be undesirable, it is even more undesirable for you to limit your access to home buyers.  Staying “off the MLS” is really like being off the market.  It just doesn’t make sense if you want to sell your home.

Unfortunately, do-it-yourself home buyers are really only seeing a small portion of true home inventory.  If you are a buyer not working with agent, there are a lot more homes available for sale in Marin than show up on the MLS.  Contact a qualified (and connected) agent to give you the inside scoop.  As much as I dislike off the market listings, the reality is that there are a ton of them out there, and unless you are working with agent “in the know”, you may never see them.

The Market Action Index answers the question “How’s the Kentfield Real Estate Market?” By measuring the current rate of sale versus the amount of inventory.  Index above 30 implies Seller’s Market conditions.  Below 30, conditions favor the buyer.

The Market Action Index answers the question “How’s the Ross Real Estate Market?” By measuring the current rate of sale versus the amount of inventory.  Index above 30 implies Seller’s Market conditions.  Below 30, conditions favor the buyer.

The Market Action Index answers the question “How’s the Larkspur Real Estate Market?” By measuring the current rate of sale versus the amount of inventory.  Index above 30 implies Seller’s Market conditions.  Below 30, conditions favor the buyer.