Orangecrest Riverside California Real Estate Blog
Orangecrest Riverside California Real Estate Blog

Scott Chappell and Brian Bean
Friday, December 29, 2006

What to expect from Real Estate in 2007

Perspective: Up, down, all around for real estate-related costs, commissions, fees

Friday, December 29, 2006

Inman News

Housing costs were a frequently discussed topic in 2006 as markets slowed from explosive highs and everyone from consumers to brokers to agents became acutely tuned to their own expenses. Here are some predictions from the Inman News team on what will happen to housing costs in 2007:

1. Home prices: Not up, not down -- flat is the operative word for home prices. 2006 was the year for adjustment, and adjust they did: they stopped rising as fast as the price of oil. Without easy money, without ridiculous hype and without speculators, 2007 will see further erosion of home prices.

2. Rents: Landlords are finally having their day, as home ownership loses some of its luster. Rental vacancies are tightening up and property owners can finally push up rents.

3. Real estate commissions: The Internet and a tight home listing inventory made for shrinking real estate commissions the last two years. Real estate agents were discounting each other to nab a scarce supply of listings. But that should end as listing inventory expands and the number of agents joining the industry shrinks. Plus, consumers will be willing to pay more to unload the houses that are sitting with very little traffic or action.

4. Mortgage rates: Interest rates have been up, down and all around. But when you smooth out the curves, they should stay about the same next year, say most experts. This alone will prevent a slowing housing market from becoming a bust.

5. Appraiser fees: The pressure is on as more and more online alternatives are created: Zillow, HomeGain and now Fidelity's CyberHomes.com, just to name a few. At some point, these automated home valuations will replace the cookie-cutter home appraiser. High-end and complex transactions will, of course, still require appraisers.

6. Title fees: Regulators have kept title insurance fees artificially high. With renewed sunshine on the title industry, title fees could finally feel the pressure and come down.

7. Open-house staging fees: Stagers will be in high demand, as homeowners must schlep more to sell their homes. Stagers will get more elaborate and so will their fees. More listings, more staging: supply and demand will kick in.

8. Construction supplies: Thanks to a slowing market, contractors' fees and their supply costs will finally come down as the home improvement industry slows and lenders tighten up on credit.

9. Number of Realtors: After 10 years of exploding numbers, the number of Realtors should stabilize with the slowing market and may even fall as the newbies find out that this market will have no mercy.

10. Publicly traded real estate firms: Don't bet your 401(k) on making a killing on publicly traded real estate. REITs (real estate investment trusts) are already pumped up, and the home builders are coming down to real estate reality.

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# posted by Scott Chappell and Brian Bean @ 4:22 PM

5 home-sale negotiation tricks to anticipate

Sealing deal often harder than it looks

Friday, December 29, 2006

By Robert J. Bruss
Inman News

Whether you are a home buyer, seller or real estate agent, you can never learn too much about negotiation tactics. Sooner or later, some or all of these key tricks will be used by your negotiation opponent. Even the best negotiators admit there is always more to learn.

Having been involved in real estate sales, purchases and brokerage more than 40 years, I admit to having been the victim of too many shrewd negotiators. However, I always learned from the experiences and vowed never again to let someone get the best of me in a negotiation.

Frankly, many real estate negotiators are not aware when they are using a negotiation strategy. Instead, they are just doing what comes naturally to them.

But savvy real estate negotiators recognize key strategies and anticipate how to avoid becoming a victim. Here are the five most often-used real estate negotiation tricks to expect:

1. THE HIGHER AUTHORITY "TWO BITES FROM THE APPLE" NEGOTIATOR TRICK. This famous negotiation strategy has many variations. In a real estate sales situation, it most frequently occurs when a buyer negotiates a home sale as to the price and terms. Then, before signing the contract, he says, "This looks good. But I need to run it by my attorney (or accountant, mother, father, grandmother, etc.)."

Oops! The negotiation opponent has just become a victim of the higher authority or "two bites from the apple" strategy.

To prevent this from happening, smart negotiators start by asking, "Is there anyone not present who must approve this transaction for us to proceed?"

As a property seller and a real estate broker, I've learned the importance of having all parties involved present. Occasionally, I've made exceptions when one party seemed to have control over the absent person, such as a property co-owner.

Whenever a sale or purchase is subject to approval of another person, especially if that individual is financially involved by paying all or part of the down payment, if the contract says it is subject to that third party's approval, there's no sale until that "higher authority" approves.

What often happens is the "higher authority" will find something wrong. That's their job!

For example, years ago, without realizing, I became that "higher authority" for my law school classmates, Fred and his wife, who were buying their first house. I recall crawling underneath the house with Fred and finding nothing wrong. The house was immaculate. But Fred said to me, "Bob, you've got to find something wrong so I can negotiate a better purchase price." That's when I realized I was the innocent higher authority.

When you realize the higher authority "two bites from the apple" negotiation strategy is being used on you, the best strategy is to be firm but friendly. Even if you absolutely must negotiate a transaction, pretend you really don't care. "Take it or leave it" should be your attitude, but don't take the property off the market while awaiting higher authority approval.

2. THE NONSTOP NEGOTIATOR WHO NEVER STOPS "NIBBLING" TRICK. Nonstop negotiators are usually buyers. They never quit trying to get a better price or terms. To them, signing the sales contract is just the start of the serious negotiations.

A frequent example occurs when a home purchase contract, signed by the buyer and seller, includes a contingency clause for the buyer's approval of the professional inspection report. This is normal.

However, the nonstop negotiator will use that professional inspection report to re-open negotiations to get the seller to either reduce the sales price or offer the buyer a credit to repair a real or imagined previously undisclosed defect.

Some buyers will even instruct their professional inspectors to make minor defects seem extremely serious and costly to repair. For example, I recall selling a house to a nice man who was buying it for his parents. Their inspector, a retired contractor, found all sorts of minor problems. I readily agreed to have two serious problems, a missing chimney spark arrestor and an electrical junction box in the attic, fixed.

But the buyer's inspection report also said the furnace heat exchanger or firebox was cracked. This is a serious and potentially dangerous problem, but my inspector said the furnace was fine.

So I called the buyer's bluff. But I was always very polite. I arranged to have my furnace repairman, plus a representative of the local gas company, inspect the furnace at the same time. I invited the buyers and their inspector to attend. Everybody showed up. My furnace repairman checked out the furnace and said he could find nothing wrong. Next, the gas company man came to the same conclusion. The buyer agreed to accept their verdicts and the sale closed without further delay.

Another example of the nonstop negotiation method occurs when the buyer asks to repeatedly re-inspect the house, such as to measure the rooms for furnishings or drapes. The truth is the buyer is really looking for real or imagined defects to re-open negotiations on price and terms. Smart sellers and their realty agents head off this tactic by not allowing re-inspections, except for the customary inspection the day before the sale closes.

3. THE "GOOD COP-BAD COP" NEGOTIATION TRICK. Either home buyers or sellers can use this negotiation tactic, which we have all seen on TV shows. Usually, the bad cop will ruthlessly browbeat the suspect, hoping to get a confession. When that doesn't work, the bad cop leaves the room and the good cop comes in, makes friends with the suspect, and gets him to confess.

In real estate, husbands and wives use this negotiation trick especially well. Years ago, this tactic was used on me by wealthy "for sale by owner" sellers Carl and Elsie. They were selling their vacant rental house. The reason I didn't recognize this technique was Elsie was the bad cop.

Although she was extremely pleasant, I didn't realize she was the one holding out for top dollar and all cash. Carl, a retiree, turned out to be the good cop. He was more laid back and relaxed. He realized the house was less than perfect. Also, I think he was bored and wanted to get back to working on his classic car collection of Nash Ramblers.

After several weeks of informal negotiations, bad cop Elsie finally realized if she wanted to get top dollar she would have to accept my terms of 10 percent down and a 90 percent seller carryback mortgage, which would add to the sellers' retirement income.

Elsie and Carl later became my good friends, and we entered into several mutually profitable real estate transactions together.

4. THE SURPRISE AUCTION NEGOTIATION TRICK. Few home buyers expect to become involved in an auction. This negotiation trick can occur when the asking price for a property is artificially low. The result is to create a "buyer frenzy" of competitive bids. The winner is always the seller.

Real estate agents sometimes use this method to get top dollar for their sellers. This is often accomplished by saying, "Another buyer is seriously interested in this house. You better make your offer fast."

However, you think you are in competition with another buyer and raise your offer without even a counteroffer from the seller. The result is you are bidding against yourself.

When this situation occurs, smart buyers either (a) drop out of the bidding to see what happens, or (b) ask for the seller to make a counteroffer rather than the buyer making a higher offer against a mythical, possibly nonexistent second buyer.

5. THE "WOULDJATAKE" NEGOTIATION TRICK. Real estate agents hate this negotiation tactic. As a buyer, I love it. Whenever I can arrange to meet the home seller before making a written purchase offer, I try to do so.

Of course, real estate agents usually attempt to keep buyers and sellers from ever meeting, at least until after the sale closes.

This method works best in face-to-face buyer-seller contacts, such as during an open house or a home inspection. After informal chitchat with the seller, I turn the conversation to the house and the asking price. My favorite question is, "Wouldjatake $--- for your wonderful home?"

Then I shut up. The realty agent is usually shocked. Sometimes the seller says "maybe."

But a better question to ask of the seller is, "What is the lowest price you would accept for this house?" If that price isn't acceptable, then ask the "wouldjatake" question.

However, the correct answer for the seller when encountering a tough buyer like me is to politely reply, "Well, why don't you put that offer in writing so I can seriously consider it?"

SUMMARY: Home buyers, sellers and their real estate agents can never know too much about negotiation tricks. The five tactics above and their many variations are the most frequently encountered. More details are in my special report, "How to Become a Super-Successful Real Estate Negotiator," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.

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# posted by Scott Chappell and Brian Bean @ 4:09 PM

Thursday, December 14, 2006

Riverside County home prices up, but number of sales down

Wednesday, December 13, 2006

By LESLIE BERKMAN
The Press-Enterprise


Inland home sales are way below the peak they hit a year ago, but in November the median price of a home in the region reached a new records.

Last month, the median home price hit $426,000 in Riverside County, up more than 5 percent from a year ago, and $380,000 in San Bernardino County, up almost 9 percent.


In the same time, home sales dropped almost 36 percent in Riverside County to a total of 3,794, and almost 27 percent in San Bernardino County to 2,926.

"The fact we still have increasing prices is something we find surprising," said John Karevoll, analyst for DataQuick Information Systems, which released the November housing statistics Wednesday.

DataQuick had predicted appreciation in the Inland region would halt by the year's end. Karevoll said the organization, which monitors real estate activity nationwide, still anticipates Inland prices will peak in the next couple of months and then decline, most likely by 2 percent to 3 percent.

Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange, said he believes median home prices in the two counties are being propped up by sales of new homes, which generally cost more than resale homes. He said builders struggling to sell completed homes have been trying to avoid lowering prices by offering other incentives, including free upgrades and below-market financing.

Despite Inland Southern California's rising median prices, Adibi said the value of a typical house probably has not increased when the incentives are factored out.

"We are going through an adjustment process, and ultimately these appreciations will turn negative," Adibi said. "We believe it will happen early next year."


Chapman's Anderson Center has predicted prices will decline an average of 4 percent in Riverside and San Bernardino counties in 2007.

Steve Johnson, a director with MetroStudy, a Riverside consultant to home builders, said he believes the Inland region's median home prices are staying higher because the more expensive homes are selling better.

He said sales of midpriced homes are suffering because people are having difficulty selling their own homes to move up. Also, he said, there is a limited supply of cheaper entry-level homes. By contrast, sales have remained relatively strong in homes priced $600,000 and higher.

Johnson said builders already have made major concessions this year to sell their homes, and he predicted prices will fall on the resale market in 2007. He said he expects that people who are forced to move for a variety of reasons, from job relocations to divorce, are waiting until the holidays are over to get the best price they can for their homes but will ultimately drop their demands.

Karevoll said that although the market has taken a sharp correction from the buyer frenzy of a year ago, from a historic perspective it is still no worse than normal. He said although sales have slowed considerably in Southern California, sales in Riverside and San Bernardino counties were still above average for November.

"There is price appreciation at a moderate pace and homes are available for sale and there is no urgency among buyers, but they are still buying," Karevoll said.

Still uncertain is whether adjustable-rate mortgages will have a significant negative impact on the market. Karevoll said it will become clearer next spring when many of the ARMs will reset at higher interest rates.

"It is hard to predict homeowner behavior, to what degree people who get in trouble fail or just tough it out," he said.

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# posted by Scott Chappell and Brian Bean @ 12:33 PM

Tuesday, December 05, 2006

Do new homes really need a home inspection?

Some buyers claim warranty is enough

Tuesday, December 05, 2006

By Barry Stone
Inman News

Dear Barry,

You often recommend home inspections for brand-new homes, but in my case, this has proved to be unnecessary. Since buying my home about six months ago, I've had two problems, and the builder repaired them immediately. In another six months, my warranty will expire. What reasons, if any, can you give for having an inspection during that time? -- Mark

Dear Mark,

Reliance on the builder's warranty is the most common reason why buyers of new homes forego home inspections. In many cases, this has proved to be a costly error. Buyers assume that all significant defects will become apparent during the warranty period. This, as we shall see, is a faulty assumption.

All new homes have unapparent defects, regardless of the quality of construction or the integrity of the builder. Simply stated: No one can build something as large and complex as a house without committing a few errors at various stages of the process. To assume that all such errors will be readily apparent is a recipe for financial loss. Some problems may reside in the attic, in the electric service panel, or high atop the roof. They may involve safety violations with a chimney installation or the grounding of electrical outlets. There might be a defect in the roof framing, the gas connection to the heater, or the site drainage on the property. A home inspector who is able to discover such conditions will enable you to take full advantage of your builders' warranty.

Professional inspection of a brand-new home is always beneficial, if performed by a truly qualified individual. Just be sure to find an inspector with many years of experience and a reputation for thoroughness.

Dear Barry,

We recently purchased a home and had it checked by our agent's home inspector. The inspector noticed some loose floor tiles in the kitchen and said they could be repaired for about $200. The sellers agreed to credit us $200, so we closed escrow on that basis. Since then, two contractors have told us the problem is more serious and requires relaying the entire kitchen floor, at a cost of nearly $2,500. How could our inspector have given such an inaccurate repair estimate, and why was his estimate verbal, rather than part of the inspection report. Is he liable for the excess costs? --Susan

Dear Susan,

Your home inspector should not have estimated the repair costs for your floor unless costs estimates were included in his written report. Since he did not provide written estimates, his recommendation should have simply been "further evaluation by a qualified flooring contractor prior to close of transaction." If that had been done, contractors could have submitted the $2,500 estimates, and negotiations with the sellers for the actual cost of repairs could have taken place.

Your inspector's undocumented "guess-timate" was unprofessional and ill-advised. Whether you can base a claim of liability on a verbal statement is doubtful, but the matter could be easily tested in small claims court. At the very least, the inspector should be notified of your displeasure.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

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# posted by Scott Chappell and Brian Bean @ 10:06 AM

Friday, December 01, 2006

Make Holidays Special for a Child

Scott & Brian are proud sponsors of Toys For Tots program

This year, right here in Riverside, many children will miss the simple joy of opening a gift on Christmas Day. But with your help, we can help make the holiday season a happy one for disadvantaged kids. It’s easy, inexpensive, and best of all, it’ll make you feel as great as that lucky child you get to help.

Orangecrest Realtors Scott & Brian have set up a Toys For Tots collection center at their office, 3333 Central Ave., Suite A. Sponsor a toy and give a child recognition, confidence and a positive memory for a lifetime. You can help by donating a new, unwrapped toy valued at $10 or more. Toys suitable for teens are especially needed.

The Toys For Tots program is a 59-year tradition of the U.S. Marine Corps Reserves and donations are 100% tax-deductible. In 2005, Toys for Tots delivered more than 15 million toys to over 6.5 million children. With 13 million children living in poverty, they need help more than ever this year.

For more information, please call 951-369-1222, or e-mail us at ToysForTots@Scott-Brian.com.

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# posted by Scott Chappell and Brian Bean @ 3:39 PM

Superb real estate deals surface during holidays

Sellers benefit from pool of serious buyers

Friday, December 01, 2006

By Robert J. Bruss
Inman News

If you are a serious home buyer, the absolute best time of the year to buy is between Thanksgiving Day and New Year's Day, even extending through Super Bowl Sunday in many cities. The reasons are:

  1. Few home buyers are in the market during the holiday season so competition is low.
  2. House and condo sellers who have their homes listed for sale now are usually highly motivated to sell and will listen to any reasonable purchase offer.
There is an additional special reason the 2006 holiday season is a great time to be a home buyer: it's a home "buyer's market" in most communities. That means even during this slow holiday season, when most unmotivated sellers take their listings off the market, there are more homes listed for sale than there are qualified buyers searching for homes.

However, thousands of home sales take place during this "slow season." New-home builders are anxious to close sales by Dec. 31, 2006, so they are offering amazing sales incentives such as:

  1. No mortgage payments for several months.
  2. Free upgrades.
  3. No closing costs.
  4. 100 percent mortgage financing.
  5. Even reduced sales prices.

But sales incentives for buyers of resale homes are different. Motivated sellers (and their anxious listing agents) are willing to listen to all reasonable purchase offers. Buyer negotiation strategies include asking for the seller to pay the mortgage loan fee and/or nonrecurring closing costs. In other words, it's a great time to be a home buyer.
HOME SELLER BENEFITS OF SELLING DURING THE SLOW SEASON. If you are a motivated home seller, especially in the lower price ranges in your community, this can be a superb time of year to sell.

Buyers who are in the market now are usually very anxious to buy, perhaps motivated by a job transfer, marriage or divorce, birth or death in the family, down-payment gift from parents, year-end salary bonus, or other buying incentives.

As a home seller, you won't have as many prospective buyers as during the peak home sales season of March through June in most communities, but home buyers at this time of year are usually very serious.

For example, many home buyers want to close their purchases by Dec. 31 to claim the extra tax deductions, such as for loan fee points, pro-rated property taxes, and prepaid mortgage interest. However, if you can't move out by year-end, you can probably rent-back for a month or two from the buyer providing the sale is recorded before New Year's Day.

An extra seller bonus is if the home was your principal residence at least 24 of the last 60 months before the sale, Internal Revenue Code 121 gives you up to $250,000 tax-free capital gains (up to $500,000 for a qualified married couple filing a joint tax return).

HOW TO EARN TOP DOLLAR FROM YOUR HOME SALE. To earn top dollar from your home sale requires making your residence show its best. Although the weather outside might not be perfect, the interior of your home can sparkle.

The most profitable but least expensive home improvements include painting, cleaning and repairing. Fresh interior paint is, by far, the most profitable improvement. Other profitable moneymakers that add more market value than they cost include new light fixtures, new carpets and flooring, and new plumbing fixtures. Your goal should be to make the residence as close to a "model home" as possible.

A recent innovation for home sellers who want to sell for top dollar is to "stage" the residence. That means a professional decorator or "stager" refurbishes the residence, often removing the seller's dingy old furniture and bringing in rented furnishings to show prospective buyers how desirable your home really is. Spending several thousand dollars for home staging usually pays off with a faster sale for top dollar.

HIRE THE BEST LISTING AGENT. If your home is not already listed for sale, interviewing at least three successful local real estate agents can pay off in many ways. Even if you think you can sell your home alone (called "for sale by owner," or "FSBO") without a professional agent, interviewing three or more agents will show you the market value of your residence.

The agents you interview won't mind. The reason is they know most FSBOs decide within 30 to 60 days to hire a professional agent, usually one of the agents already interviewed.

Five key questions to ask each interviewed agent include:

1. HOW MUCH CAN YOU GET FOR MY HOME? This is a trick question. Ask it anyway. After inspecting your home, each agent should prepare a written CMA (comparative market analysis). Disregard any agent who doesn't give you a CMA.

Each CMA form shows (a) recent sales prices of comparable nearby homes within the last few months; (b) asking prices of similar neighborhood homes (your competition); and (c) asking prices of recently expired listings in the vicinity (usually overpriced). Based on the CMAs, each agent should then give you his/her opinion of your home's market value. Beware of any agent who either estimates an abnormally high asking price (called "buying the listing") or recommends a very low asking price (called "low balling").

The key reason to interview at least three successful agents who sell homes in your vicinity is to compare their CMAs, their recommended asking prices, and their client references.

2. HOW LONG WILL IT TAKE YOU TO SELL MY HOME? The best agents will recommend a 90-day listing. That is plenty of time for a successful agent to sell your home. If your listing doesn't sell within 90 days, but you are pleased with the agent's service, you can always renew. However, if you selected a "bad agent" then you are not stuck for a long term.

Some agents, when begging for a longer listing, will point to "average days on the market" your community, which might be 110 days. If an agent says that, your instant reply should be, "Well, I don't want to hire just an average agent. Do you know any superior agents?"

However, if the best agent interviewed insists on a listing term longer than 90 days, be sure it contains an unconditional cancellation clause after 90 days. Then you won't get stuck with a lazy or incompetent agent for a long time period.

3. WHAT IS YOUR MARKETING PLAN FOR MY HOME? The best agents will anticipate this question and hand you a prepared marketing plan for your home.

Such a plan should include at a minimum use of the local MLS (multiple listing service), listings on Internet Web sites including
www.Realtor.com, advertising in newspapers and local home sales magazines, weekend open houses, and special broker agent tours.

4. HOW MANY LISTINGS DO YOU CURRENTLY HAVE AND WHAT PERCENT OF YOUR LISTINGS SOLD IN 2006? The answer will reveal a "numbers agent" who has lots of listings but sells only a low percentage.

Ask how many assistants each agent has and if you will be dealing with the agent or an assistant. Inquire how often you will hear from the agent with progress on the sale of your home. The answer should be "at least once a week."

Solo agents without assistants can usually handle 15 to 20 listings at most. New, inexperienced agents might have only a few listings, but perhaps they can devote more time to getting your home sold. However, be wary of any part-time agent unless that agent comes very highly recommended by a trusted friend or relative.

5. WHAT ARE THE NAMES AND PHONES OF YOUR LAST FIVE HOME SELLERS? The best agents will anticipate this key question in their listing presentations. Before signing a listing, take time to phone each agent's seller references to ask, "Were you in any way unhappy with your agent and would you list another home with the same agent again?"

COUNTEROFFER EVERY OFFER. Especially during this slow holiday home sales season, when you receive a purchase offer, if it is not acceptable be sure to make a written counteroffer. Many buyers love to negotiate and test home sellers (and their agents). A counteroffer will keep negotiations open to show if the buyer is serious and if there is any possibility of a sale.

But bear in mind an old real estate motto: "The first offer is often the best offer." If the first purchase offer you receive is acceptable, grab it rather than risk losing that buyer during this slowest sales season.

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# posted by Scott Chappell and Brian Bean @ 10:17 AM


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