More on Inventory

We walk through the doors, the entry opens into a large dining room/living room combo. The walls have been painted white. The floors have been upgraded to beautiful dark wood. We can see straight through the living room into the backyard (one of the things my wife loves). To the left of the living room is a hall way with 3 bedrooms (including the master). To the right is the kitchen and family room. The carpet is berber carpet in beige tones. The kitchen has black granite, stainless steel appliances and two sinks! The home is located in a secluded area just east of Corona. She boasts over 3,100 square feet and comes with a price tag a little under $500,000.

My client walks in and likes what he sees. The way I can tell this (other than the fact that we have walked into 50+ homes together) he spends a lot of time in each room, drawing sketches and taking pictures. He is an engineer and is very detailed oriented. He is a student of the comps and will not over pay.

Sidebar. Many buyers today make offers well over what the comps say. Furthermore, when you offer over listing price the banks require that you remove your appraisal contingency AND pay the difference between purchase price and appraisal (if the appraisal is low) in cash. A tactic that works because you have removed your appraisal contingency and would forfeit your deposit if you canceled because of appraisal.

Every house he wants to offer on he wants to know; tax rate, mello roos, special assessment, HOA, what the seller owes (if it is standard or short sale), and the comps. He compares the comps with zillow (using the zestimate feature), e-appraisal, and other online value sites. Then, he sends me the house he wants to offer on. There are a couple of flaws in his strategy.

1.) Time. He takes an unbelieveable amount of time to make an offer. We look at the home on Saturday.It takes until Tuesday for him to process all of the data. Then he wants to offer on Wednesday. Unfortunately, all of the bank owned homes and corporate owned (investor owned) are gone. Literally, every bank owned home that he wants to offer on is in escrow by the time we get the offer completed.

2.) Price. He is very conservative. He is desperately trying not to over pay. He wants to make sure that he gets the right home at the right price. So, when he does offer, his offers are aligned with the comps, but they are not aligned with the current market conditions. Which is low inventory and high demand, which means that people are paying more than the comps (see the sidebar above).


Which begs the question, where is the housing market headed? Here is a snapshot of the market in Corona.

Geography

There are five zip codes in Corona. They are 92879, 92880, 92881, 92882, 92883.

92879 is around the 91 and 15 freeways. The zip code is both east and west of the 15 freeway (Main St to McKinley Ave) AND north and south (2nd St in Norco to Magnolia Ave) of the 91 freeway.

92880 is the northern most part of Corona, affectionately called Eastvale. This area generally covers north of 6th St in Norco and just north of Limonite west of the 15 freeway.

92881 is south of the Ontario Ave and west of the 15 freeway.

92882 covers from Green River Rd to Lincoln Ave south of the 91 freeway.

92883 is the southern most area of Corona. The area generally covers west of the 15 FWY from Eagle Glen all the way south to Lake Elsinore.


The stats are coming tomorrow...

15722 Hummingbird Ln, Huntington Beach, CA

OPEN HOUSE!!!

When: 6/5/2010
Time: 11-2pm

This home is amazing. Tons of upgrades. Beautiful new kitchen and sparkling pool in the backyard. We are opening this home up to view. There will be refreshments served. Please come by and check the home out.

Is Corona the Center of the Universe? part III

In order to determine the car expense, I calculated the distance from the house to the "work" site. I then figured out the monthly expense for fuel. The problems with this was 3 fold:

1. It did not take into account the wear and tear on the vehicle.
2. It did not take into account the cost of toll roads.
3. By calculating only fuel the costs were VERY close. For example, the closest home was in Irvine and fuel costs per month was $14.66. The furthest home was in Corona and the fuel costs per month was $131.02 per month. Making the difference only $116.36.

Therefore, I decided to see what the difference would be if I calculated at the mileage reimbursement given by the Federal Government. Using the above example, the per month car expense for Irvine is $84.37, and the per month car expense for Corona is $861.96. The Corona expense also got bumped for the cost of using the toll roads daily.

The only city that comes close to Corona in monthly cost for housing and car is Santa Ana. However, to get that home in Santa Ana (which I am not saying is a bad area - but it ain't the best) you have to put out $22,000 more in downpayment. Which isn't so bad...because that nets you an internal rate of return of 10.9% on your monthly savings.

All of the other cities are not even close. The reality is simple, in Corona you will get a lot bigger bang for your buck than you will of any of the cities I looked at in Orange County except Santa Ana. The other factor that was not included in this study was HOA. The vast majority of all homes in Orange County have an HOA. In fact, a large portion of Irvine has HOA's in excess of $400 per month.

I am not going to go as far as to say that Corona is the center of the universe, but it is a very viable option for those living in the O.C.

Is Corona the Center of the Universe?

So, every other Tuesday a lovely lady comes to clean our house (this is a requirement of my wife working full time). She prefers us to not be home...so Mac and I usually go to the bear place (Hunney's Restaurant) for breakfast. A couple weeks back I was reading an article in the Orange County Register - I know print is dead, but I had nothing else to do for 3 hours. But, I digress...

The article basically said it doesn't make financial sense to live in Riverside County when you work in Orange County. Now, the author of this article not only had a certain amount of snobbery in their writing, but they also lacked the ability to do simple math.

So, I decided to open the MLS, google maps, etc...and see what the actual numbers looked like. Here are the constants for my experiment...

Work address: 17951 Macarthur Blvd, Irvine, CA
Downpayment: 20%
Interest Rate: 6.5%
Mileage: $0.545 (current mileage reimbursement by the Federal Government)
Car: '09 Mercedes Benz C300 Sports Sedan (26 MPG highway)
Premium Gas Price: $2.47/gallon (Chevron as of today)

The City's looked at:

1. Aliso Viejo
2. Costa Mesa
3. Irvine
4. Newport
5. Tustin
6. Villa Park
7. Santa Ana
8. Orange
9. Rancho Santa Margarita
10. Corona

These homes are average...they are obviously not the top of the market, nor are they the worst houses available.

The homes:

31 STONE PINE Aliso Viejo $599,000 4 3 2108
2513 Colby Place Costa Mesa $509,900 4 2 2200
36 Gillman ST Irvine $584,999 5 3 2294
2120 Vista Laredo Newport Beach $929,000 4 3 2100
14112 Carfax AV Tustin $449,900 4 3 2138
10535 South Cedarhil Villa Park $675,000 4 3 2387
1911 West SECREST Santa Ana $350,000 4 2 2112
3343 East Ruth Place Orange $419,000 4 2 2200
19 Sunny Slope R. S. M. $524,900 4 3 2300
13453 Barker LN Corona $239,900 4 3 2100

more to come in tomorrow's post...

Zip Realty

Zip Realty combines the power of the internet and the service of a traditional Realtor (me). You have access to search the same homes other Realtors search, putting you in control of your home buying experience. Additionally, our website offers a wealth of information such as financial calculators, information on schools, and demographics. Having said all of that, Zip Realty, really does have an amazing website. We allow all homes onto our websites…not just home listed by Zip Realty. Also, our search engines are very powerful. You can include/exclude/etc short sales or fixers…and you can search either by home value or monthly payment. Please click on the Zip Realty logo to the left...and you can visit our site. IF YOU DO...PLEASE REGISTER AND SELECT ME AS YOUR REALTOR!!! I will do an amazing job helping you buy a home.

I will write more later on a HUGE benefit of Zip Realty!!!

Closing Costs

What are closing costs? This is a VERY common question that I am asked. And it is very quickly followed up with...how much are closing costs? Most of the time they will be less than 3% of the purchase price. The percentage might be higher, the lower the purchase price. Let me first describe closing costs...they are the costs associated with escrow.

Title Insurance: $1,000
Escrow fees: $500
Notary fees: $150
Misc fees: $500

This is not the end of the story...closing costs also include the fees associated with obtaining a mortgage. Typical fees for a mortgage are 1-1.5%...to the mortgage officer (this is also known as "origination fee"...or "broker fee"). The lender is also going to add fees. As you can see we are quickly approaching the 3%.

Lastly, pre-paids are part of closing costs. When you close a loan...you are required to pay interest for the rest of the month in which the loan funds (example...the loan funds on May 15th...31 days in May...you would owe pre-paid interest for 16 days...the actual cost depends on your interest rate). Also, the lender may require you to pay pre-paid insurance. And it is likely that you will be responsible for paying a portion of the years taxes.

When negotiating closing costs with your lender..the areas with the most wiggle room are the "mortgage fees". Title insurance and escrow fees are going to be mostly the same from company to company...however, a lot of mortgage officer's require a lot of other fees (like processing fees, etc...). The biggest area of negotiating is the "origination" or " broker" fees.

Short Sales

Short sales are very hard to read, and are not always a good deal. Let me try to explain the process. In order to sell property as a "short sale"...the owner must "qualify". In order to "qualify", they (the owner) must submit documentation (bank statements, financial statements, tax returns, etc) proving that they can no longer afford their mortgage. A "short sale" is an attempt by the owner to sell the property short of foreclosure AND what they owe. In order to get the lender to look at the "short sale", they need to submit an offer from someone willing to purchase the property. Therefore, the primary motivation of the owner and the listing agent is to get the initial offer...NOT listing the property at market value. After the lender gets the initial offer (and the owner's financial statements), the lender orders an appraisal and BPOs (this is where the lender asks a few Realtors in the area how much the Realtor thinks the property is worth). This process takes 2-6 weeks...to just get an approval! After the approval, they must now accept an offer from a buyer. After they accept an offer, escrow is opened, which typically last 30 days.

Short sales are not necessarily a good deal because...1.) they are often listed below market value and banks are typically trying to sell the property for approximately market value, 2.) you are agreeing to a price on a property 10 weeks before closing the transaction. This can cause 2 problems, 1.) the buyers lender may not approve of the deal after that much time (interest rates may rise, loan programs may go away), 2.) the buyer is agreeing to a price on a property 10 weeks before it may close escrow (in a declining market the home may actually be worth significantly less before escrow closes).

The primary thing to be considered when making an offer on a short sale is the market value of the property NOT the list price.

I really want to buy a home...where do I start? pt. 3

The fun begins after the offer is accepted. In a normal environment...you have 17 days to remove all contingencies. Contingencies...

1.) home inspection
2.) home appraisal
3.) loan approval

The home inspection is a vital part of any home purchase. This is where an inspector comes out to the home and thoroughly inspects the property. He looks at the condition of the property (nothing cosmetic...i.e. carpet, paint, etc.). He is going to check the appliances, the utilities, and see if there are any other major items that he believes need to be further inspected.

The home appraisal is another inspection. However, the appraiser is inspecting the property compared to other properties...in an effort to assign a value to the property.

For both of these inspections...it is recommended to have a licensed inspector. Also, remember...most of the time these inspections are going to be paid for by the buyer. This means typically in the first 10 days of escrow...the buyer will be responsible for paying approximately $750.00. Here are some links to look into inspectors and appraisers...

http://www.ashi.org/
http://www.nachi.org/

http://www.appraisalinstitute.org/

I really want to buy a home...where do I start? pt. 1

I get asked this question a lot. My experience tells me that people have many different "places" to start. Here is my opinion of the home buying process...

1.) Pre-approval - this is the part that everyone dreads. You have to give very personal information to a complete stranger who then is going to tell you how much of a house you qualify to buy. The process is short and typically painless. You call a bank or a mortgage officer (by the way...I have plenty to refer you to if you don't know who to call), and tell them that you want to buy a house. They will ask for your income, credit information, etc...and tell you how much you can afford...usually folks decide how much they can afford by the payment.

2.) Get out and start looking - this is the fun part. You have an opportunity to view many homes (tons in fact...there are over 2,700 homes available in Corona, 1,000 in Lake Elsinore, 1,600 in Murrieta, and 1,300 in Temecula). The process can also become tedious and overwhelming because of the inventory. I recommend viewing 6-8 homes at a time...when you look at more than that...the homes tend to start blurring together (which house had the granite counter-tops, did this one have the slate kitchen, what did the loft look like in the house on Main St, etc...).