Have you noticed that the short sales laden with questionable tactics seem to be the ones that have the hardest time closing? Buyers are not tolerant of the unusual – they just want a clean shot at buying a house. Let’s give it to them! P.S. The lender also cancelled the trustee sale this week.
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Jim Klinge
Klinge Realty Group
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Trustindex verifies that the original source of the review is Google. We sold a home with Jim and Donna and from beginning to end they were consummate professionals. Their initial walk through the property resulted in a list of items to be repaired or updated. They supplied a list of vendors and job quotes to do the repairs and updates. We originally wanted to sell ‘as is’ and just get it over with. They gave us a selling price for ‘as is’ and options for doing a few updates/repairs to doing it all with the selling price for each option. We agreed to do all they suggested and we sold for the exact price they predicted. For every dollar spent we got back more than $2 back in the selling price. And they got that price in a rising interest rate environment! Donna and Jim are extremely detailed and guide you through ever aspect of the sale. There were no surprises thanks to their guidance. We couldn’t be more pleased with their representation. Thank you Donna and Jim, Jerry and MaryTrustindex verifies that the original source of the review is Google. We have known Jim & Donna Klinge for over a dozen years, having met them in Carlsbad where our children went to the same school. As long time North County residents, it was a no- brainer for us to have the Klinges be our eyes and ears for San Diego real estate in general and North County in particular. As my military career caused our family to move all over the country and overseas to Asia, Europe and the Pacific, we trusted Jim and Donna to help keep our house in Carlsbad rented with reliable and respectful tenants for over 10 years. Naturally, when the time came to sell our beloved Carlsbad home to pursue a rural lifestyle in retirement out of California, we could think of no better team to represent us than Jim and Donna. They immediately went to work to update our house built in 2004 to current-day standards and trends — in 2 short months they transformed it into a literal modern-day masterpiece. We trusted their judgement implicitly and followed 100% of their recommended changes. When our house finally came on the market, there was a blizzard of serious interest, we had multiple offers by the third day and it sold in just 5 days after a frenzied bidding war for 20% above our asking price! The investment we made in upgrades recommended by Jim and Donna yielded a 4-fold return, in the process setting a new high water mark for a house sold in our community. In our view, there are no better real estate professionals in all of San Diego than Jim and Donna Klinge. Buying or selling, you must run and beg Jim and Donna Klinge to represent you! Our family will never forget Jim, Donna, and their whole team at Compass — we are forever grateful to them.Trustindex verifies that the original source of the review is Google. WeI had the pleasure of working with Klinge Realty Group to sell our home in Carmel Valley, and I cannot recommend them highly enough! Jim and Donna demonstrated exceptional professionalism, offering expert guidance on market conditions and pricing strategy, which resulted in a quick and successful sale. Communication was prompt and we were well-informed throughout the entire process. For anyone looking for a dedicated and knowledgeable real estate team, look no further! ---Trustindex verifies that the original source of the review is Google. Donna and Jim Klinge of Klinge Realty Group have our highest possible recommendation. From Donna and Jim’s first visit to our house through closing their advice and counsel was candid and honest in all dealings. They kept us fully informed throughout the process. The house sold less than three days after listing with a two-week closing. My wife and I have sold several houses during our lives. This was by far the best experience. Klinge Reality is a premium service realtor. You can’t make a better choice for someone to sell your home fast and for top dollar.Trustindex verifies that the original source of the review is Google. Donna and Jim provided exceptional support and professionalism throughout the entire process. We couldn't have been happier with their efforts. They made our house shine, and thanks to their expertise, it sold above the listing price in the very first weekend! Truly a fantastic experience from start to finish.Trustindex verifies that the original source of the review is Google. This year has been difficult on our family, mainly due to having to sell our home. Thankfully we knew God had a plan for us and working with the Klinge team was a key part of it. It was an obvious decision to work with them again after such an amazing experience when purchasing the same home we needed to sell. The challenge was, how will we do this in so little time with so much going on? Jim and Donna held our hand every step of the way. Whenever an unexpected issue arose they found and provided a solution. Never once did we feel pressured to make a decision and the Klinges were always reassuring after providing the information that the decision was ours to make. Despite the curve balls, they never panicked and exemplified the “can do” attitude, making us feel optimistic and taken care of. Their expertise and professionalism was superb. But of all the reasons to work with the Klinges, the most impactful and valuable is their compassion and genuine care for their clients. We pray that we can one day purchase our forever home and you better believe that Jim and Donna will be representing us - as long as they will have us of course. Thank you again Klinge team! Your execution, experience, and care are unmatched.Trustindex verifies that the original source of the review is Google. Jim and Donna were fantastic! Jim understanding my needs, recommending potential places, pointing out the pros and cons of each property was invaluable. Then when the offer was accepted Donna’s organized guidance through the inspections, paperwork etc made the whole process seem effortless. So grateful that I had them on my side!Trustindex verifies that the original source of the review is Google. We first found Jim through his blog at bubbleinfo.com, which really showcased his knowledge of SoCal real estate. Since then we've done three transactions with Jim and Donna, and they are an incredible full service agency, with Jim's deep market insight and Donna's deft contract and project management. We trust them implicitly in their analysis and strategy, which is based on years of experience. They're always available and on top of things, and we strongly recommend them to anyone.Trustindex verifies that the original source of the review is Google. The Good The Klinge Realty Group operates like a finely tuned machine, with a very personal touch. We contacted them on a Sunday and they were talking to us about our family and our needs on our living room couch the following day. They carefully listened to us and worked with us to identify the best and quickest path to listing within 2 weeks to take advantage of the low inventory conditions in our South Carlsbad neighborhood. They knew our tract specifically and had many previous sales there over the years - they came prepared with a thorough analysis of comparative sales and recommended a pricing strategy that they felt confident would yield offers the first weekend on the market. The Great Over the next two weeks Donna coordinated a range of vendors who she knew from experience could get the preparation to list work we needed done on time and with high quality. Our light tune-up involved excellent experiences with their stagers, landscapers, contractors, electricians, and plumbers. Throughout this period Donna's daily communication was clear, concise, and responsive. Any time we had questions Donna picked up the phone or texted immediately - but almost always, she answered our questions before we even knew we had them. The Outstanding We had a tricky situation with a shared fence that could have delayed our escrow. Donna used superb mediation skills to negotiate the terms of replacement and was personally on site with the fence contractor to make sure everything went smoothly. The fence looks great and escrow closed on time. The Truly Exceptional Our house came on the market on a Wednesday and between then and Monday morning Jim was personally at all three open houses. He was in constant communication explaining potential buyer reaction and strength. As he predicted offers began to come in on Saturday and each one was incrementally higher than the last. At the end we had 5 offers, 4 of which were over list, and the final accepted offer was $100,000 over list. In addition to being over list it included rent back terms that met our needs. The Recommendation For all of these reasons we would strongly recommend The Klinge Team to anyone wanting to sell in North County Coastal San Diego. I had been reading Jim's bubbleinfo.com blog for 15 years and knew when the time came to sell that he would be our first call. Jim Klinge is not your standard realtor. He is keenly aware of market conditions and sales strategies. And, works his tail off - though not as hard as Donna . At this point he's gone from realtor to friend and I plan to have him over to grill and chill at our new place to talk real estate, but also just about life and raising kids in San Diego. He's more interested in relationships than his sales numbers - and that's why his sales numbers are so high. We have already recommended the Klinge's to some close friends and another successful sale is on deck right around the corner...Trustindex verifies that the original source of the review is Google. We recently had the pleasure of working with Jim and Donna from Klinge Realty Group to sell our house, and we couldn't be more satisfied with the experience. From the initial meeting, they listened attentively to our needs and provided invaluable guidance on specific improvements to get our home market ready. Their responsiveness throughout the entire process was truly impressive. Anytime we had questions or concerns, they were quick to address them, ensuring we felt comfortable and informed every step of the way. What stood out the most was their team and extensive network of tradespeople, which made addressing any necessary repairs or updates seamless and stress-free. Thanks to their expertise and dedication, our house sold quickly and at a great price. We highly recommend Jim and Donna to anyone looking to buy or sell a home. They are a fantastic team who truly care about their clients and deliver exceptional results.Load more
OT : It looks like the banks are ready to fight back a bit against the strategic defaulters.
http://money.cnn.com/2010/05/28/real_estate/homebuying_after_foreclosure/index.htm
“Credit scores are only one component of a complete credit decision,” Brinkmann said. “[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage.”
“But future underwriters will scrutinize their records very closely, and if they find no precipitating factors leading to the defaults — no job loss, no health issues –the repaired credit score won’t overshadow the black mark of a walkaway.”
I think this is all hot air until the government gets out of the mortgage business which may never happen.
I dont know about you guys but why is buying a house treated unlike all other debt?Seems a lot of these short sales are just people that overbought and want the banks to eat the loss.I dont like this as it hurts everyone else who wants to borrow money in the future.
Agreed – Buyers treated homes more as an Option on the home rather than ownership. Buy options/calls on the stock market for a few $$$, price goes down, or the option expires (read: the loan is due) and it is discarded.
I’m not one for regulation, however, since the gov is taking over everything anyway, just make mortgages 70% LTV max, 30 yr amtz, on all homes and call it good.
considering this was the largest bust/boom cycle ever and we’re down 30% across the board, 70% mortgages would have stopped this from even starting.
Sure prices would fall, but once it resets to the lower debt levels, who cares.
We run our commercial real estate funds at 50% LTC across the portfolio (certain properties are 70% LTV given their investment grade tenants). This ensures we can meet our debt service, and pay an annualized dividend of 8%+ every month….its pretty simple if you take a long term view and don’t swing for the fences. Tony Gwynn made the Hall of Fame hitting singles & doubles, he just rarely struck out…
clearfund, I think one of the goals of the government’s involvement in housing is to prevent further price declines. If that’s the case then requiring 70% LTV won’t work.
I believe that it’s not overstating things to say that the government is supporting the current housing market. There seems to be wide spread consensus on this point. I think we (i.e. the nation) need to first admit this, and then have an honest conversation as to whether or not this is the best way for the government to spend our tax dollars. There can be reasonable arguments made on both sides I think.
On a more visceral level I’ll admit that I hate it. My tax dollars are essentially funding other buyers with whom I’m competing. We’re also continuing the behaviors that got us into this mess in the first place because the more properties that get purchased with 5% down, the more reason there becomes to not let home prices slip anymore than they already have. It just sucks. But on a broader, more dispassionate view, I really don’t know what the right answer is.
JTR- I have actually spoken with people who have this thought in their heads…
It goes something like this (this is not my idea, so please give me some slack in trying to explain):
[start of guessing games]
If you list a home for less money, $700k for example using the home featured in the video (well under-value, as you suggest), then suddenly there will be a bidding war, and the bidding war will result in buyers paying more than the home is actually worth. In other words, lets put a fair market value of $1M on the home (an assumed number for the sake of discussion). Then if you, as an agent, get the owner to agree to list it for $700k, so many bids will be coming in that there will be at least one over $1M.
As far as “buyer walked,” no buyer walks from a really good deal. Once again assuming the homes is really worth $1M, then why would the buyer walk if he was able to buy it for less than $850k? There is only one reason that I can think of–we know it’s a short sale, so the sale price was not approved by the lien holder. Now what the selling agent must do is try to extract enough additional cash out of the buyer to satisfy the lien holder. In other words, as time passes, the selling agent continues to try to increase the price.
Two things are happening- 1. The buyer would be getting a less and less deal (or so-called alpha). 2. Time continues to pass (this results in two things: A. generally buyers want the deal sooner rather than later, and B. in a down market, the buyer’s alpha is reduced further. If the market were going up by more than the desired increases in price (for example the values suddenly doubled, but the lien holder demanded an extra 25% for final approval), then the buyer would probably just pay.
And while this is not rational, 3. The buyer will get frustrated by not knowing what authority the selling agent has, as the selling agent cannot approve the selling price, so the selling agent must play a game of continuing to extract more from the buyer–the buyer might ask, “When does this end?” It ends when the buyer walks.
Now let’s move to the neighbor discouraging the sale. I am not sure what’s going on in the neighbor’s head, unless he was connected to at least one potential buyer. Why would he try to reduce the value of the homes in his area? Two potential reasons come to mind:
1. He has a friend who wants a deal on the home.
2. He knows that if this distressed sale is recorded, then it will be clear that his home is actually worth less.
Following the second idea, it could be that the buyer was a shill–simply trying to delay the sale, but this does not fully explain why the listing now suggests that the price range is both increased and lender approved.
I suppose there is a possibility that the neighbor, playing the loud music, wanted to buy the home himself, move in it, and sell his home.
[end of guessing games]
Making the normal market assumptions, the fair value of the home, whatever it is, will not change with selling strategy. But if you have a fantasy that buyers will bid more based on other bidders (thus the normal assumption that buyers are independent is violated), then possibly a higher selling price could be realized. This is common in some situations, such as oil and gas reserves. If it is known that a well-respected geologist places a high value on a particular reserve, then the other players may be willing to bid more, if they place some value in that geologist’s skill.
The oil and gas industry is exactly where the term “winner’s curse” originated.
My guess is the buyer walked because there was too much attached to this short sale. Jim, didn’t the listing agent say something about the buyer also having to pick up $30k in debt (almost sounding like credit cared debt?) Tack on the mandatory negotiator and whatever other shenanigans, and I bet the buyer just got fed up.
That open house was one of the funniest spectacles I’ve seen.
The Blur- If the total price, including all the things you speak of, was significantly below what the buyer was willing to pay, then the buyer would not walk. The buyer’s problem is the risk that the transaction fails on the seller side. If the buyer could be assured that the transaction would ultimately be successful in a specific time, then he’d be less likely to walk. JTR has discussed how long some of these short sales drag on for, and I am not talking about the ones where he is part of the sale. (Remember he got “dinged” for actually selling the properties in a slightly below average time, and by slightly below average, I do not know what the standard deviation was.)
For example, let’s assume the home is worth $1M. Now if the price is $700k in cash, plus $30k in debt, plus 90 days in time/negotiations, that might be fine, but at some point when the deal is not going as planned, the buyer will simply give up. This is especially true in a down market where plenty of other substitute properties exist.
I am not suggesting the market is down in that area, but rather, if the market is down and supply is high, then finding a substitute property is relatively easy as contrasted to an market where property values are rapidly increasing and supply is narrow.
What might have happened:
Buyer makes offer.
Seller says it must be approved.
Buyer then learns that there is another 30k in debt that must be paid.
Buyer thinks, well I was getting a real bargain at my offered price, and it’s still an ok deal after the 30k is added, so the buyer agrees to pay an extra $30k.
Seller then says the offer is still not approved, needs more $.
If small enough, buyer might still agree, but buyer wants to get moved in.
Seller then places additional demands, as the person at lender didn’t have sufficient authority to make ultimate approval. Personal with authority says more $$$ is needed.
Buyer says enough is enough, and “simply walks,” or so the seller’s agent might suggest.
I would suggest that it is likely that the listing agent was inadequate, inexperienced, unprofessional and unable to get the deal done, but what listing agent would put that into the remarks?
On all the sales that I’ve been looking at, whether distressed or not, I try to understand what the market price for the property is. I factor in any repair costs and any other costs, like $30k in debt service. I also factor in hassle factor and risk because those are real costs. If it makes sense then I’m in, if it doesn’t I’m gone.
As noted here, I haven’t found any really screamin’ deals when you do all of the above. It just seems like the San Diego market is too competitive and efficient to allow a really screamin’ deal happen (under $1M). Someone else will step in a pay a little more, then someone else, etc. The best it seems you can hope for is a good deal, maybe a tad below market, because maybe you were quick to offer and the seller wants to get it done.
JP2,
I’ll live with the theory/practice of underpricing a home in order to create a frenzy, it works. But buyers will go about 10% over list price, then the discomfort kicks in.
In this case, the winning buyer probably overbid, then got stuck with the extra $30,000 and then the bank came back wanting more and it was the last straw. They feel worked over and much higher than the original list price.
If it would have been listed for $799,000 we wouldn’t be talking about it, because it would have been bid up into the low-$800,000s and the buyers would have been comfortable, and the bank might have lived with the price.
Waiting,
I agree, for as screwed up as the market seems, it really is quite functional and efficient. The majority of sales sell for what a ready, willing, and able buyer will pay.
“I’ll live with the theory/practice of underpricing a home in order to create a frenzy, it works. But buyers will go about 10% over list price, then the discomfort kicks in.”
If the final price is higher than a fair price, the frenzy is known as the “winner’s curse.”
I’ve actually been having this conversation with a guy in the Bay area, and I note the 10% you quote.
“If it would have been listed for $799,000 we wouldn’t be talking about it, because it would have been bid up into the low-$800,000s and the buyers would have been comfortable, and the bank might have lived with the price.”
Ok, if you list for $750k to get bids around $825k, and if you list for $799k, then you get bids in the “low-$800,000s” (shouldn’t this be high-$800,000s, as 110% of $799 is $879), why not list at $900k, or $1M, or $2M?
Simply put the market value is not determined by the listing price.
Alternatively, so that I cover both sides, what list price would a buyer like to see? If a low listing price suggests over-bidding, then maybe a buyer would want to see a higher listing price? But if a higher listing price suggest that a full-price offer will not be forthcoming, then what difference does the listing price make? The listing price is simply a reserve where the seller is suggesting that offers below that amount may be rejected without penalty.
Finally, if this place would have been listed for $600k, are you suggesting that no offer over $660k would have been made, or greater discomfort would have been realized? Clearly Alpha is being reduced as the price goes higher, but discomfort comes when Alpha is near zero or negative.
Ultimately we need to pull out the game theory and apply it to auctions. In the case where the price starts high, it’s a reverse auction, where the first person to make a bid wins. In the case of a no-reserve first-price auction (where the bidder pays their bid price rather than the second-highest bidder’s bid, as happens in the standard English auction), the bidders are forced to bid lower, in anticipation that other bidders are bidding low too (these are sometimes called silent auctions).
The ultimate question is as a seller how can you maximize the selling price. Without going through extensive proof, the bottom line is that all sales systems yield the same selling price, so long as we apply the usual assumptions (including buyer independence, all buyers in the universe know about the sale, all buyers are rational players, etc.).
So if you price it expecting 10% over-bidding versus pricing it at fair market value, the final selling price is the same.
A low price garners the bids of a greater number of buyers, but that just suggests more bidders will be rejected.
The underlying value of the asset is not increased or decreased by a specific selling technique (once again, we are under the normal assumptions, including all players in the universe have knowledge, rational players, independence, etc.).
(To be fair, I have made offers that are far north of the 10% discomfort level you suggest, and I have submitted offers that are south of 50% of the asking price, but I have never made an offer that drops by $100k each month. The gross amount of 10% should be discussed too. In Vegas 10% might be $10k, but for a $1M home in California, which is not that uncommon, 10% is $100k, or 10x 10% in Vegas. I’d also be willing to consider percent of median income, or some other metric to measure the impact of a point.)
All of that said, it is very well-established that a good salesperson will maximize the selling price, although you have discussed buyers submitting offers directly to listing agents in an attempt to reduce the buyer’s price while maximizing the net realized by the seller.
Here is the most likely reason for you. The seller doesn’t really want to sell the house. He probably just wants to prolong the foreclosure process by starting the fake short-sale that he will sabotage by any means, so he can continue living at his place for free.
But isn’t the house already vacant?
yes, house has been vacant at least all year.
Ok, if you list for $750k to get bids around $825k, and if you list for $799k, then you get bids in the “low-$800,000s” (shouldn’t this be high-$800,000s, as 110% of $799 is $879), why not list at $900k, or $1M, or $2M?
The +10% is relative to market value, which in this case is mid-$800,000s, evidenced by the bank’s approval. Buyers don’t automatically tack on 10%, my point is that it’s about the max anyone is going to go over an artificially low list price before feeling uncomfortable.
The ultimate question is as a seller how can you maximize the selling price.
My recommendation is to list at 5% under market (if actual market value can be determined) allowing for the +10% overbid. If everything goes right and a bidding war breaks out, the sales price ends up a little higher than market, yet the buyer is comfortable enough to close.
How does that saying go?
Pigs get fat, hogs get slaughtered?
Fact that the lender canceled the upcoming trustee sale is a big tell. Think of all the tactics a “investor” would go through to prevent a shortsale on “gem”. The ones expecting this to fly onto the court house steps where they could pick this up on the cheap and make a fat profit did not get the last laugh in this case. Banks no longer take kindly to getting shortchanged anymore.
“My recommendation is to list at 5% under market (if actual market value can be determined) allowing for the +10% overbid. If everything goes right and a bidding war breaks out, the sales price ends up a little higher than market, yet the buyer is comfortable enough to close.”
Fair enough! 5% under gets the job done, and any over-bidding brings it right up to market, or just above.
BTW, and this should not be ignored, from what you’ve posted, you have a great record on pricing AND getting the job done.
“My recommendation is to list at 5% under market (if actual market value can be determined) allowing for the +10% overbid. If everything goes right and a bidding war breaks out, the sales price ends up a little higher than market, yet the buyer is comfortable enough to close.
How does that saying go?
Pigs get fat, hogs get slaughtered?”
I think Jim has the right tact for selling. In San Diego 5% under market is sufficient to get noticed. I know I’d pick it out in the neighborhoods I’m looking in. Those are the houses that I’ve put offers on. I set what I think the market price really is, make any adjustments as to how much it might be worth it to me personally (i.e. I might be willing to overpay a bit for a certain feature because it has value to me), and then put in my offer. If it goes higher than my number I drop out, but I think many people will be pulled into the game once they’ve made the initial offer. It only takes one person to get overly excited and bid high to make this strategy work.
The problem is many properties aren’t priced this way. They’re priced high and work their way down. Having recently been a seller (albeit in a different market) I can tell you that it’s hard to underprice and hope for overbidding. It less competitive areas it might not even be the best play. I’ll admit that I didn’t have the stomach to do it.
“I can tell you that it’s hard to underprice and hope for overbidding.”
Let’s just say that there have been plenty of sales go down for less than the seller desired, but every seller desires more.
There is an online auction site that allows a person to pick a starting bid. A low starting bid garners bidder attention, but it’s risky: the final bid may be far too low.
I’ve seen essentially identical items sell both ways:
1. Start at a low bid and sell much higher than others listed at a higher opening bid.
2. Start at a low bid and sell much lower than similar items listed at a higher initial bid.
The item sold for the higher initial bid amount in the past, so a low opening bid can yield a higher selling price, but it can result in a lower selling price too.
Assuming the seller wants to sell, then we must consider the clock keeps ticking as the item remains unsold.
Thus we want to maximize selling price, but we want to minimize selling time.