Antonio & Alexia's Blog

Despite the difficulties in obtaining financing for a home purchase, there are great rewards for those who dare step into home ownership. You will need a couple of qualified people to help you navigate through this obstacle course: A Lender and a Professional Realtor. Open your eyes to today's opportunities! Here are 7 proven strategies to help you navigate to a successful home purchase.

• Begin by gathering all your financial documents first. You will need among others: current pay stubs, copies of tax records from the last two years, recent bank statements for all your accounts, copies of Divorce decrees if applicable. If you have funds in CD's or 401Ks or other income, you will need to bring copies of those documents too. 

• The next step is to talk to a lender about your finances. Find out what you qualify for, how much money you need to have for a down payment plus closing costs. You can do this by simply asking your lender to do a pre-qualification for a loan. After this meeting you should know what your price range is and how much your monthly payments will be.

• Make a list of what is important to you and your family when is comes to housing. Do you really need to have 4 bedrooms?  is a pool an absolute necessity? Keep in mind that the First Home is not exactly your Dream Home. Buy below your maximum qualifications if you can, that will leave you room to save money by applying a small amount each month to the mortgage payments to reduce the principal amount borrowed.

• Meet and interview a local, Professional Realtor. Choose a person that specializes in the area that your are interested in. You can do a lot of research on your own online, but a professional Realtor's help is absolutely necessary. Remember this: Realtor's commissions are paid for by the home seller. There is no cost to you when you buy a home. Use his/her knowledge and expertise... for Free!

• There will be other professional trades people that will get involved in a typical real estate transaction. your Realtor will assist you here and on your behalf, he/she will contact home, roof, termite and other inspectors. The lender will take care of having the house appraisal done for you.

• Once you have made an offer on a house, you will make a cash deposit into a title insurance company. This neutral company will not only run an escrow for you, it will also ensure the title of the house in your name after escrow closes and you become the new owner of the house.

• Read and understand all documents handed to you and the time elements involved during the transaction. The more you know the better it will be for you. if you take these steps in order, once you have picked the right house and made and offer that has been accepted, you will have about 30 to 40 days before you can get the house. If the house, however, is in a short sale, it might take months before you can close the escrow and call that home your own.

There are plenty of reasons to buy your first house. Beginning with pride of ownership, appreciation, mortgage interest deductions, property tax deductions, capital gains exclusion and build up of equity just to name a few. The cycle of real estate will continue, just as when prices went up and then come down, we will see in the near future this trend reversed. Buying a house in the long run is far better than renting.

The CA Residential Purchase Agreement is the the only document that a lender will accept as the basics for granting a home loan. Home buyers, specially first time home buyers, are reluctant to sign such document on the spot, after all, with the required Buyers Inspection Advisory and the Disclosure Regarding Real Estate Relationships, those are 14 pages of gibberish mambo jumbo stuff that is not easy to understand when read for the first time.

At the height of the market, we lost a great home because the first time buyer took 2 days to read the contract and another 3 hours for me to clarify the questions he had when he read it. By the time we presented the offer, another buyer's offer had been accepted. I could not blame the buyer for not signing on the spot. For this type of purchase, as a consumer, I probably would have done the same.

That is when I decided to actually write the offer earlier and even before I show the first house to buyer looking to buy a home. Once we tour the houses for the first time, I give the buyer the entire 14 pages of an offer written on the best house we saw. By previewing first, I would know which house to write the contract for. Since I do not show houses unless the buyer is pre-approved, I also know the finances, I write down the exact numbers for a down payment and even calculate an estimated buyer's closing costs.

Having the buyers have the contract on the first tour of houses, with real numbers, and sending them home to read those documents is a huge time saver for both of us. I tell them to assume that we just bought this house, and that these are exactly the documents that we will use when presenting an offer. I ask them to read those pages, and make notes on them to ask me when we see each other again. By reading the contract without any pressure for time, they will be ready when the time comes to sign an offer. I do make a point on subsequent meetings to ask about the contract.

Yes, this might sound like putting the cart in front of the horse. But we accomplish so much, the buyer's confidence on the process is key for the entire transaction to start and finish on time. A well informed and educated consumer is also a very happy Home Buyer. This type of home buyer makes the lender, the seller, their Realtors and the other 30+ people who somehow get involved in a typical real estate transaction very happy too!

Taking the steps in this order takes the fear out of actually purchasing a home, the knowledge, understanding and familiarity might avoid the infamous "Buyers Remorse" for which I also have a prepared medicine. After the offer is accepted, I give the buyers colorful M&M's in a prescription bottle. I tell them to take 2 pills when they feel scared or uneasy about their purchase, if the feeling is too intense to double the dose, that the color of the M&M's does not matter.

But if they feel real bad about what they bought, to call me immediately. If the buyer is not 100% into it, I want them out of the transaction as early as possible. If you are looking to buy a house right now, ask your Realtor for those documents and familiarize yourself with them.

In my 26+ years in real estate, I thought I had seen it all... well, not exactly all, here is a new one for me. I have been very adamant about NOT taking a listing that is not priced properly. Overpriced listings are bad for everybody, for the seller, the home buyer, the appraiser, the Realtors, even the neighborhood! Why is it that sellers want yesterday's prices? haven't they read the real estate news? The market has dropped... a lot!

About 3 months ago, I was called to put a house on the market, I did my usual research, took a good look at the house, reviewed the comparable sales with the owners and help them secure a stagger, and even a carpet outfit to replace a worn out carpet in the hallway. My suggestion, based on comparable sales, and my knowledge of the neighborhood, (I live 4 blocks away from this home) was to price this home at about $650,000. The sellers were not happy at all. They wanted to list it at $775,000! what a big difference!

I looked at my research again, and could not find a justification for their price. I knew that I will never have comparable sales for the appraisal. I offered to list it at $675,000 with a proviso that we reduce the price after 3 open houses, the difference was too big for them to overcome, my standard speech for a situation like this one was given: "... I am sorry, I rather turn you down, than let you down..." I cannot work with your price. They told me, they will think about it...

  The very next day, I received a beautiful plant delivered to my house with a note of thanks. They informed me that they were going to go with another Realtor, and thank me for my efforts. 3 days later, the house was listed on the MLS at $775,000. The other Realtor had open houses almost every weekend, after 30 days the price went down to $750,000, another 3 weeks later to $725,000 5 weeks later the price dropped again to $699,950 and then again to $675,000, then it went pending. Last week it closed escrow at $640,000!

Who dropped the ball in this scenario? the other Realtor did get paid. I upheld my high values and did not get paid, the other guy spent time and money, but got the job done. Then, I realized, that the seller does have the right to try and get the best possible price for his home... Even if it is an unrealistic price to begin with.! Sellers, are at a disadvantage when playing real estate, if the seller does not get the best price, he cannot go back and fix it. The buyer can realized he is overpaying and pull out of escrow before is too late, the seller cannot accept a higher offer once is in escrow.

If this would have been an isolated incident, I would have not even writen this post. But earlier this year, I had a similar situation where I was called to sell a house and my price based on comparables told me the house was worth $630,000 tops, I always look at how I will provide the right 3 comparable sales to the appraiser. I did not have them here either, I also refused to list it at their high price. The seller had another agent list it for $675,000 and it sold in ONE day! The kicker? an all cash buyer come and close escrow in 7 days... yes, this seller was lucky, because there are not too many all cash buyers ready to overpay for a house anymore.

As Realtors, we are paid for our knowledge and experience, but overpriced listings and no comparable sales are a bad and very expensive proposition. Appraisers are on the firing line, and we have lost weeks of previewing, showing houses, writing contracts and then after being in escrow for weeks, the appraisal comes and shuts down the entire transaction and sends everyone back to square one. Does anyone out there have the magic formula? I would like to know.

If a future home seller would take the time to check the credentials of potential listing agents, they could very easily weed out those who are not fitted for the job. After all, a listing agreement presently will tie up the seller to his Realtor of choice for about 4 to 6 months. If you, as a home seller, have the wrong representation, it's your fault. You, Mr. Seller did not do your homework, as simple as that.

 A quick look at my MLS, here in Alameda County, on the East shores of the San Francisco Bay, shows an incredible array of listings of all types. The ones that stand a good chance of attracting a home buyer, are those that simply have the basic information, i.e. a few photograhs, a good description of the property on the remark section, and an easy to find listing agent with an office with a person who actually answers the phone during normal working hours. A few Realtors even have the audacity to write on the comment section for other Realtors: "NO calls, only emails."

The person who is going to be selling a property, should call on one of the listings of the Realtor he is thinking of giving the listing to and pose as a home buyer. Many things could come out of that conversation that could help decide whether this individual is the right person for the job. Here is a short list of the items to look for.

1. How quickly does this Realtor responds to calls?
2. Make a tentative appointment to see the house. How flexible is this person?
3. Is this Realtor eager and available to show the house within hours?
4. Ask where on the Internet you can find more information about the house
5. Compare the Realtor's web site with others. How do the listings show?
6. Is the site easy to navigate? Is information clearly presented?
7. How well does this Realtor know your neighborhood? How does he sells it?

In my area, I know there are a couple of listings that will probably never sell! One has a Realtor that works about 3 hours away. I can just imagine, how he reacts when someone calls and ask to see the house. Obviously, he just expects that putting the house on the Realtors MLS, another Realtor will sell it for him. Another moved out of state but still comes every now and then and lists homes for sale and his co-workers sort of take care of his business. If these sellers would have just made a couple of phone calls, and pretend they were home buyers, they would have seen how bad these houses were represented. Mistakes like these can costs home sellers thousands of dollars.

Do not allow YOUR HOUSE to be what I call an "Orphan Listing" Similar to REO's and some Short Sales, those are listings where it appears nobody is in charge! banks sometimes assign listings at random with agents who are not familiar with the area, and do not seem to spend any time advertising those listings. Their great marketing ploy is only to post the listing on the local MLS.

Finally, if you already have your home on the market, go find it on the Internet! Find out how it shows, is it missing important information? use the list above and see what happens. On almost any real estate site on the Internet you can simply put your zip code and a price range, your house should show in all it's glory... or not! If your Realtor have done his/her job properly and professionally, and your house has not sold... REDUCE THE PRICE! 

One of my best friends is seriously thinking about walking away from his mortage via a strategic default. But his guilt and sense of moral obligation and ethical responsibiliies are killing him. He wants my opinion... he bought his home in 2007 for about $850,000 and it is now worth only $550,000. His payments are going to almost tripled the amount he currently pays in about a year.  A strategic default occurs when a homeowner stops paying their mortgage even though they are still financially able to do so.

I told him the standard Realtor talk: I could not tell him what to do, he needed to talk to a his bank about possible options for a loan modification, also to talk to his CPA to understand potential tax liabilities, and to a lawyer for potential legal ramifications, and to consider the hit on his credit scores.

  Then we went off record, and as friends we discussed the issue in an open manner. I do not understand why is the homeowner the one that is supposed to be the only responsible party and to pay up and not go back on his promise to hold his own. A loan after all, is a business transaction between an investor and his partner, the borrower. The Investor puts up the money and expects a return in his investment, the borrower agrees to make payments until the loan has been paid off completely. Investor makes his money back plus some helfty profits and the borrower will end up with the property free and clear, hopefully worth a small fortune.

There is no investment of any kind that has no risk at all. Lenders have always reaped good returns on those investments, and traditionally have had good  safeguards against losing. They even have Private Mortgage Insurance (PMI) that they ask the borrowers to pay for, and the government has a golden parachute to bail them out. How come they do not have moral or ethical obligations to make them feel guilty? They have scared people into staying in their homes and continue to make payments even though, those houses will remain underwaterl for many years.

Home owners traditionally have paid their mortage, and their house was one of the major debts that they wanted to pay off first. The investors greed helped create the economic collapse, the no-money, interest only loans they sold to unqualified borrowers were irresponsible, they deserve to lose. Home borrowers already lost their downpayment, and their closing costs, along with their dreams, sometimes compiled with the loss of a job and their own self steem. Why should they feel guilty about losing the house? why should they be the only ones asked to be moraly and ethically correct? The lenders have recovered quickly and will go on making money. Homeowners, however, will take years to recover, if ever.

We concluded that as equal partners in this transactions with the banks, homeowners should be able to call it quits, accept the loses and go forward and not feel guilty about a strategic default. Making high payments on a house that has no chance of providing a return for years to come is not in the homeowners best economic interest.

My friend will let the house go, and start the recovery period, knowing that nobody will loan him money for at least 3-7 years. He will rent for a while, save money and be prepared to invest in homeownership again... sometime down the road. He realized that he has nothing to be ashamed off, or guilty of, he will lose his down payment or initial investment, it was a risk he took, the lender took a risk too, it is after all, a simple business transaction that did not pay off  for either party. If you make a bad investment, you have the right to walk away from it.

Have you ever been on a roller coaster? Then you know the feeling of going up, and up, and up... and then there is a point when you realize you are about to experience one of the most basic laws of nature: what goes up, must come down! Yes, I am a Realtor and this analogy is very real in my business. Since 1985 I have experience a few of those turns... this one however, is by far the most long lasting, meanest and most destructive business periods I have ever seen in my profession

I believe most Realtors are on a survival mode right about now, here in sunny northern California, the inventory of homes is still way too high, the banks are not helping anybody, the home buyers are scared and those who can afford and qualify for a loan are waiting to see what happens next. Not a friendly atmosphere for a self employed person who earns a living helping people buy and sell real estate. Looking into the future, my nest egg has been reduced to a couple of twigs...

In the past at this time, I would be planning my next year, I will have set goals, and plans and objectives to reach within the next 12 months, how many listings I need to take, of those how many could sell and based on that, what type of budget I will have, then where and how to spend that money to generate the listings and so forth... Now there is only one goal: Survive!I have enough listings, but they are not selling!

When I look back at where I am now, and how I got here, I can see that a few steps I took many years ago were very good, others, not so good. Here are the lessons I learned during this recession:

• Keeping Some of Your Hard Earned Money Must Become a Priority. I always thought that you should have at leas a 4 to 6 months reserves. In this recession, we need about a year or more. I once read a book where the author insisted that everyone of us should pay ourselves first. That we should keep at least 10% of whatever we earn and put it aside and invest it and make it grow. It was a good book, but I did not follow its teachings, I should have. Bad Move # 1
  

• There is NO Safety in Numbers. Not too long ago, I sold one of my rental properties and took the money, met with my "Financial Adviser" and bought some stocks. I was supposed to be "Diversified and Invested" Everybody had stock holdings and was making money in the stock market. A couple of years after my initial investment, my stock holdings had lost about 53% of the original value. Following the herd for safety only works in the wild. Bad Move # 2
  

• Buy and Hold Real Estate. Early in my career, I did listen to a couple of seasoned Realtors and bought a few rental properties, they went up and up and up in value, and then down and down and down some more. When I look at them today, they are still worth more than when I bought them, and they are producing precious income at this time. Good Move # 1
  

• Listen to Your CPA and Build Liquid Reserves. This one is a lifeline that a business person should not live without. Every year, my CPA insisted that I invest on SEP and/or Roth IRA's, reluctantly, I did, not even knowing the difference between the two of them. Today, even paying a tax of about 12% on some, I can access that money within a couple of days. when you are on a survival mode, this is the difference between the life and the death of a self employed Realtor. Good Move # 2

• Know That Your Financial Friends Will Betray You. For a business person, good credit lines are the blood of the business, without them, you simply cannot survive. When the going was good, my friends at Bank Of America, American Express, and Visa amongst others, were very happy to provide unsolicited lines of credit, check books will arrive with 0% introductory rates on a new line of credit. My credit scores have always been high and I made all my payments on time. They still reduced the amount of credit and froze solid the lines of credit. Just at the time when their help was needed the most. Because of the lesson learned: Good Move # 3

• Do a Complete Inventory and An Appraisal of Your Business. Just writing this blog post, made me think inwards. I started analyzing how I conduct my real estate business. I need to know where I spend my time and money while selling real estate. I started to look in more details at all my financing, We actually  got together with my wife and started writing down every single expense. I must confess, I was shocked to see how much we spend. Good Move # 4

This situation will change, and it can not get any worse than what it has been. I can see the dim light at the end of the tunnel. I have learned that I cannot write a check anymore without making a brief analysis: is this money well spent? Can I live without this item, or service? Could I save this money for a rainy day?

On the personal side, it comes down to economics, I truly enjoy and love what I do. I believe that what I have learned from this recession will make me stronger in better times. On the Professional side, however, I have felt the pain that some of my clients are experiencing, I have learned to be more compasionate specially when it comes to selling their short sales, I must work harder to help them ease that pain. 

I also realized that uncooperative sellers and buyers are very expensive, if they do not know exactly what they want, and work with me to put together a feasible plan to achieve their real estate goals. If I can not afford to lose time and money, neither can they. I cannot be the answer to their prayers until I know exactly what the heck they are praying for!

Back in 2007, when our real estate market started going... nowhere. My wife and I went to a movie called Pirates of The Caribbean. As the movie ended, she turns to me and says, wouldn't it be nice if we make our house look like a Pirate Ship for Halloween? I looked at her in disbelief and started to say "...are you craz..." I changed my thought mid sentence and ended with: You know, that is a great idea, In our ballroom at home, we started building a 40' Pirate Ship.

The very first Saturday of October, we took the pieces outside and started putting it together in our front lawn, in the beautiful Estudillo Estates neighborhood in San Leandro, CA. What we discovered was that people started to come by to look at the unusual display. Working on the Pirate Ship outside our house, we started talking to more people than we were at an Open House on Sunday afternoons. We were not shy about telling them that we were Realtors, a virtual tour of the making of the the Pirate Ship was posted in our web site, we started seeing the numbers to our site go up. The increase traffic generated 2 listings and 4 buyers leads.

From then on, we have made the Holidays our best advertising campaign ever, one that pays it forward, our earth friendly, recyclables, reusable, larger-than-life sculptures in front of our house for Halloween and Christmas lead our neighborhood into the holiday celebrations, it offers the local children a place to go and by selling these pieces of art and donating the proceeds to local charities, we make the famous win-win mantra from real estate a true reality benefiting a lot of people, including our present client sellers.

Here is our 2010 Skeleton Biker, made of paper mache, chicken wire, burlap, conduit pipe and saw dust. We attracted the attention of the local media, a reporter from a major local newspaper come to interview us, we also granted interviews to a TV station, our web site registered over 32,000 hits on the month of October only. That is over a 1,000 hits per day! About a hit per minute! How much could I pay for that?

The plan was to ride this wave from October until January, so we transformed our Skeleton Biker into a Santa Rider, with just a few key strokes, we are now celebrating Christmas. Santa is really coming to town! And the best part is that we receive emails from the neighbors telling us how we altered their routines, as one woman put it: "... it used to be: our house to school, school to our house, now it has changed into: Our house, to YOUR house to School, and then from School, to YOUR house, to our house."

From the advertising point of view, it has been a success story, Nothing beats having children bring their parents to OUR house. We give away colorful teddy bears to them and 2011 calendars to the adults, we hung a flier box in our fence and have an over sized postcard with a color picture of the display and greetings from us as Realtors. In the past we have built a Hearse with a Riper, and a Haunted Castle. We are already thinking about what to built next year. (All ideas are welcome)

The keys to making this advertising campaing work, comes down to: A) To have a genuine desire to help the neighborhood look festive, and B) To use all recycable materials, and to show how to built the sculpture via an educational virtual tour. The rest and best will come later. Give first... give second, and if you have done it right all those good vibes should come back to you. Happy Holidays!

As a Professional Realtor, I am in the front lines and play an important part, up close and very personal when representing a homeowner who is facing foreclosure. How do you stay up beat during these trying times?

Selling a house used to be a voluntary, smooth and well thought out process. Typically home sellers would be looking forward to their new place, or new destination. Asking them to prepare the house for sale was greeted with joy and anticipation, everybody in the family would get in on helping sell the house and move on to the next one.

Sadly, that is not the case now, in probably 30-40% of the cases I deal with. The entire process requires a lot more TLC, that infamous "Tender, Love & Care" is far more important now than ever before. Most people do not realize, how critical our role as Listing Agents has become. Dealing with banks and Foreclosures, we have learned where to go, who to talk to, what type of information and documentation are required, but getting all that together from a depressed individual who is short of money, low in self stem, angry with his lender, and maybe unemployed is not an easy task.

When we come to meet with these sellers to speak about listing the house for sale, we can sense the frustration, the mental anguish, the despair that some people have. The entire house is in disarray, the lawn has not been cut for months, plants have not been watered, children don't play loudly anymore, and pets get more aggressive.

You think I am making these things up? As I type these words, I am mentally reliving my own recent experiences with short sales and foreclosure clients.

I need their help, they need my help. We must work together! I need them to stay focus and mentally alert and to work together towards achieving the goal of selling the house and for them to move on with life. I often suggest to start considering these points:

• Realize that regardless of the outcome, this situation is temporary. It will change, and it will get better

• Sprucing up and cleaning the house will help get a much better price and sell a lot quicker

• If the house sells for a good price, your potential deficiency judgement will be lower

• Gathering all necessary documents is a must. Short sale approvals will depend on complete packages

• If there are young children in the house, tell them what is happening. This could be an interesting lesson. And show them how you can overcome adversity... with their help and support.

• The family will be moving, so start packing, do a garage sale, lighten up your load

• Get active! Depression will kill you! Cleaning things around the house will help you

• Get involved in the process of selling the house. There are serious deadlines, foreclosures are followed by Trustee Sales and then by Sheriff's evictions... if necessary. You need to know when and where to go.

The most important thing is to realize that you are not alone. Unfortunately, thousands of people are in the same situation you are. The sooner you get out from under this situation, the quicker you will begin the process of recovery. You have been successful in the past, that is why you become a homeowner, you can do it again... FHA loans are waiting for you just about three years from foreclosure, remember that. 

Finally; Not all Realtors are created equal! Some are true Professionals, who have made an effort to educate  themselves in the intricacies of dealing with short sales and foreclosures. Begin by looking for an experienced, knowledgeable and Professional Realtor. One who has done a few short sales and foreclosures, because experience and knowledge does count here. This is not a job for a beginner.

If you do not know anyone, feel free to email me, or call me, because no matter where you are in the county, I am sure I can find you the best local Realtor for your market. REMEMBER THIS: There is no cost for this service. For your information: I will get paid a small referral fee for connecting you with that person. That is why, I'll make sure WE get the very best one! Visit us at: www.listedbyantonio.com

Getting a home loan today is getting harder and harder, and home buyers who are unprepared could find themselves homeless if they misbehave while applying for a loan. Lending institutions now check, double check and triple check their applicants until the very last day they fund their loans. 

A recent first time newly wed home buyer found out the hard way, how banks fears of having another foreclosure is making them pull their loans at the very last minute. This particular loan applicant went through about 35 houses, wrote 14 offers, responded to 10 counter offers, and finally! his offer was accepted on first place! Since he had done all the prequalification for the loan, he was informed that he did not need anything else, except to wait for another 3 weeks to close the escrow. He was so happy, that he decided to go out and celebrate with a bunch of friends... bad idea!

After a few drinks with his buddies, they noticed a furniture store across the street from the bar, they decided to offer some advise and help him pick the right furniture and surprise his wife with his purchase. His friends assited him with a lay-out plan to buy a dining room set, a large sofa with a couple of recliners, plus of course a flat 40+ inch T.V. A small down payment was paid and a credit was established. (ouch!) The idea was to move the furniture inside the house when escrow closed and surprise the wife when she opened the door and finds that the house come in with new furniture... (good intentions though.)

Needless to say, the wife was very surprised! She did not even got to see the new furniture... or the house for that matter! because the bank called the day after signing to tell them that the previously approved loan had been denied! The bank had run one more credit check prior to funding and found out that the FICO score went down because of the new purchases. No matter how hard they tried to fix things up, they did not get the loan, they were lucky their landlord help them stay as renters where they lived.

While applying for a loan, stay put and do not spend a dime on credit! do not cosign for anybody, do not apply for anything that might generate even a simple credit check. Banks look at that behavior as bad business and will not hesitate to cancel everything on the mere suspicion that the buyer is not credit smart at such critical point.

The consequences for everybody involved in this transaction are devastating, a huge waste of time and money, that could have been avoided had the Realtor or Lender made a point to warn this first time buyer not to go shopping for anything while in escrow. I am making now this incident a must-tell story for all my buyers, it is a way to get this point across in a very clear and painful way, so they remember.