Posts filed under ‘Tips’

Finding Value—the tip of the iceberg

The current soft market is illustrating one of my long held principles as a realtor:   value, as indicated by a property that goes up the most in an “up” market and down the least in a “down” market, is not purely a matter of location.

While prices on the Westside in general and Santa Monica in particular are holding up better than other parts of Los Angeles County and the rest of California, it’s instructive to pay attention to details.   The very best properties, the tip of the real estate iceberg, assuming they have credible listing prices, are still selling quickly, some even with multiple offers.

But if that three-bedroom house is on a busy street it will take longer to sell, and at a disproportionately lower price, than its uncompromised neighbor two blocks over.   That two-bedroom condo with less than 900 square feet of living space will be a much more difficult sell than the one in the same neighborhood with more than 1,200 square feet, even though the latter has a higher asking price.

There’s a line of conventional wisdom about real estate that says one should buy the worst property in the best location one can afford.   I disagree.    If you put all the properties in an area on a 1-100 scale, I recommend not buying any home at 25 or below.   Don’t buy on the busy street, don’t buy the excessively small, don’t buy the house across the street from a fire station.   Instead, if building and sustaining value is among your top priorities, find a home that doesn’t have any of these incurable defects.

Contrariwise, if you really need “bang for the buck,” getting some combination of larger/newer/nicer, then these homes with the incurable defects are exactly the properties you should look at.  But remember, the “deal” you get on the front end when you buy is the same deal you will have to give on the back end when you eventually sell.   You’ll be able to meet your daily needs at the cost of reduced appreciation.

As your realtor, I can help you understand and weigh these trade-offs.

March 30, 2008 at 3:44 pm Leave a comment

Sellers: looking at contingent offers

Virtually every real estate contract has contingencies that the Buyer must meet or otherwise have an option to withdraw from escrow. The three traditional major contingencies are the ability to get a loan for specified amounts at specified terms, the acceptance of the result of a physical inspection and other due diligence, and a review of documents pertaining to the property, such as a preliminary title report.

But the current market is seeing a new contingency that we haven’t seen much of at all in the past 12 or so years: Buyer’s offer is contingent upon the sale of the Buyer’s property. In the past few years, Sellers would have laughed at such a contingency…why wait for the Buyers to sell their property when you can get another three or four or eight offers without that contingency?

But times have changed. Now, with many properties being on the market for 60, 90, 120 days or more, Sellers may be more willing to consider an offer contingent upon the sale of the Buyer’s property.

There are many factors that a Seller should consider, including length of time the Buyer has to remove this contingency, how attractive the property is and how well priced it is (to gauge the likelihood of reasonably prompt sale), the apparent willingness of the Buyer to do what it takes to get their property sold and assessment of the Buyer’s real estate agent’s ability to successfully market the Buyer’s property.

There isn’t a simple, clean set of answers to these questions. If Sellers have their property listed with me, I will walk them through the questions and answers as I evaluate them, giving them the benefit of my 17 years of experience, including experience gained in the last down market of 1990-1996.

When the market changes as it has over the past few months, Sellers have to change and adapt with it. Carefully considering a contingency of the Buyer’s selling their home may be a prudent thing to do if the offer is otherwise solid and if the prospects of the Buyer doing so look good within a specified period of time.

February 18, 2008 at 10:28 am 1 comment

Some Common Mistakes

For most people, a real estate transaction will be among the most financially significant actions they undertake in their entire lives. Given that, it pays to be prudent. Here are two errors I’ve observed in the past year.

Using an Out-of-Area agent to list your home for sale. In one case, a couple used one of their best friends who was an agent in Hollywood to list their Santa Monica condo for sale. The agent did not understand the nuances of location in the Santa Monica market. As a result, the condo sat on the market for months while the market declined and the Sellers finally accepted a much lower sales price than they would have had to accept had their property been priced accurately to begin with.

There is no substitute for on-the-ground experience in pricing and marketing a property. When you hire an agent, make sure that he or she has that on-the-ground experience where your property is located.

Using a Part-Time Agent. In the instance above, the agent was a part-time agent in addition to being from out of the area. As a result, the agent could not respond to buyers and other agents as quickly as he/she could have. Real estate contracts contain a clause that says “time is of the essence” and while this is always true, it’s even more so in a volatile and challenging such as we are experiencing right now.

Using the Agent Representing the Seller of the Home You Want to Buy. I’ve seen parties who are buying a property use that property’s listing agent to list their current home for sale in the hopes that will get them a better deal on the purchase of their home.

The duty of the listing agent is to obtain the best price and terms for the Seller of that property. For the listing agent to induce that Seller to accept terms from a favored client of the agent would be a breach of ethics. Beyond that, from a practical standpoint, the listing agent has a longer pre-existing relationship with the Seller. Either way you figure, counting on the listing agent to get you a better deal because you let him or her sell your own property in exchange is a bad proposition.

August 28, 2007 at 4:47 pm Leave a comment

Location versus Price and Value in Santa Monica

Anne Pautler asks: why do prices in Santa Monica change so much block to block?

Actually, it depends upon which block and the answer is a variation of the old joke about the three most important things in real estate being location, location, location.

The difference in price between otherwise nearly identical condos half a block north of Wilshire and half a block south of Wilshire can easily be 15-20 percent. Both units would be in the same city, have the same environment, have no appreciable difference in crime rate, and even have the same public schools except on the elementary level, where McKinley would stand in for Franklin or Roosevelt. Is such a difference in price rational? In my opinion, no, but that doesn’t make the price differential any less real in the marketplace.

In most general terms, property in Santa Monica commands a higher value the further north you go and the further west, closer to the beach, you go. But there are exceptions to the rule. The lowest priced properties will be found in the band on either side of the Santa Monica freeway, south of Olympic Blvd. and north of Pico Blvd. As one moves south of Pico, property values rise, just as they do as one moves north of Olympic.

I’ve had clients who have come to me almost literally after stepping off the plane at LAX and they ask for “north of Wilshire” even if they know nothing else about Santa Monica. If everything else were equal, north of Wilshire properties, which command a better rate of appreciation, increasing value more in an “up” market, holding on to value more in a “down” market, would be the obvious choice.

But everything else isn’t equal. When one purchases a property, one is buying a package of two things: investment potential and “bang for the buck” as reflected in size, age, level of finish, etc. At the same price point, if one part of the package goes up, the other part of the package goes down, just like opposite sides of a teeter-totter.

Which is why one client, a professor at UCLA, after first looking at two-bedroom condos in the Santa Monica area ultimately purchased a four-bedroom house in Woodland Hills in the same price range. In so doing, he got more “bang for the buck” in a very dramatic way at the cost of a less advantageous long-range outlook in investment potential.

In making a purchase, there is no “right” decision. The balance point between location and “bang for the buck,” whether on a broad range between Santa Monica and Woodland Hills, or a narrower range between south and north of Wilshire, is decision that each buyer will weigh differently. My job as a real estate consultant is to identify the trade-offs for each client so that they can make an informed decision in light of their needs.

July 28, 2007 at 10:11 pm Leave a comment

Condos vs. Townhouses

G3Gecko asks: What’s the difference between a condo and a townhouse?

In everyday usage, “condo” is meant to be a single-level unit with an individual owner, as distinguished from an “apartment,” one such unit in a multi-unit building with all units owned by the same entity. The British “flat” is another word describing the same thing.

A townhouse is a multi-story unit. Usually the living room, dining room, kitchen, and a powder room (half bath with toilet and basin) are on the entry level and two or more bedrooms are on an upper level. Sometimes, in cases where there is a “view” potential as with townhouses along the beach, the floorplan may be reversed with the bedrooms downstairs and the living area up.

Townhouses may feature stairs providing “direct access” to a garage, which may consist either of spaces in a common garage or a private garage. Some floor plans lend themselves to a “bonus room” between the bottom of the stairs and the garage, usable for a home office, an exercise room, a game room, a room for hobbies, or just additional storage. Some townhouses also may feature a loft, overlooking either the living room or the master bedroom; many lofts are used for home offices. A few townhouses offer roof-top decks which, depending on location, may offer views of city lights, the mountains, or the ocean.

Technically speaking, the word “condo” is a form of legal ownership, where a user owns 1/n of the entire property, where “n” equals the numbers of units, along with the airspace within a designated unit. “Townhouse” refers to a style of architecture, the upstairs/downstairs as previously described. Thus, all townhouses are condos but not all condos are townhouses.

All other things being equal–locations, square footage, level of “finish,” etc.–a townhouse will be more expensive than a similar single-level condo simply because more people would rather not have anyone living above or below them and are willing to pay more to do so. Townhouses located in the front or rear of a complex will command a higher price than those in the middle of a building because they typically have more light and because there is a neighbor on the other side of only one wall.

Single-level condos on the top floor command the most price for the simple reason that nobody is above the unit; most people would rather be the “clumper” than the “clumpee.” While townhouses are more popular in the marketplace overall, single-level condos are more popular with older Buyers whose knees may not relish running up and down stairs all the time.

July 23, 2007 at 3:45 pm Leave a comment

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