Celebrating Eagle Rock’s 100th year, the free fireworks display at Eagle Rock Park brought the community together with a big lovely bang. It seemed like the whole town turned out--we had to park many blocks away and hike in to the park. Ronny and the Classics played some good old Rock and Roll. There were booths staffed by the various Eagle Rock civic groups from TERA to the Chamber of Commerce to the Eagle Rock High Boosters. Classic cars parked on the field provided more browsing opportunities. There were food booths for everything from funnel cakes and kettle corn to Chinese food. We had some very tasty Argentinian grilled sausages spiced with ChimmiChurri sauce served in a roll with fresh salad and rice.

The weather couldn’t have been better: not too hot yet clear and balmy.

The crowd was mellow and friendly with lots of kids, lots of families. We all oohed and aahed at the fireworks which were at least 15 minutes of colors and swizzles and sparklers and booms. The crowd cheered and celebrated and then we all walked back to our cars. Happy 3rd of July, Eagle Rockers!

Our latest issue of the newsletter is now available for your perusal! Check it out:

May/June 2011 Newsletter

Why I Joined a New Real Estate Office

Appraisal is Art, Not Science

A Seller Success Story: 2030 Estes Road

Case-Shiller Index Double Dips - Big Deal!

Recent Activity

Eagle Rock Fourth of July Event

Enjoy! And feel free to forward on to anyone you think would be interested.

I'm happy to announce that I've earned the NAR (National Association of Realtors) Green Designation. I now have access to the research and information from the Green Resource Council to share with you, like this essay on Why Go Green?

There is a variety of reasons to go green, but most come back to supply and demand. We have a limited amount of resources available and more and more people using them up. If we want our future generations to enjoy the same standard of living we've experienced, we need to take action.

Green building is a great place to start, as buildings consume 14% of potable water, 40% of raw materials, and 39% of energy in the United States alone (according to the US Green Building Council). That's 15 trillion gallons of water and 3 billion tons of raw materials each year! If that's not enough to convince you, here are some other reasons to go green:

FOR THE ENVIRONMENT

Want to make the world a better place? Implementing green practices into your home or office can help reduce waste, conserve natural resources, improve both air and water quality, and protect ecosystems and biodiversity.

FOR THE SAVINGS

Want to make your dollar go further? Green systems and materials reduce energy consumption, which in turn reduce your energy bills. They also increase asset value and profits and decrease marketing time; making your dollar go further for longer.

FOR YOUR HEALTH

Want to live healthier? Green building isn't just good for the environment; it's also good for YOU. Sustainable design and technology enhance a resident's overall quality of life by improving air and water quality and reducing noise pollution. According to a 2006 study by the Center of the Built Environment, University of California, green office buildings improve productivity and employee satisfaction in the workplace.

I’ve been reflecting on appraisals lately, and I’m not alone— almost everyone who sells real estate is having appraisal issues. Why? Because appraisals are based on closed sales, appraisers are evaluating the present value based on the past value. If we’re in a declining market, appraisals will be close to the price that the buyer and seller agree on. It’s when we are in a fairly normal or increasing market that we have the issues that many of us face today. You might see this as good news since it could be an indication that the market is normalizing or increasing. From the appraiser’s view it just looks like available comparables can’t justify increasing sales prices.

There is general acceptance of the notion (believed by many appraisers) that appraisal is a science, not an art (even though you’ll get as many different valuations as you have appraisers on the same property.) Many buyers believe this as well. But consider this scenario:

There is a 2-bedroom, 1.5-bath house in good condition in a nice neighborhood in a small community within Los Angeles. It has a guest house for which no permit can be found, nor can a permit be found for the half bath. So for appraisal purposes, this is a 2-bedroom, 1-bath house. Because very few properties like this sell in any 3-month period, the only sales comparables that fit this size house are distress sales in poor condition that sold in the range of $350,000 to $450,000. Six months ago, there were a few comparables that sold for $480,000 to $520,000. An appraiser brought in a value of $440,000. Why? Because the “good” comps were too old and the more recent comps were all low, so to his mind that meant that the current value was lower.

Here are some questions for you:
Had this appraiser seen all the properties that he used for his research? No, because in the current appraisal business these appraisers are working all over Southern California. The likelihood that they have ever been inside the comparables they use is slim.

Did he talk to the Realtors who actually did see the properties? Very few appraisers bother to do that.
Did he listen to the listing agent who met him at the property with comparables? No, because he thinks that appraisers know more than Realtors who are just trying to make a sale. He pretty much said that.

Why all of a sudden did we have such low comparables? Did the values drop? Again, very few properties of a given size sell in this zip code. By chance, the only three of that size and configuration that sold in the previous 90 days were short sales and foreclosures. The consequence is that regular sellers who own 2-bedroom 1-bath houses are reluctant to sell because the only comparables that appraisers are willing to use are so low. It’s a vicious cycle. One almost feels that that is what some of these appraisers and lenders want to see happen, because it is less risky for prices to be low.

When prices drop, regular sellers either don’t need or want to sell or can’t because they now owe more than the property is worth. They can’t refinance into a lower interest rate for the same reason. In 2005-2007, if you lost your job you might be able to use your equity line of credit to get by for a month or two. Or you could sell for a profit, move to a less expensive home and rent for awhile until you got on your feet. Today more people are stuck with too much debt and nowhere to turn. For many of these people, it is the same debt they were totally fine with in 2006, but their circumstances have changed. Now their only option is either foreclosure or short sale. And there you have more lower prices.

But let’s go back to the pure appraisal question. How do you evaluate a property? Wikipedia says: Real estate appraisal, property valuation or land valuation is the practice of developing an opinion of the value of real property, usually its Market Value The need for appraisals arises from the heterogeneous nature of property as an investment class: no two properties are identical, and all properties differ from each other in their location - which is one of the most important determinants of their value.

In residential real estate, market value is usually defined as the price that a willing buyer and a willing seller agree upon subject to appraisal if a loan is necessary. If everyone paid cash for property, the situation in real estate today would be much different. We wouldn’t have had the bubble and the resulting crash, for one thing, since they were both caused by unsafe and unsound lending practices.

Market value is a concept distinct from market price, which is “the price at which one can transact”, while market value is “the true underlying value” according to theoretical standards. The concept is most commonly invoked in inefficient markets or disequilibrium situations where prevailing market prices are not reflective of true underlying market value.
This is the crux of the matter: the prevailing market prices are not reflective of true underlying market value.
In San Marino, prices have not dropped. Why? Because most homes there are owned outright. The same is true in parts of Arcadia. Distress sales drive prices down. If no one is in distress, the price doesn’t go down. Why not, when the entire country has been in a housing depression? Because if you aren’t in distress and you can’t get the price you want, you just don’t sell.

What I am seeing with all the HVCC (Home Valuation Code of Conduct) and other strange rules pretending to establish reasonable rules for evaluating properties is that appraisers are all looking at market prices and defining them as value. If a buyer believes that a house is worth, say, $500,000, because it has all the amenities he feels he should find in a house at that price, why should an appraiser be able to declare that the actual value is only $350,000 because that is what a house of similar size sold for down the street?

So what does a good appraiser do?
What does a good Realtor do?
What is the relationship like between a good appraiser and a good Realtor?

In my 22 years practicing the profession of real estate, I have never left one company to go to another. I have worked in companies that were merged or sold, but I have never left by my own decision. Until now. What’s important to know is that I didn’t leave Coldwell Banker because I didn’t like it or was unhappy. CB is a great company and offers many opportunities to its agents to grow and prosper. It’s also safe to belong to a large national corporation. If you work at Coldwell Banker, its long history and good reputation cloak you in respectability. If you work for such a well-known and respected company there is a certain level of professionalism that is automatically conferred upon you in many consumers’ minds. To leave all that was a big step.

Real estate is a schizophrenic business: it’s very competitive and yet we have to cooperate with each other. A client naturally wants to work with the best professional they can, but how do they determine who that is? That’s why many of us have focused on being number one in our marketplace, working for a company that has the most market share, winning the most awards, etc., so we can assure our clients that we are good enough to earn their business. But there is much more to doing a good job than working in a big company, winning awards and doing a lot of deals.

I have worked with agents from other companies and seen what they do. I’ve gone to many professional training events with excellent teachers. I’ve networked with other Realtors all over the country as part of our various professional organizations. In the last several years, I’ve coached and trained with a group that has attained the level of a virtual office although we are scattered all over Southern California. We’ve often commented how great it would be to work with each other in a physical office—to work in an office of like-minded professionals. For me, Teles Properties offered the potential for this, plus it’s a small boutique company that is focused on what I care about: providing its agents with research, technology, and marketing. It’s small enough (so far) that I know all the owners, and they know me, but that’s just a nice extra.

What’s in this for my clients? A fresh approach. A simple, elegant look. A chance to work with a company that focuses on a deep understanding of the market, on the art and practice of real estate, and on where to position the client’s needs and desires to obtain the best result. A company that puts agents in a room together every week to learn more, to share ideas on how to price and market a property for sale and how to obtain and negotiate the best possible deal for the client. This is a company that shares its knowledge and encourages its agents to share theirs so we all get better—a truly cooperative and collegial environment. These are tumultuous times in the real estate world. Making a successful business in the shadow of one of the biggest economic downturns in US history is a real challenge. Teles Properties began in 2007 and has grown from 1 to 4 offices through these chaotic years. I think that’s quite an accomplishment. This company chose to strike out in a fresh, new direction and it is working. That’s what attracted me to it.

Data released this morning by Standard & Poor’s show that the S&P/Case-Shiller national home price index declined by 4.2 percent in the first quarter of 2011, after having fallen 3.6 percent in the fourth quarter of 2010. The national reading hit a new recession low with the first quarter’s data and posted an annual decline of 5.1 percent versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.
...From DSNews.com, your Daily Dose of Default Servicing News, May 31, 2011.

My response is, so what? What does this have to do with your home? What does this have to do with, say, the sale at 2030 Estes Rd in Eagle Rock (closed April 21, the highest sale in Eagle Rock since September, 2009, for $176,000 over asking)? In the first place, this is first-quarter news and we have moved on (and up) from there. In the second place, once again, we have to note that national home prices have little to do with local home prices.

So why should we care at all about this depressing news?

Because the common, everyday, not-in-distress, regular, homeowner who wants to move is influenced to wait.

For what?

For prices to “get better.” For the market to “improve.”

I posit that by waiting, homeowners are creating the very problem they seek to avoid. The fewer “regular” sales there are, the more weight is given to “distress” sales, which often sell for a significant discount off market price, which lowers the average sales price, which lowers the comparables that appraisers use to value a home sale, and so on in a self-fulfilling prophesy downward spiral.

We had 15 offers on 2030 Estes. That means that 14 buyers did not buy a home and went looking for others. Other “regular” sellers missed a bet by not coming on the market right after that. But it’s not too late! Some of those buyers are still out there looking...I know, I’ve seen them at other open houses. Plus there are buyers looking in different price ranges for other kinds of homes. Many buyers know that this is an amazing time to buy. They will pay fair prices for good homes. If you own a home and want to sell it, consider doing it now. Make your own good news and thumb your nose at DSNews and Case-Shiller!

Once in a while, everything comes together and the sale of a home exceeds everyone’s expectations. How does this happen? Is there a formula that can be used to at least maximize the odds?

Some necessary components:

• A great house -- good bones, proper updates, a private, idyllic setting, a very livable floor plan, a prestigious location in the area.


• A seller who knows how to prepare his home for sale, how to present the property during the showing phase of the sale, and, of course, how to choose a Realtor who will work with him to strategize the best plan to sell the house for the most money in the least amount of time and with a minimum of hassle.


• A Realtor with the market and real estate knowledge to conceive and execute the plan.


• A team of dedicated people to carry out the plan. This team includes the seller’s willing family, neighbors, and  competent professionals (Realtor’s staff, photographer, escrow and title companies, etc.) to execute the marketing and sale.

When I first met my Success Story Sellers in February, 2011, the highest sales in Eagle Rock in the past few months had been $749,000 for a much larger house and $675,000 for a house that was a foreclosure but was bigger and a popular Mediterranean style. The house at 2030 Estes was unlike any other house that had sold in the area in years, so how were we to arrive at the probable sales price? The sellers were hoping for more than $750,000 and I truly believed it should sell for much more. But how to get such a number when sales comparables were so low? Even if we found people willing to pay our price, it would never appraise for that value in the current conservative lending environment.

Out-of-the-box thinking was required. If the house sold for a price that wouldn’t appraise, we simply would insist that in order to be considered, an offer had to remove any appraisal contingency. We listed the property for $749,000, the same as the highest sale in the past few months.

Preparing the house for sale included planning how to deal with the seller’s family which included a dedicated and fabulous wife, two young boys, a dog, and a lot of personal stuff. After packing up or selling much of the stuff, the wife packed up the boys and took them away for the 8 days we were on the market. For every showing or open house, the dog went to the neighbors. More neighbors were enlisted to move their vehicles that had been parked on the street. The house looked like a Dwell magazine cover story for all showings.

We had five open houses in eight days including brokers’ open houses and a twilight open house. By the ninth day, we had 15 offers, 14 of which had no appraisal contingency. By the time counter offers came back, we had three offers over $900,000! The highest offer was for cash, closing in 10 days. Long intense story short, we closed 11 days later for $925,000, as-is, no repairs or termite work to be done.

As I said, this was an ideal situation: great house, great sellers, great team altogether. It’s rare to have it all. But isn’t it good to know that a house can sell with multiple offers way over the last highest sales price in this uncertain market?

Here is what the seller of 2030 Estes Road had to say:


Thank you to Kendyl Young for her fabulous video shooting and editing skills!