Love's Real Stories

Cash is a real estate game changer, and the real estate game in the North Valley has changed. Cash buyers are rolling into town like sailors on leave, buying up everything in sight. Sellers are opening their front doors, rolling out the red carpet, waving cash buyers in like long lost friends. Buyers with loans stand outside in the cold watching cash buyers get the V.I.P treatment.

Seller: “I had four offers on my house the first weekend on the market. One was full-price involving a loan; one was $5,000 less, all cash. My realtor countered the all cash buyer; they came up $2,500 and we called it good.”

Accepting less money for all cash?

“Yes. We didn’t want to chance the sticky parts of getting loans. We’ve heard about problems with buyers qualifying for loans, and problems with appraisals,” he said. “Also, the cash buyer could close faster than the loan buyer. That worked for us.”

Seller two: “We had two offers on the table, both with loan financing. We were just about to sign one, when we got the word another offer was coming in. It turned out to be all cash and over our asking price. We signed it quick and closed fast.”

Low supply is another game changer in real estate, and the real estate game in the North Valley has changed that way, too. Low supply puts the buyers in a foot-race every time a new listing hits the market. The buyer-with-loan might win the race to the house, but the cash buyer might win the day, if the seller waits for the offer.

Cash Buyer: “The time is now. Real Estate is my group’s favorite investment, but we’ve held off for the last several years, except for a couple of properties we fixed and flipped. Now we’re buying fixers and rentals. Interest rates are staying low, and we think the real estate market has flattened out, so our money will see a better return in real estate than in a money market account. We’ll buy five or six properties this year in and around the North Valley.”

This is all good news for sellers, not so much for the buyer-with-loan.

Buyer-with-loan: “It’s hard right now. My husband and I thought we could get a great deal on a house. We found out the hard way we’re not the only buyers out there. We wasted a lot of time shooting low-ball offers around, and we walked away from deals we wish we had back now. We started four months ago and it’s gotten a lot tighter. The last few houses we offered on had multiple buyers and the cash guys blew us out of the water on a couple. We’re not discouraged, though. We’re qualified and our loan is solid. We know the market, and our realtor is on the ball, so we’ll get our house. We won’t hesitate now when we see a house we like.”

Real estate math looks like this: cash buyers plus low supply plus high demand equals higher prices.

The real estate game in the North Valley has changed.

Uncle Sam wants to sell his house. His houses, that is. In fact, he has hundreds of thousands of houses to sell.

Uncle Sam owns houses all over the United States because he foreclosed on them. Uncle Sam doesn’t want to own houses. He has sold a bunch, but he’s stuck with the worst.

Some of the houses have been stripped and peeled to the bone. Some stand unfinished; others need to be torn down.

Some of the houses stand out like a bad tooth in nice neighborhoods. Some stand together like a mouthful of bad teeth in neighborhoods where nobody lives anymore, and nobody wants to live.

Uncle Sam has a new plan for selling his houses, and Californians don’t like it.

The plan is to package these houses together, thousands of them per package, and offer them up like grab bags for investors to buy. The minimum bid for each package is fifty million dollars. Yes, that’s right, $50,000,000. The investors must remodel or rebuild the houses, and agree to rent them out to tenants for at least one year.

The idea is to bring families back to ghost neighborhoods, reseed swaths of blight across the country, and bring life back to dead zones.

Californians don’t like the idea because the state is reseeding on its own. The California market is absorbing foreclosures, and life is coming back to dead zones.

The president of the California Association of Realtors, Le Francis Arnold, put it this way: “It’s a terrible idea for most California homeowners and small investors. So strong are sales of foreclosures in our state, the inventory of properties has fallen to levels considered low even in a normal real estate market.”

At fifty million a pop, the likely buyers for Uncle Sam’s houses are Wall Street investment syndicates, hedge funds and institutional investors.

“The government should let small local investors participate who have a stake in their own communities,” said Arnold.

“Wall Street does not need another gift at the expense of taxpayers.”

Realtors are asked one question time and again: “How’s the market?”

The classic answer, one word: “Unbelievable!” The word covers a lot of ground; the wide dry deserts of short sales, the jungles of foreclosures, hard times and good times. Unbelievable was the giddy ride to the top of real estate sales 1998 to 2005, then over the peak, into free-fall down the other side.

The six- year slide down from that peak may be leveling off, according to recent reports. We’ve even heard claims of an uphill climb. That seems unbelievable.

I gazed out my office window pondering, “Which way are we really headed?” I should call my assistant and begin an investigation. I jumped in place when my assistant blasted in, smacking the door against the wall like a cannon shot.

“Must you?” I said.

“Hey, you called me.”

“No I didn’t. I mean, I did? Anyway, let’s go,” I said.

“Where to?” he asked

“To find out where we’re really headed,” I said.

He looked at me with a twisted brow and a hanging jaw as if to say “Haw?”

I slugged down the last layer of sludge from my coffee cup, flipped the lights, said goodbye to everything familiar, and hit the road.

I travelled six doors down the hall and walked into the office of a realtor. “How’s the market?” I asked her. “And don’t say unbelievable.”

“Okay. Different,” she said, “very different.” She said open houses are busier than they’ve been in a long time. Multiple offers are commonplace. Inventory is low, and buyers are competing for the few properties on the market.

“I’m working with buyers who are so frustrated they’re going crazy,” she said. “We’ve written full-price offers on six properties, and lost every time to buyers offering all cash, no loan.”

All-cash buyers are more prevalent than she’s seen since pre-peak days.

My assistant met me back at my office. “An appraiser told me sales are higher and prices are rising here in the North Valley,” he said. “Unbeliev—-“

“Hard to believe,” I said.

Eighteen out of twenty-five is a good record. Pitchers, hitters, and quarterbacks are smokin’ when they have a record like that. California got a smokin’ 18 out of 25 billion dollars when Attorney General Kamala D. Harris stepped up to the plate and hit a home run at the National Mortgage Settlement negotiations.

The settlement is a $25 billion fine paid to the states by banks for their rampant robo-signing and massive mortgage misconduct.

Attorney General Harris and California walked out of the multistate negotiations last September when the estimated relief to California was $4 billion. Harris held out for more. She also demanded the right to enforcement if the banks don’t live up to the agreement, and the right for California and other states to continue investigations into the banks’ misconduct for possible prosecution.

“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis. Hundreds of thousands of homeowners will directly benefit from this California commitment,” she said. “This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here. We insisted on homeowner relief for Californians and demanded enforceability so homeowners actually see a benefit that will allow them to stay in their homes, and preserved our ability to investigate banker crime and predatory lending.”

As part of the separate California guarantee, banks must spend a minimum of $12 billion on principal reductions and short sales for an estimated 250,000 homeowners within the first year of the agreement. Failure to achieve this will result in cash payments of up to $800 million to the state. Unlike the larger multistate agreement, which is enforceable in a federal court in Washington, D.C., this payment provision empowers the Attorney General to summon the banks to California state court.

The Attorney General said other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general’s office for costs and fees. To speed investigations and strengthen prosecutions of these mortgage cases, California will expand its. Mortgage Fraud Strike Force, and will look to collaborate with other states focused on law enforcement response to the wave of mortgage fraud.

Harris says she will propose a comprehensive legislative agenda to protect homeowners in the mortgage market, and build on the three-year reforms agreed to as part of the California settlement. “This is an historic amount of relief for California homeowners,” said Harris, “but it is one piece of a broader focus. We will continue our crackdown on mortgage fraud and quickly move to pass legislation that will simplify and upgrade our broken mortgage system.”

Californians are cheering on their big hitter, Attorney General Kamala D. Harris. “The banks threw a bunch of curveballs and sliders, but Harris has a good eye.” said one Californian. “She waited ‘em out, and when they tried to sneak a fastball past her, she knocked it out of the park.”

18 out of 25 so far; keep swingin’, Harris.

A strange, unexpected thing has happened in the world of real estate; a bizarre, momentous, game-changing thing. This thing that happened is like having your bad neighbor- the neighbor who shot at your dog and cut down the tree on your side of the property line, and conducts AK-47 target practice every Sunday morning- bring you flowers and a warm pie, and smile at you without the usual tobacco juice dribbling down his chin. Wait, that sounds more like my neighbor. Maybe your neighbor just gives you the stink-eye, or maybe you give your neighbor the stink-eye. In any case, you know what I mean; friendly gestures would be unexpected, or even momentous and game-changing.

Here’s the thing that happened: a short sale negotiator for a bank returned a phone call. Yes- called a realtor back! And that’s just the beginning. This short sale negotiator, this person, gave their name, their real name! It gets more bizarre. This person took the time to explain the process for the short sale, and- get this- apologized for a slight delay, that it was the bank’s fault! It’s as if O.J. Simpson raised his hand and said, “I did it.”

The thing sounds crazy, especially to people who have been through the grueling short sale process, wherein short sale negotiators torture realtors, buyers and sellers, requiring refrigerator-sized stacks of documents filled out in triplicate, originals only (“any mistakes and they will be sent back”). Then again (“fill them out and fax them”); and again (“fill them out and email them”); and again (“do it all again because the documents were lost. Not the bank’s fault”). Days and weeks and months with no word go by (“don’t call, email only”).

One buyer said pregnancy and giving birth was like the short sale process, except faster and less painful.

Here’s the game-changer: this short sale negotiator, this person who called back, said this is a “new type of short sale”– a “DTS” short sale- with guaranteed approval by the bank in five days. That’s days, not weeks, not months. And then (are you sitting down?) this person gave the realtor a private phone number and said, “Have the buyer call me any time.” That’s crazy talk.

That’s the kind of crazy we could get used to.