Greetings from David & Heather

Dear Friends and Clients, I'm excited to introduce Heather Clark, my new business partner at South Bay Brokers.  If you haven't met her, you should!  Heather and her family are long time Beach Cities residents, contributors, volunteers, and homeowners. We're proud to be Your Partners in Beach Cities Real Estate!

We'd like to wish you and your family a belated Happy Hanukkah, an early Merry Christmas, and wonderful holidays all around!!!

Home Developed by David Featured on Cover of the Other "Digs"

South Bay Digs recently featured a home built by David on its cover.  Have a look!

Real Estate In My Own Words

A little video with a few of my thoughts on real estate...

Housing Affordability Soars to Record High | Realtor Magazine

Nationwide, housing affordability is now at Record Highs.  In the South Bay, our market has really heated up, having stabilized last year.  YOU WON'T READ THAT IN THE NEWSPAPERS, because good news doesn't sell newspapers.  Better to look at the actual facts, which you can find continually updated in the "South Bay Market Data" tab at the Beach City Digs blog!  Or give me a call for the straight scoop in the Beach Cities.

A few teasers: 35% of our current sales are ALL CASH (these are smart buyers who know what they are doing).  And about the same percentage are multiple offer situations.  All of this going on while interest rates are at 50-year lows.- David

P.S.  Know of someone who needs to buy or sell a home in the South Bay?  Give me a call with their name and number and I'll take great care of them (yep, that was a shameless plug). -D

David Named a Top Producer for January 2012

2012 off to a good start for David White adn South Bay real estate!  Contrary to the headlines, the South Bay has stable prices, increasing sales, and a shortage of homes on the market.  Oh, and lifetime low interest rates! - David

Zillow Got You Down? Look Beyond the Averages!

Speaking with a good friend and very savvy client this morning, I happened to comment that "Zillow is directionally correct 50% of the time" for overall prices in a given local market.  Of course this is because Zillow uses mathematical algorithms that fail to address property condition, changes in sales mix, shortages in inventory, and similar qualitative and quantitative factors not available without a modicum of local expertise.

As an example, relying on Zillow, one could easily conclude that property values in Manhattan Beach have suffered to the tune of 5-8% in recent months.  This dramatic but misleading conclusion results from what I call the "tyranny of averages." By this I mean that averages of non-homogeneous groups (e.g., newer homes vs. older, desirable homes vs. teardowns, better locations vs. commercially-impacted streets, markets including builders vs. markets without significant building activity) are little more than hash totals until underlying factors are revealed.

In the Manhattan Beach Tree Section and in East Manhattan, few newer, larger, highly-desirable, well-located homes have been available in the inventory of homes for sale in recent months.  I have well-qualified buyers for both RIGHT NOW, and have yet to find suitable properties to match their needs. As a result, Tree Section statistics are skewed toward smaller, less-desirable properties that have been marching through the ranks.  Zillow interprets this as meaning Tree Section sales volumes and values are down, an uninformed conclusion.

The reality:  South Bay Brokers' sales are up 18% year-over-year from 2010.  Of course that's a composite number too, but I can give you the details!  In fact, many such details can be found at the South Bay Market Data section of this very Beach City Digs Blog!

So as frequently mentioned in this blog, watch out for averages.  You'll find them rampantly reported in the general press, which is a great place for real estate ads but seldom for actionable real estate news.

Instead, rely on a qualified real estate professional who knows and understands the micromarket, the underlying factors, the prevailing trends, and how to have peace of mind dealing with them all. -David

David Named a Top Producer for May 2011

May 2011, David again named a top producer.  Thanks South Bay Brokers!

David Named Top Producer for March 2011

David was again named a South Bay Brokers Top Producer for March of 2011

Realtor or Tangled King?

BCD reader Annie Wald reveals the true identity of your previously humble blogger! Have a blessed Good Friday and Easter. - David

Generous Teacher Leaves Scouting Legacy

From the Compass magazine (Volume 2, Issue 1) of the Los Angeles Area Council, Boy Scouts of America: More coverage of the legacy donation of an Old Town Torrance home to BSA by a revered local high school teacher, Mr. Glenn Schwendemann..  David sold the home (to an Eagle Scout!) on behalf of the Scouts, and local professionals TKO Painting, Bob Levy Roofing, and All Cities Termite donated a portion of their services to help the cause.  The funds will be used to send kids to Scout camp!

Serial Golf Benefits Scouting

From the Compass magazine (Volume 2, Issue 1) of the Los Angeles Area Council, Boy Scouts of America: Manhattan Beach Mayor Richard Montgomery and David White are mentioned for their participation as playing partners in a Sunrise to Sunset golf marathon benefit event!

ACM's are all about Real Estate!

Miranda Lambert's "House that Built Me," featured earlier on this blog, cleaned up on the Academy of Country Music Awards tonight.  Here's another link to the video of this award-winning tribute to the lifelong importance of home! - David

Local Hero Col. David McCarthy (Ret.)

Article in The Beach Reporter about friend and Scouting colleague Col. David McCarthy's latest heroics, this time in Manhattan Beach instead of Afghanistan or Iraq. This is the sort of guy we need on OUR city staff! - David

Local Realtor rappels 32-floor building for charity

My rappelling adventure down the side of the Bonaventure featured in today's Beach Reporter.
---
Story:
Local Realtor rappels 32-floor building for charity
There he was. Standing on the rooftop of the 32-floor Bonaventure Hotel, his heels balancing on the edge. Manhattan Beach resident David White was about to rappel down the hotel as a fundraiser for the Los Angeles Council of the Boy Scouts of America...  See the full article at
http://www.tbrnews.com/articles/2011/01/06/manhattan_beach_news/news05.txt

Many thanks to my sponsors, including:

• South Bay Brokers
• Hon. Richard Montgomery
• Getchel Wilson*
• Jeff & Susan Bare
• Eric Fonoimoana*
• Tina White
• Susan Jensen*
• Bonney Larson*
• Barry Host*
• Rob Norrie*
• Nina Michaels*
• Ron Werner*
• Julie-Ann Forney*
• Hana El Sawy*
• Ricci Reardin*
• Marsha Peters*
• Danielle Newson*

*My generous colleagues at South Bay Brokers!

A videotaped interview following the rappel appears in the "Other Media" tab of this site.  Please feel free to contact me about getting involved in Scouts via participation and/or financial support.

-David

South Bay Brokers Top Producer, Nov. 2010

David is again happy to be declared a Top Producer at South Bay Brokers for November 2010!

Over the Edge of the Bonaventure Hotel

Manhattan Beach Patch covered David's rappelling adventure over the edge of the Bonaventure Hotel in Downtown LA to benefit the Boy Scouts of America.  See video under "Other Media" tab above. - David

Two Methods of Seller Financing (AITD, Subject to)

Seller financing comes in many shapes and sizes, including the AITD.  AITD is the acronym for "All Inclusive Trust Deed."  Click here for a brief document from Lawyer's Title that explains what it is.


Following is a slightly expanded explanation from your blogger, but I’m not a lawyer, so this is not legal advice. You should consult an experienced real estate attorney if you contemplate offering or accepting this sort of financing. I'll refer to "you" as the buyer and "him" as the seller.  Of course the seller could be a her, and so could you!

AITD's

With an AITD, you the buyer get title to the property without putting new financing on it. Instead the seller passes through the benefit and responsibilities of the current financing to you, but remains obligated on the original mortgage loan(s). So you have an official continuing responsibility to him (evidenced by the AITD), and he continues to have a responsibility to the existing mortgage lender. You make your payments to him, and as long as you do so and keep the terms of the AITD, or eliminate the AITD entirely by refinancing the property yourself, the property remains yours.

If you fail to keep the term of the AITD, the seller can take back the property under the deed of trust you have given him (like a traditional lender can take back a property if you don’t keep the provisions of the loan). This keeps the seller at risk on the property, which sellers don’t like, because it could affect their credit. If the buyer doesn’t make the payments, the bank will probably go after the seller for the money and the buyer for the property. But it does enable you to close on a property before you can get new financing on it. What sellers do like about it is that an AITD makes it clearer what happens if the buyer doesn’t keep his part of the bargain.

Subject to

Another approach to seller financing is to purchase a property “subject to” the existing mortgage. That means you get title to the property without putting new financing on it (just like above), but in this case you’re officially assuming responsibility for the existing mortgage loans on the property, and ostensibly letting the seller off the hook, without getting the lender’s approval to do so. So purchasing the property “subject to” the existing mortgage basically means that you are taking over responsibility for the mortgage yourself and assuming the seller’s responsibilities to the lender. The buyer will make monthly payments directly to the lender in this instance.

Subject to financing is easier and faster to do because it’s a less formal approach than an AITD, and the buyer doesn’t have to pay to have an AITD drawn up. But it doesn’t really define what happens if something goes wrong (such as you not maintaining the property or making the payments). And if the bank calls the loan, somebody must get the property refinanced right away. The bank will probably go after both buyer and seller to get their money and the buyer for the property.

Problems?

So assuming the buyer continues to make payments and maintain the property, what could go wrong? The problem is that most mortgages (including the ones on these properties) have a “due on sale” clause, which means the mortgage must be paid off when the property is sold, and some have an assumption clause, which means a buyer can assume the existing mortgage so long as he gets the lender’s permission first (if he doesn’t, then the due on sale clause applies).

Banks like to approve loans before making them, and they want to be asked before someone assumes them or takes them over. One obvious reason is to ensure the new borrower is as creditworthy as the old. Another is that it’s a new chance to appraise the property. Another is that if rates have gone up, they want to get out of the old loan terms.

Current Environment

So what does the market tell us about a lender's receptivity to these sorts of financing? Well, we all know that credit has tightened, so basically nobody is as qualified as before. Values have gone down, so banks want to re-appraise properties and get their loan-to-value ratios back down. And rates have gone down, so there’s not much motivation to drive deals to current rates.

Would a lender really wish to call a loan were they to discover that a buyer had taken them over? Probably, but they have their hands full these days, so it might take awhile. On the other hand, if your plan is merely to buy more time to assume or put permanent financing on a property, either an AITD or “subject to” scenario should be short lived.  And if all goes well it shouldn’t make a big of difference which approach you use.

Recommendations

In this writer's opinion, the reason it matters which you choose is that if something does go wrong (you don’t make your payments or the seller doesn’t make his payments under an AITD or you are ultimately unable to assume or refinance the original mortgage loan), then you and the seller are going to have a longer relationship than anticipated.

And if I was going to have a potentially long financial relationship with someone, I’d want it documented as thoroughly as possible.  In this case by an experienced real estate attorney, perhaps for around $1500, because this is not something to try to do with a boilerplate form.

Not only would I get to do my transaction, but I could sleep at night too! - David

What are "digs," anyway?

I've been asked by a few folks what the term "Digs" means in my blog title.  Well, the way I learned it, it was slang for "housing," "home," or "residence."  Sort of like "pad," which was popular in the 1960's, but around longer. Like "Nice ride!" can mean "Nice car you have there."

A little research, and I mean very little, tells me the actual root of the word may be in the term "diggings," referring to a mine which also had room for temporary quarters, particularly in the UK or Australia.  Apparently it also has been used since the 1800's to mean lodging, often related to small and/or temporary quarters. The best reference source I found was in an online publication called World Wide Words.

There's also the thought that many who write about real estate seem to me to be more interested in getting in an unflattering "dig" or two about the industry or its practitioners (or about selling newspapers) than about informing their readers.  It's a topic that fires up journalists and the general public alike, and one on which a broad array of often badly uninformed opinions are passionately argued as facts.

My goal for BeachCityDigs.com is to reliably and intelligently inform and interest my readers on the topic of real estate.  I value accurate, useful, fact-based information more greatly than provocative headlines and attitude-ridden authors.

But mainly, I just like the way "Digs" combines with "Beach City" to form "Beach City Digs."

Can you dig it?  -David

Choosing a Realtor to List your Property

A potential client phoned me to day to ask about listing his Sand Section property.  We discussed his goals at length, and agreed to meet on the weekend.  Later in the day I learned he had phoned an entire army of Realtors to set up appointments with them on the weekend in hopes of grinding them on commissions (and unknowingly securing for himself the least valuable, most desperate listing agent).

With that information in hand, and knowing that the value of his property is considerably less than his hoped-for price, I sent the communication which follows.  - David


"Dear [Potential Client],

As you can see, we are well networked and we do our homework.  Based upon our discussion and an analysis of your property, I would be happy to provide you with the best, most professional service you are going to find. Your motivation to sell is strong, so your representative in this transaction should be as well.

Our goal would be to bring you the maximum net proceeds for your property within the timeframe you have defined. That means neither the maximum listing price (promising you something that is unrealistic, otherwise known as “buying your listing” and then begging for price reductions after the listing has gone stale), nor the maximum selling price (regardless of whether it will appraise), nor the minimum commission percentage (meaning the lowest service or the least valuable, most desperate agent), nor the quickest sale (to a buyer who ultimately backs out when the numbers don’t work).

It means the maximum net proceeds within your time constraints after all is said and done. As you mentioned today, it takes a professional to do a professional’s job. And in your situation, it takes a Realtor with serious development experience [the property has building potential] and contacts. Speaking freely, it also requires straight talk and strong negotiation skills, as evidenced by working only on a full service basis.

We offer you all of those resources, because professionalism matters if your goal is maximum net proceeds and a transaction that doesn’t come back to bite you.

If that makes sense, then I’d love to be of service. By the way, the right full-service Realtor will also enable a smooth transition to your next home.  It's not to early to start envisioning that goal.

Please let me know how you would like to proceed."

Meltdown Post Mortem Ad Nauseum

The Fed continues to be grilled over whether it caused the mortgage meltdown via low interest rates, or allowed it via lax bank supervision.  Here's the latest:  Fed Transcripts Stoke Debate on Rates - NYTimes.com. 

So what's the answer?  They allowed it via lax bank supervision.  Those insisting the Fed caused the mortgage meltdown via encouraging low short-term interest rates don't understand (or don't want the public to understand) basic macroeconomics, and like to imply that the Fed has more influence on mortgage rates than it does.