Well, I have a million thoughts running through my head about the residential real estate market in 2009. I think the following will happen:

1. Foreclosure inventory will grow and at an incredible rate. The banks are sitting on huge amounts of inventory and most of this inventory will come on the market in the first quarter of 2009. Most foreclosure moratoriums will be ending the first of the year. Get ready. Lots of evictions will happen.

2. Cash flow deals are out there. You will be able to buy a house in SoCal with 10 to 20% down and it will cash flow. This has not been seen in these parts in at least 5 years. This excites me me the most. With every $30K you have, you should be able to buy a house with a 10% cash on cash return. This is awesome. Save $30K and make 10% FOREVER. Can’t beat that.

3. Interest rates will stay at historic lows. Bottom line is that to qualify for a loan these days you need to “more than fog a mirror”. It ain’t gonna happen. It is hard to get money. Period. If you can get a loan, your rate will be awesome. Cuddle up to those family and friends that have good credit and a W-2 job. You know. The friends that have worked for the hospital, City or Nissan for the past five years and have never missed a credit card payment. Those are great borrower’s. Partner with them and you can make some good money. You find the deals. They bring the financing. Perfect fit. Plus, if you buy right it should cash flow.

Bottom line is–the market is going to continue to drop in value but great deals are out there. Just buy smart. Easy. Call me if you are serious and have at least $40K cash.

Your real estate guy,
Mark Shandrow
Shandrow Group

Here are the numbers:

Active Properties for sale:  1667
Foreclosures:   717

Sold Last month in October:  305
Foreclosures or short sales:  135

Inventory:  5.46

Hot Property for the week:  251 E 17th Street, Seal Beach, CA

Probably one of the most common questions that I hear negotiating Short Sales in Los Angeles and Orange County, California is:

“Do I have to be behind on my mortgage to do a short sale?”

It is a totally logical and fair question.  Unfortunately, there is no really clear cut answer.  It all depends on your particular situation and lender.

In my experience I have found that banks are much more receptive to writing off tens of thousands of dollars if they feel that a foreclosure is inevitable.  So, being behind on your mortgage does help with the negotiations but your credit is at risk.  The closer you are to foreclosure, usually, the more negotiable the bank is.  If a foreclosure costs a bank on average, say $40,000 plus the loss on the loan, they will do the best they can to avoid this additional costs.

With that said, many banks are open to discussing loan modifications and short sales if you are not behind on your mortgage.  I have worked on several loan modifications and short sales where, for example, Litton actually offered the borrower $3,000 to help with moving costs at close of escrow.  If you can demonstrate to the bank that, even though you are not behind now, doing a short sale is in their best interest in the long run, they will listen.

It is more about presentation and having an open dialogue with the bank that is important.  That is the key to a successful short sale transaction.

Respectfully,
Mark Shandrow
Los Angeles and Orange County
REO and Short Sale Real Estate Broker

Hi Everyone,

I am extremely excited to report that I have rented my own private space for my team on Atlantic Blvd.  The reason for the move is two-fold.  First, I needed a larger office space than I had at the Keller Williams office on Pacific Coast Highway, and more importantly, I can now WALK or RIDE MY BIKE to work.  The new office is literally 1 mile from my home.  See picture below.

3970 Atlantic Ave 210, Long Beach, CA

The new office is going to save me driving approximately 10,000 miles per year.  Plus, we are starting an aggressive recycling program and implementing a new paperless transaction system.  Shandrow Group is going GREEN.

Please stop by sometime and check out the new pad.

Best,
Mark Shandrow
Shandrow Group
Keller Williams Realty

One of my great clients, Champion Mortgage formerly Nationstar, distributed this marketing piece with a quote from yours truly.

Click on the thumbnail to view the entire flyer.

Best,
Mark Shandrow
ShandrowGroup

I just got back this week from the 2008 REOMAC Fall Conference in Hollywood, Florida.  The event was attended by approximatley 2,000 industry people including asset managers, portofolio managers, REO brokers, attroneys and service provides.  The event was more than half the size of thhe 5 Star Conference in Dallas last month.  This gave the setting a much more intimate feeling and I was able to have more in depth conversations with attendees.

Some of the asset management companies that i was able to talk with included Old Republic Default Servicing, Lighthouse, Citi, Asset Management Servicing, LLC, Keystone Asset Management, Phoenix Asset Management and US Real Estate Services.

I also networked with many other REO brokers.  One broker, Bob Siegmeth of the Seigmeth Team, really impressed me.  Bob was an Asset Manager for IndyMac for many years and has transitioned into a REO broker.  He has about 15 years of REO experience and really has an incredible understanding of asset management business.  In just six months, he has built an impressive team of agents managing over 70 REOs.

The biggest lesson that I leared from the REOMAC event was that change is inevitable.  Lenders are constantly shuffling assets around from one management company to another.  The business is always going to be in a state of flux and it is extremely important to attend these types of events to stay on top of what is going on in the market and continuing to learn best practices.

Sincerely,
Mark Shandrow
ShandrowGroup

Wow. That is all I can really say about the recent economic meltdown on Wall Street. We all knew it was coming, but didn’t know what “it” was going to look like. The good news is that with every market there are great opportunities. One such opportunity is right on my own street just five houses away from where I raise my family.

This bank foreclosure home just came on the market for $233,000. This home sold for $550,000 just a few years ago. It is a two bedroom, one bath Spanish style home with a half size lot.

Thanks,
Mark Shandrow
Keller Williams Realty

I just got back from the 5 Star Default Servicing Conference and Expo in Dallas, Texas this past week. This was my first REO conference. Wow, what an event!

The organizers did an incredible job putting this program together. There were over 5,000 participants ranging from real estate brokers like myself to asset manager to senior executives of larger lending institutions. I met with people from Nationstar, REOTrans, USRes, Freddie Mac, First Preston, Lighthouse, Keystone, Green River Capital, and Fannie Mae. The event was topped off by a classic rock and roll performance by REO Speedwagon. Oh yeah, Eric Estrada from CHiPs fame was there too. What was even better was that I was able to talk to many of these people one-on-one and get the inside scope on what is going on in the REO market. It was an incredible education for me.

Here are a few highlights that I took away from the event:

1. Banks and Asset Management Companies Need Agents. There is an incredible shortage of highly skilled and professional REO agents in most markets. Obviously, some markets like Southern California are saturated but there are other markets that they are having an incredibly difficult time finding good REO agents. At one seminar, an asset manager was pretty much assigning properties right there to ANYONE in Kentucky. She was desperate for agents.

2. Short Salas Are Going To Be The New Paradigm: Several lenders are starting to roll out large scale short sale programs whereby they have already FULLY APPROVED a short sale before the borrower even knows what is going on. Many of the nations banks, like IndyMac and Washington Mutual, realize that short sales are less costly and more community minded than a foreclosure. So, they are currently testing programs where a borrower will receive a letter that has already approved them for a short sale and assigned a real estate agent to help them with the process. The borrower then just has to list the house at the banks pre-approved price and they can save their credit and dignity. The bank will even pay them to move out. Several of these banks are looking to develop a large scale network of agents to list and sell these approved short sales.

3. Communication, Communication and Communication: I spoke with at least 10 different asset managers and asked them what their biggest problem with real estate agents was–communication. That is it. Simple. Easy. Many REO agents do not communicate with their asset manager. They don’t answer their phone or return email or voice mails in a timely manner. They hide when there are problems. If you want to make an asset manager love you–and give you more business–the biggest key is to constantly be communicating with them. Anytime there is an issue, tell them. Even better, let them know BEFORE problems arise. As long as you keep the communication channels open, you will continue to maintain a strong working relationship with the asset managers. I have been to many real estate events in my career and this was by far the best. I learned so much and made so many great contacts that my to do list on Monday is pages long.

Sincerely,
Mark Shandrow
Keller Williams Realty
Long Beach, CA

Every newspaper seems to be headlining with the Failing Banks!

In case you don’t know what the ‘Watch List’ is..think of it as the list of banks the government thinks will fail. pGuess what, finding the list of banks on the list is nearly impossible. The FDIC doesn’t publish their list! pI read that the FDIC is not releasing the list because they are trying to avoid panic and a ‘rush on the banks’ for people to withdraw their money.

After all, if the bank fails your deposits/ savings are insured to up to $100,000. If the bail out passes that amount will increase to $250,000. From a real estate perspective, I want to know which banks are on the ‘Watch Lists’ for the sake of real estate clients. For example, you certainly wouldn’t want to refer a buyer to a lender for financing if the bank is going to fail. Here is the list. FDIC Bank Watch List (03.08)

Thanks, Tim Harris, for this great post.

Best,

Mark Shandrow

This is a recent article in the Wall Street Journal about the new development downtown Long Beach.  Amazing.

Mark Shandrow
Keller Williams Realty

Condo-Minimum

Developers Turn to Auctions to Shed Units

By JONATHAN KARP
September 10, 2008; Page C15

With the condo glut growing as new towers are finished, and buyers walk away from presale contracts, developers increasingly are resorting to auctions to unload units at steep discounts.

Unlike ubiquitous foreclosed-home auctions, these events seek to establish market prices for untainted, often upscale properties. In an aggressive test of the strategy, 39 luxury coastal condominiums in Long Beach, Calif., went under the hammer in late August at about half their previous asking prices.

“We believe people are sitting on the sidelines looking for an excuse to buy. We gave them that excuse,” said David Parsky, director of Citi Property Investors, a Citigroup Inc. unit that is the controlling owner of the West Ocean Two building in Long Beach.

Thirty-three of the 39 condos sold on auction day, including a three-bedroom, 1,651-square-foot unit that went for $995,000. That was above the minimum acceptable bid of $795,000 but well below the original list price of nearly $1.5 million.

“It’s a massive discount to anything in the market,” Mr. Parsky said. He declined to comment on Citi’s profit outlook for the project and said it is premature to declare the event a success, because auction purchases haven’t yet closed escrow.

Construction of the 114-condo high-rise, which has views of the Long Beach harbor, was completed in the first quarter of this year. Citi opted for an auction after selling just 20 units through conventional marketing. In addition to the 33 auction-day sales, Citi has since sold four units, leaving 57 condos to market.

Jon Gollinger, co-founder of Accelerated Marketing Partners, a consulting firm that conducted the Long Beach auction, said developers are grappling with how to establish prices in this declining, turbulent market. “Why try to catch a falling knife? Let it hit the ground. That’s what an auction does,” he said.

Marty Clouser, senior vice president of the auction group at Kennedy Wilson Inc., a real-estate services and investment company, said that new, developer-owned condos and single-family homes account for the majority of his recent auctions. Last month, Kennedy Wilson sold 31 of 40 condos in the east San Francisco Bay area at sharply reduced prices to close out inventory in a large development.

“Developers are at a point where they feel an auction will yield similar, if not better, results than waiting 18 months to have the inventory absorbed,” Mr. Clouser said.

Still, so-called accelerated sales strategies are being adopted more slowly in the Miami area, where overbuilding has left the city, by some estimates with a 35-year supply of condos. Peter Zalewski of Condo Vultures Realty LLC compiled data showing that only 53% of the 20,000 Miami condos built since 2003 have been sold. Some owners are considering auctions to raise money so they can hold the building until the market improves, he said.

Auctions are by no means sure-fire successes. Recent events in Sarasota and Panama City, Fla., resulted in fewer condo sales and lower prices than developers anticipated. Developers typically set minimum acceptable bids and won’t sell below that price, though some events, known as absolute auctions, have no threshold price.

Some builders have opted for auctions only after their biggest financial risk has passed, such as paying off their construction loan. Wood Partners auctioned off condos in Orlando and Jacksonville, Fla., to reinvigorate stalled projects. Both buildings had sold out when marketed before they were built in the heyday of the real-estate boom. But nearly one-third of the contract holders walked away.

In May, Wood Partners sold all 29 units it put up for auction at its Jacksonville development, for an average of $148 a square foot, compared with $225 a square foot during preconstruction sales, said Charles Barrus, development director for Wood Partners in Orlando. Since the auction, the building has closed 21 more sales, for slightly higher than auction prices.

“In today’s market, selling the traditional way by cutting prices till you get traction is almost counterproductive,” Mr. Barrus said. “An auction is transparent, and if you can live with that pricing, we found there is a big tailwind after the auction.”

Greg Wohl, principal of The InVision Group LLC in Atlanta, agrees. After the credit crunch left his 147-unit Tribute Loft project half-sold, he settled for an auction in June. With careful marketing to emphasize that it wasn’t a foreclosure or bankruptcy fire sale, Mr. Wohl sold 27 of the 33 condos on auction and generated strong publicity.

Seven of those sales fell through, but thanks to increased traffic in the building, he has been able to replace all seven and sell 11 more condos. “When no one is buying anything,” Mr. Wohl said, “18 postauction sales in two months is pretty darn good.”