Real Estate and Property for Living

What Do Wealthy Home Buyers Want From Their Real Estate Agent?

Wealthy home buyers who buy multi-million dollar homes are typically self-made millionaires with new money, according to a recent online survey of 683 Coldwell Banker Previews International property specialists. The study revealed the top professions of these affluent customers. According to the respondents, 88 % of their customers are business or corporate executives, 37 % are physicians, 31 % are lawyers, 30 % are financial professional and 14 % are entertainers, entertainment executives or professional athletes.

Wealthy home buyers require their real estate agents to be equipped with special skills, according to the Coldwell Banker’s survey. Given the magnitude of the financial transactions involved in luxury home purchases, 78 % of sales associates said that the top most need their clients require from their real estate agents is privacy and confidentiality. The luxury customers also want their real estate agents to exercise discretion while dealing with their multi-million dollar transactions. Almost 70 % of respondents polled that their wealthy clients want their real estate professionals to offer customized services while 44 % said that the luxury home buyers want their agents to have good network and work relationship with executive assistants, CPAs and attorneys.

Wealthy home buyers also want their agents to know the inside scoop on the real estate market, according to 36 % of the respondents in the Coldwell Banker’s survey. Seventeen percent of the sales associates surveyed indicated that one of the necessary skills for real estate professionals working with affluent customers was the ability to provide emotional support to their clients. And according to 11 % of respondents, luxury customers want their real estate agents to establish personal rapport with their clients.

The study also included queries on the “must have” amenities that the affluent clientele want in their luxury homes. Wealthy home buyers want media rooms in their homes, according to 60 % of respondents and another 60 % polled that their affluent customers want “wired” homes. However, there are a few home design elements that are out among luxury home buyers. Gourmet kitchens, granite countertops and wet bars are no longer counted as luxuries by wealthy home buyers, according to the survey respondents.

The survey also found that the multi-million dollar home buyer pays a typical down payment of 20 % to 30 %, while a quarter of clients put down 30 % to 50 % of the sale price.

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2011 Year of the Real Estate Short Sale

It’s that time of the year: The real estate industry is rolling out the shop-worn playbook of optimistic forecasts for the New Year. In San Diego these canned phrases are:

Solid signs of a firming market,
With interest rates near all-time lows,
Buying now is a no-brainer,
Get in now, before the huge pent-up demand for homes hits,
What a great time to buy with low interest rates and a good supply of homes for sale,
Act fast now, or you may be paying thousands more in a few months.

We have heard these same phrases since 2005. The major difference was that in 2005 and 2006 many of the Gurus were adding phrases:

It’s only a normal pull-back,
It’s known as a ‘pause to refresh’,
This is a once in a lifetime buying opportunity before the market resumes it’s double digit yearly appreciation.

Amazingly in San Diego, California, is the local media talking-heads still go back to the same industry spokespeople to get their 60 second optimistic new year outlook for the 6:00PM news.

Naturally, I’d like to join this optimistic, self-promoting crowd, but sorry, I have to tell it like I see it.

The title of this article says it all. After the ,000, Federal and California home buyer credits expired, the local San Diego real estate market entered into a double-dip continued erosion of home values.

After the homebuyer credits concluded, San Diego home values saw modest price appreciation. Now even this modest appreciation has disappeared. Even more troubling is that the resale home sales volume has been dropping at double digit rates for the last few months. Just from April to May the western states sales dropped a reported 20.9%. Huge double-digit declines in home sales are a major red flag that cannot be ignored.

When will the government learn that you cannot artificially create lasting demand? (Statistics show the vast majority of government housing programs, costing billions, are outright failures and have only prolonged our malaise.) I believe the best thing the government can do is to stay out of the housing market and let the open market clean up the mess.

Think about this: Bernanke initially spent almost trillion to drive long-term interest rates down.

The 0 billion QE2 has no effect to date. Actually, interest rates have moved up substantially. There are a few months left, but I am sure Bernanke will use the “it would have been much worse” argument and declare success. The reality is that there will be no QE3, not with Ron Paul now as the watchdog of the Fed.

Our aging population, combined with a decreased standard of living can’t equate to housing starts comparable to prior generations. I think our government’s relentless destruction of the middle class is making this different from prior real estate cycles.

Foreclosure moratoriums are beginning to expire. I believe the banks will push to clean up their portfolios through increased foreclosures.

Except for cash buyers, home pricing is derived from the affordability of the monthly payment. Should interest rates and taxes go up (a good bet), the purchase price will have to come down to establish a market. Construction labor is already about as cheap as you can get it and inflation for materials is already present. This spells very bad news for homebuilders.

As far as pent-up buyer demand goes, the gurus again have it backwards. It’s not buyer pent-up demand, but seller pent-up demand to unload their homes.

The depth and longevity of this San Diego housing value depression has been imbedded into the consciousness of the usual first wave of home buyers in their late 20′s and early 30′s. The high cost of living in San Diego has been further stressed with continued multiple raises in utilities, increased state taxes/fees, higher education costs and .00+ per gallon gas prices. This all equates to over-priced homes in the current world of qualifying for a home mortgage.

I just believe there are major problems with our economy at play that we have never seen before and that will have a deciding call on what happens with housing. I see demand based on finance rather than population at this point.

During the mid 2000′s, almost the entire mortgage universe had been refinanced. This included many baby boomers that were in the last half of the 30-year mortgage they took out when they purchased their home. Some of this was hopefully to pay down other expenses and not to maintain their fantasy of the luxury lifestyle. The refinancing bubble that resulted from the irresponsible actions of Greenspan reset the 30-year mortgage clock. All borrowers looked at, was how the refinance lowered their house payment by $ X per month, without giving a second thought to the fact that they have also extended the term to a new 30-year loan.

Another round of refinancing occurred when Bernanke pushed rates down to the 4% range. The only borrowers left who have not refinanced are those with no equity and/or are facing foreclosure.

In either case, now many Boomers who are reaching the traditional retirement age, find themselves strapped with 20+ years left on their refinanced mortgages. Instead of preparing for the mortgage burning party that their parents had when that generation retired, they are wondering how they can make house payments on a lower income during retirement.

Since this is the first year of the boomers reaching 65, it is going to be a negative drag on housing for years to come.

For the San Diego and California real estate market we have to contend with our own Cap & Tax laws going into effect in 2011 that will increase utility costs by 20% over the next five and speeding up the loss of manufacturing jobs. We also have a new, old governor who was against proposition 13 which sets a maximum cap on property taxes and will likely propose new massive state taxes to deal with a .4 billion budget deficit.

If you have stayed with me this long, I’ll wrap things up by saying I personally do not see any real base building in the San Diego real estate market until 2012. Naturally, I hope I’m wrong and 2011 sees a big jump in San Diego home appreciation. With 30+ plus years of residential experience and my 2005 article that foretold this national housing bust, I wouldn’t bet against me.

Tags: 2011 Estate Real Sale Short Year

Protect Your Deposit When Buying Real Estate

When you start the process of buying a home or any type of real estate, you’ll no doubt hear the term “earnest money deposit” (EMD). So what exactly is an EMD?

An EMD becomes relevant when you are ready to make an offer on a property. In most states, your Real Estate Agent prepares the offer on your behalf. The offer usually takes the form of a written contract that is submitted to the seller by way of their agent.

In addition to the offer document, sellers typically expect an EMD. An EMD is a monetary deposit submitted via check to demonstrate to the seller that you are a serious buyer. In some regions of the country, only a photocopy of the check is submitted with the offer, and the original check is delivered to the appropriate entity if the offer is accepted. Ask your Real Estate Agent to clarify how deposits are handled in your region of the country.

The check is usually made out to an independent third- party such as a Title Company, Escrow Company, Real Estate Attorney or your Real Estate Broker. Ask your Real Estate Agent to clarify who will hold the EMD.

The amount of the EMD sellers expect varies by region. The EMD amount is based on the customs and practices for a region, but is generally from 1% to 2% of the purchase price. In a competitive market place where demand exceeds the supply of homes, some buyers may offer a higher EMD than expected to impress the seller of their intent. In determining the amount of your EMD, consult your Real Estate Agent and balance the need to demonstrate your serious intent, against the good business practice of minimizing the deposit amount.

The amount of the EMD is usually applied to reduce the purchase price of the property or to cover closing costs, as you dictate. For example, if you are purchasing a 0,000 property and you give an EMD of 00, then the remaining balance owned at closing is 7,000 (plus closing costs). Alternatively, you may direct that the EMD be applied toward the closing costs.

Once a valid contract for purchase is created, an independent third-party usually holds the EMD until the purchase is either completed or cancelled. At this point, the money belongs jointly to both the seller and the buyer.

In cases where you make an offer that is accepted but later decide to cancel the offer, the terms specified in the contract (or state law) will dictate if, and under what circumstances, the EMD is returned to you. Be aware that you could loose your deposit if you do not not comply with the terms of your contract. Your Real Estate Agent can provide you information about how EMDs are dealt with if a contract is cancelled.

Since state law varies by region and practices can differ even within the same state, be sure to consult your Real Estate agent about the rules that apply to EMDs in your region of the country. You should also be aware that the EMD is not related to any down payment that you make toward your home loan.