The end of the year is upon us with the holiday’s right around the corner. It has been a very interesting, volatile and bumpy ride with the economy, stock market, Presidential election and real estate crisis. We witnessed some of our largest financial institutions go under, Fannie Mae and Freddie Mac both become taken over by the government and the stock market loose nearly 4 trillion dollars. We have witnessed world renowned business and economic figures such as Warren Buffet and Alan Greenspan in the spot light stating they have never seen anything like this. Our national debt has accumulated to unprecedented levels and our economy literally nearly collapsed. We have had numerous phone calls and emails from worried clients who are watching their retirement portfolios dwindle before their eyes and many have felt helpless. It is during these times that I recall a quote my father used to say to me “with every disaster there is always a gift on the other side”. What does this mean for real estate?
Right now is the best time to buy Bay Area real estate in the past twenty years. For those who have been waiting to purchase, the time is right now.
We are seeing more buying activity in the fourth quarter than we have seen all year. The market is rich with great deals and multiple offers are happening frequently. Many people have been waiting for the “bottom” to hit but the truth is most of us will see it in the rear view mirror. According to Data Quick, Bay Area sales are at the highest volume they have been in 17 months and median values are down 40% from a year ago across 9 Bay Area Counties. Investors and buyers have stepped off the sidelines and into the game. We will most likely see more purchasing activity in 09 with the window of opportunity closing in quickly. The buying frenzy has indeed been initiated and the heat is on. This is a very important step for all of us. Our economy needs to stabilize and homeowners need their property values to stop declining. Bay Area real estate for many is a good investment strategy if it is long term. In today’s market it is not all that bad to have a saleable, tangible asset instead of an extremely volatile stock portfolio.
Much of the purchase activity in the real estate market is with bank owned or “distressed” properties. We would like to put out a word of caution when dealing with these types of properties. Many of the lenders who own these are located out of state and have lengthy contracts that are drafted by their own attorneys protecting the banks best interest. The purchase contract in California is designed to protect the buyer not the bank. It is important to watch out for clauses in the banks contracts like their contract supersedes the interest of the California purchase contract in case of a difference between the two. It is also very common in the banks contracts to revert back to the passive removal of contingencies instead of the California contract requiring an active removal. A passive removal of contingency means that per the banks contract the buyer has a certain amount of time to do inspections, remove the appraisal and the loan contingencies. If that date comes and goes, the contingencies are automatically removed and the buyers deposit is on the line. The California contract requires the contingencies to be removed in writing with both parties signing and dating those removals. Make sure to be very careful when dealing with bank owned properties and that you are working with a professional who knows what they are doing. It is also a very good idea to have an attorney look over any agreement from a bank before you sign it just to make sure you fully understand what you’re getting into.
The real estate market most likely will see a significant number of lawsuits arise in the following months largely due to bank owned and distressed properties. There will be many attorneys watching very carefully for negligent behavior and real estate agents and brokers should be cautious in their dealings. There is nothing to worry about as long as business transactions are done carefully and professionally. Real estate has made more people wealthy than just about anything and the Bay Area is no exception. This market is a niche and demand is always been strong. The population will continue to grow and the economy will remain a large player in the global economy.
Please contact Team Enterprise for more information or visit us online.
Best,
Matt Larsen
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