This weekend, we have the first of what we hope are many more market reports from Shevy Akason.

Irvine Home Address … 4981 CORKWOOD Ln Irvine, CA 92612

Resale Home Price …… $849,000

I never felt this loss before

And the world is closing doors

I never wanted anything more

Don't let me make the same mistake again

Moby — Mistake

By far the biggest mistake I made in my four and half years of writing the IHB was the way I introduced Shevy to the readership. Sometimes the best way to learn is to do, so I am prone to jump into things and figure it out as I go. Unfortunately, sometimes it is better to carefully think through your next step before you embark on a strategy or course of action. I did not think through Shevy's introduction to the blog, and it made for a painful and unfortunate incident for all of us. I deeply regret the pain I caused Shevy and my own family as a result of the awful things that were posted that day.

What has saddened me ever since is the loss to the readership of Shevy's keen understanding of people and markets. Shevy and I think much alike, and the stories he tells me at our lunches are both interesting and insightful.

Shevy is a rare combination of talent, strength, serenity, diligence, discipline, innocence and charm. His professional habits are impeccable, and his performance is consistently top-notch. I am continually impressed with how well he serves the clients of IHB.

We run an open blog. If Shevy weren't as skilled as i say, it would come out in the astute observations. Nobody is perfect, and despite the testimonials he has earned, someone, somewhere may not be completely satisfied. But Shevy has always put forth his best effort to do what's necessary to serve the IHB, and given his skills and aptitudes, superior performance is generally the result.

If he has the time, we hope he will make regular contributions on weekends. What follows is Shevy's report on the current state of the Irvine market.

Shevy's market report

Most IHB readers know more about real estate and the market than 99% of agents out there. We’ve had husband and wife Harvard Educated dentists, Cal Tech professors, attorneys, Doctors, founders of software companies, and even a professor that teaches a class on negotiation at Cal State Fullerton. Our readers are diverse but all have one thing in common; they are well read regarding the real estate market. From this interaction we learn something new that build upon our experience, systems, and strategies daily. Besides spending time with my family, I truly enjoy working with the diverse group of well-educated and genuinely good and nice people that are attracted to the IHB. Moreover, I really enjoy communicating with IR on a regular basis; this interaction has become a favorite part of daily my daily life.

Larry asked me to provide some coverage from ‘in the trenches’ and I hope to be able to add to the conversation. I look forward to providing insights into the market and hope to add to the conversation regarding Irvine and Orange County real estate and I look forward to hearing from you and hope that current and past clients as well as other readers active in the market will choose to participate with questions and add their own insights. Here is what I have been seeing.

Supply has been steadily increasing, however, there is also a growing gap between what sellers are asking and where properties are transacting. This is the biggest challenge this time of year. No doubt, there will be over anxious buyers that have been waiting to buy that will be willing to outbid patient buyers in some areas. In these situations, I encourage clients to look at the bright side, one less motivated buyer in the market to compete with. We stress to our clients the importance of being patient, ideally identifying multiple properties, offering on multiple properties of interest, and then being patient again until one finds a motivated seller or a seller’s motivation level changes, they often do. Those that follow this model yet are ready to move when the right deal comes along, get the best deals. Has anyone noticed some really great deals that have closed in the last year in Irvine? Often by looking at the past and the best deals one is able to establish a frame of reference that will prepare them for the next good opportunity that comes along.

In areas like Irvine, there are rarely great deals. Great deals typically occur when a property is distressed and not financeable. The more risk the better the deal. For example, I’m looking at a property outside of Irvine in an OK neighborhood that is completely trashed, has a bedroom built in the garage, had two deaths in the past 3 months and I will likely get it, put $40,000 into it and still get it for around 20% below market value. However, it will be an all cash, as-is sale, and there is risk.

Buyers get good deals with limited risk through correct timing, market knowledge, by recognizing a good deal, and reacting. A great example of and equity trustee sale seller owned property that resulted in a great deal for an IHB reader. The property located in Oak Creek is over 1700 square feet, 3 bedrooms, 3 bathrooms, built in around 2000, with a nice back yard, 2 car garage and nice finishes. At the time the closest model match sold during the tax credit in April of 2010 for $637,000. The property that our client purchased was purchased by a large Orange County trustee sale investor for $522,000 who subsequently paid back taxes, back HOA’s, painted, carpeted, and listed the property for $650,000 in the beginning of September. After numerous price drops it caught our eye when it dropped to $550,000 and we started tracking the property to see it that weekend. To our surprise another quick price drop to $525,000 signaled to us that we should see it right away. We acted quickly and it was acquired for $525,000 using 30 year fixed financing at 3.875% which allowed our client to save well over $500/month by owning this unit versus renting a similar unit and market rent.

We stress and communicate to buyers that the key to finding a good deal is to find a motivated sellers. This particular property became a good deal because the seller was very motivated and we knew the market well enough to react quickly and comfortably when a good deal became available. Our client was confident and took swift action when this deal became available and sat back when deals were not right.

This particular seller was motivated for a few reasons. First, a model match REO in much inferior condition, with virtually no yard, and no privacy was lowered to $550,000. Second, as Larry will attest, trustee sale sellers make money in two ways, first, by selling for more than they purchase and second by turning their money over quick. The sellers were motivated enough just to get out that they were willing to take a large loss so that they could deploy their capital elsewhere. The model match with inferior privacy, inferior location, and in terrible condition closed in January for $540,000, we had previewed that one as well and decided even for $475,000 we would not purchase that one, the property our client acquired was easily worth $50,000 more than the REO that transacted in January for $540,000. The buyer on the inferior REO only used a $200,000 loan so the increased rate of at least 1% that they are paying compared to our clients rate of 3.875 had a smaller effect than it could have. It’s unfortunate that the buyer or buyer’s agent had not seen our clients’ property because if he had he would have recognized that anything over $475,000 was too much. Not understanding the market or working with an agent that does, it likely cost that buyer over $50,000.

Do any of you have experiences of waiting because a listing price is too high only to see the property sell a few months later for a price that you would have paid? Sometimes a high list price works in the buyers favor because it scares off good buyers that would otherwise compete for a property. Another common occurrence in a down market is for a seller not to counter a buyer that makes a solid offer only to sell it for $10,000's of thousands of dollars less than that offer months or sometimes years later, does anyone have any examples of this type of experience?

There are some important questions regarding the market. Will seller motivation change? When fall comes and the current high supply, sellers of homes that have not sold that stay on the market will likely be much more motivated. Moreover, I often see unmotivated sellers become highly motivated, most often from one of the 4 d’s, death, divorce, dissolution (normally of a partnership), and drugs and sometimes a combination.

Unfortunately, spring demand tends to bring out Kool aid. We will see sellers shoot for the moon and some highly motivated buyers step up and pay more than they should. However, many sellers will be disappointed and if they are motivated, they will sell for much less than they wanted. Others will “wait until the market comes back,” of course, with historically low interest rates that will likely only go up, they will probably be waiting for a very long time.

Does anyone have any examples of properties that they've seen that have highly motivated sellers as a result of the falling market? Is the low volume and falling prices starting to spook sellers? In my opinion, the answer is yes and no. In areas where there is competing supply of motivated sellers, one sees a race to be the next to sell. This provides the most leverage for buyers and the biggest discounts. In other neighborhoods, despite low demand, if there is limited supply or no competing sellers often sellers will hold out for their price. Many times, if nothing competing comes along, they will be successful.

2010 was the first full year of the IHB offering real estate services and we feel blessed to have met and worked with so many readers. We are fortunate in that 2011 seems to be even more promising. I have learned so much from our clients over the past year and I feel blessed to be working with IR and the readers of the IHB. If anyone would like more information regarding our operations I’m available on my cell at 949.769.1599 or shevy@idealhomebrokers.com. I look forward to hearing from you.

Irvine House Address … 4981 CORKWOOD Ln Irvine, CA 92612

Resale House Price …… $849,000

House Purchase Price … $337,500

House Purchase Date …. 5/8/1991

Net Gain (Loss) ………. $460,560

Percent Change ………. 136.5%

Annual Appreciation … 0.2%

Cost of House Ownership

————————————————-

$849,000 ………. Asking Price

$169,800 ………. 20% Down Conventional

4.72% …………… Mortgage Interest Rate

$679,200 ………. 30-Year Mortgage

$151,318 ………. Income Requirement

$3,531 ………. Monthly Mortgage Payment

$736 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$177 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$160 ………. Homeowners Association Fees

============================================

$4,603 ………. Monthly Cash Outlays

-$852 ………. Tax Savings (% of Interest and Property Tax)

-$859 ………. Equity Hidden in Payment (Amortization)

$304 ………. Lost Income to Down Payment (net of taxes)

$126 ………. Maintenance and Replacement Reserves

============================================

$3,322 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$8,490 ………. Furnishing and Move In @1%

$8,490 ………. Closing Costs @1%

$6,792 ………… Interest Points @1% of Loan

$169,800 ………. Down Payment

============================================

$193,572 ………. Total Cash Costs

$50,900 ………… Emergency Cash Reserves

============================================

$244,472 ………. Total Savings Needed

Property Details for 4981 CORKWOOD Ln Irvine, CA 92612

——————————————————————————

Beds: 5

Baths: 3

Sq. Ft.: 2700

$314/SF

Property Type: Residential, Single Family

Style: Two Level, Contemporary

View: Trees/Woods

Year Built: 1974

Community: University Park

County: Orange

MLS#: S656904

Source: SoCalMLS

Status: Active

——————————————————————————

Beautifully remodeled & expanded, bright & spacious home! Spactactular, customized Kensington plan with added den/bedroom and breakfast nook! Recently remodeled gourmet kitchen with granite countertops, refaced white cabinets, added recessed lighting, garden window & newer appliances. Home is especially bright with many clerestory windows, including a rare extra set of third story windows! Replacement windows & doors, throughout! Many other upgrades including updated baths, plantation shutters, mirrored closets, closet organizers! Newer, concrete tile siding and concrete tile roof! Incredible & peaceful wrap around yard with great privacy, lush landscape and generous patio & deck space! Wonderful association amenities including a large pool complex with spa, tennis courts, expansive lawn, picnic area, and a private clubhouse which can be rented for events! University High School attendance area!