California Real Estate Bargains are not a secret...but getting one is more difficult than it sounds.

The US Real Estate market is REALLY chaotic at the moment.

Much of that chaos is related to what is happening with the banks both from a lending and selling perspective.

A lot of foreclosures are happening, and a lot of people are trying to “short sell” to get out of their house without foreclosing. Many of those keeping their houses are doing so only with a great struggle to pay the bills.

So what is the situation in California?

In the last 3 to 4 months Real Estate in California has changed DRASTICALLY.


1) Good properties at good prices at the lower end of the price range are subject to multiple offers and often have 10 to 20 offers within days of going on the market. Buyers who cannot move fast simply do not get a chance. Most places for sale at the lower end of the market are either Bank Owned or “short sales” ( still bank controlled). Equity sellers are few and far between because nobody is selling now unless they absolutely have to do so. This is often a surprise to new potential buyers who had thought the market was slow and they would just be able to step in and pick up bargains. It is true that many great properties are selling at 30% to 45% below what they sold for 3 years ago, but guess what……..you are not the only person who has noticed this and can use a calculator!

2) There is now a SHORTAGE of places on the market in the lower price ranges. The banks are not releasing a lot of the bank owned properties for a variety of reasons. This MAY change in the next few months but nobody is sure because nobody is really saying why the banks are holding on to the houses now. I believe it is a mixture of being overwhelmed, and staff who are reeling from rapid changes in policies, or even a lack of clear policies. They are mired in lots of new regulations intended to modify people’s loans and keep them in their houses. There is a lot of activity on loan modifications intended to stop people losing their homes but not a lot of success. Nobody is quite sure if we are about to see a lot of modifications, or a lot more foreclosures and sales of property. The odds are on the latter.

3) Some properties look cheap, and have been on the market for a while, but there will be a reason for that. It may be area, condition, liens, HOA problems. There are not easy, clean deals just sat there waiting for someone to pick them up.

4) Banks are being terribly difficult on loans. 3 years ago, loan approvals were being given in 24 hours with limited proof of ability to pay. Now, loans are at great rates, but qualifying is tough. There are great first-time buyer tax incentives and this is adding to the frenzied offer and buy activity at the low end of the market. Buyers able to pay CASH are often at an advantage in negotiating for bank owned/short sale properties. This is not a “rule”, but a trend. Some banks and agents really like cash deals, some are just as happy with a 20% down buyer.

5) The list prices of short sales and bank owned are being driven up by the numbers of offers. Bank owned and short sale list prices are generally the opposite of those used by equity sellers. You may be used to offering 20% below asking price. That may be a starting point with an equity seller, but it is a pointless waste of paper with bank-owned or short sale properties. Bank Owned and Short Sale list prices are usually pitched intentionally low, not high, and the intention is to get a fast flurry of offers; often a bank owned list price of $ 200,000 will generate offers from $210,000 all the way up to $ 250,000 and above. It is important to look at the comparison sales in the area to get a valid benchmark for setting your offer. The list price is just a number, nothing more.

6) The vacant bank-owned properties that are not being properly marketed are deteriorating so when they do come on the market they often need extensive repairs. The logic behind the banks leaving these places to deteriorate and lose even more value is beyond the capacity of my brain-cells. My suspicion is that there is something going on at a national strategic level linked to how much money the banks think they can get out of the Government to compensate them for the losses on these foreclosures. Some of the deteriorating properties are formerly beautiful homes that now have brown grass, green pools, and holes in the drywall.

7) By the way, there are incredible bargains at the TOP end of the market. The top end of the market is very slow with houses taking a long time to sell and huge price reductions on offer. Loans over $ 729,875 are tough to get at good rates, so buyers need to have a lot of cash. However, some houses that may have gone for $ 2.5 million 3 years ago are now struggling to sell for $ 1.5 million. Houses that went for $ 1.3 million are often going for $ 800,000.


So, what do you do if you want to take advantage of the huge drop in California Real Estate prices? There will be a recovery and it may not be too far away. However, if you want to buy in California for investment, take at least a 5 year perspective and preferably 10. If you buy now, I really believe that 10 years from now you will have a big smile on your face, and will congratulate yourself on just how smart you are.

There are still good places to buy out there. How do you get them?

The key is you have to be patient, you have to be prepared to make lots of offers, and you have to be alert and responsive and have your money and/or loans ready to go. You have to work with people who know the market and will tell you the truth. You cannot do it by dabbling but only by being committed to the process. You cannot get frustrated or fixated on one particular property. Your objective must be to get a good deal, not a steal. A steal is what some guy you met in a bar told you a friend of his once got. A good deal is what real investors get. There are a lot of savvy buyers in the market and they are your competition.

California real estate bargains are not a secret…..…but getting one is more difficult than it sounds.

You know who to call!