At Palm Springs Condo Living we encourage people to purchase condos because it's such a desirable and easy way to experience the Palm Springs lifestyle. However, it's not for everybody. With this in mind for this week's blog I'm going to offer a link to an article I read in the Washington Post that spells out many of the good and not so good point about condo living. Please read it and let me know what you think.
Click on this link http://www.washingtonpost.com/wp-dyn/content/article/2008/09/05/AR2008090501825.html
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, November 18, 2010
Tuesday, November 16, 2010
October 2010 Sales Analysis
The following sales analysis compares October 2010 sales data with data from the preceding month (September 2010) and the previous year (October 2009). Data is analyzed by region in the city: South Palm Springs, Central Palm Springs, and North Palm Springs.
South Palm Springs - South of Ramon Road
Sales in South Palm Springs were mostly flat during the most recent period compared with the earlier periods. The range of prices paid was also mostly similar with previous periods, but the average and median prices did see an increase over last month and last year. The price per square foot did drop over last year, but increased over last month. The number of days on the market did see a big jump from 80 last year to 111 this year. The percent of sales that were distressed properties dropped from last month and also from last year. Overall, not a bad picture for South Palm Springs given where the market has been for the past couple years.
Central Palm Springs - Between Ramon Road and Vista Chino
The scenario in Central Palm Springs was not as rosy as South Palm Springs. The number of sales did jump up over the preceding year and month. The range of prices paid was more or less in line with the previous periods. However, both the average and median prices were down dramatically from last year. The price per square foot was also down compared with last year and last month. The days on market was down from last year, but up from last month. But the big news is that distressed sales represented 73% of all condo sales in the region, almost 3 times more than 1 year ago.
North Palm Springs - North of Vista Chino
Sales in North Palm Springs actually were not too bad during the most recent period. The number of condos sold is double what it was last year and 50% greater than the previous month. The price range for sold condos is in line with the preceding month and year. Average and median prices, however, experienced increases, especially over the preceding month. The average price per square foot is also higher than the earlier periods. Days on market was a bit higher than last year, but a lot lower than just a month earlier. The big news here, as with Central Palm Springs, is the amount of distressed sales...73% of all condo sales were distressed in the area, a small drop from last month, but a fairly good size jump from last year.
The good news is that in all regions of Palm Springs the number of sales is increasing or at least equal with last year. As somebody who's out in the field daily this makes sense to me...it just feels like more transactions are happening. Pricing, however, is hit or miss, with increases in South and North Palm Springs, but decreases in the Central area. Also problematic are the percentage of distressed sales, which are lower in South Palm Springs, but quite high in Central and North Palm Springs. All of this is indicative of a still volatile market.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
South Palm Springs - South of Ramon Road
| October 2010 | September 2010 | October 2009 | |
| Condos Sold | 29 | 28 | 28 |
| Price Range | $59,000 - $435,000 | $29,000 - $350,000 | $61,000 - $440,000 |
| Average Price | $186,471 | $150,779 | $170,782 |
| Median Price | $172,250 | $132,000 | $137,500 |
| Price/Square Foot | $128.47 | $108.71 | $134.34 |
| Days on Market | 111 | 115 | 80 |
| % Distressed Sales (REO or Short Sale) | 28% | 43% | 36% |
Sales in South Palm Springs were mostly flat during the most recent period compared with the earlier periods. The range of prices paid was also mostly similar with previous periods, but the average and median prices did see an increase over last month and last year. The price per square foot did drop over last year, but increased over last month. The number of days on the market did see a big jump from 80 last year to 111 this year. The percent of sales that were distressed properties dropped from last month and also from last year. Overall, not a bad picture for South Palm Springs given where the market has been for the past couple years.
Central Palm Springs - Between Ramon Road and Vista Chino
| October 2010 | September 2010 | October 2009 | |
| Condos Sold | 15 | 11 | 12 |
| Price Range | $29,500 - $400,000 | $30,000 - $400,000 | $69,000 - $364,900 |
| Average Price | $155,745 | $143,409 | $206,081 |
| Median Price | $125,000 | $105,000 | $204,000 |
| Price/Square Foot | $127.83 | $133.89 | $152.11 |
| Days on Market | 142 | 107 | 169 |
| % Distressed Sales (REO or Short Sale) | 73% | 64% | 25% |
The scenario in Central Palm Springs was not as rosy as South Palm Springs. The number of sales did jump up over the preceding year and month. The range of prices paid was more or less in line with the previous periods. However, both the average and median prices were down dramatically from last year. The price per square foot was also down compared with last year and last month. The days on market was down from last year, but up from last month. But the big news is that distressed sales represented 73% of all condo sales in the region, almost 3 times more than 1 year ago.
North Palm Springs - North of Vista Chino
| October 2010 | September 2010 | October 2009 | |
| Condos Sold | 15 | 10 | 7 |
| Price Range | $37,500 - $197,500 | $42,000 - $235,000 | $48,000 - $195,000 |
| Average Price | $118,079 | $94,445 | $105,843 |
| Median Price | $125,000 | $66,350 | $105,000 |
| Price/Square Foot | $112.33 | $93.81 | $110.99 |
| Days on Market | 62 | 117 | 51 |
| % Distressed Sales (REO or Short Sale) | 73% | 80% | 57% |
Sales in North Palm Springs actually were not too bad during the most recent period. The number of condos sold is double what it was last year and 50% greater than the previous month. The price range for sold condos is in line with the preceding month and year. Average and median prices, however, experienced increases, especially over the preceding month. The average price per square foot is also higher than the earlier periods. Days on market was a bit higher than last year, but a lot lower than just a month earlier. The big news here, as with Central Palm Springs, is the amount of distressed sales...73% of all condo sales were distressed in the area, a small drop from last month, but a fairly good size jump from last year.
The good news is that in all regions of Palm Springs the number of sales is increasing or at least equal with last year. As somebody who's out in the field daily this makes sense to me...it just feels like more transactions are happening. Pricing, however, is hit or miss, with increases in South and North Palm Springs, but decreases in the Central area. Also problematic are the percentage of distressed sales, which are lower in South Palm Springs, but quite high in Central and North Palm Springs. All of this is indicative of a still volatile market.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, October 21, 2010
The Condo Buying Process: Foreclosures
In last week's blog I wrote about the sales figures for September 2010. Although I already knew that foreclosures and short sales represent a large part of our business today, I was reawakened to that fact by my examination of the sales statistics for condos. Depending on the region up to 80% of all condo sales were foreclosures or short sales in September, and I don't see that number dropping radically in the foreseeable future. For that reason, I thought I would share some information regarding the purchase of foreclosure condos for this week's blog. Below are a couple issues I think should be kept in mind when in escrow to purchase a foreclosure condo.
Addendums
Typically a bank-owned foreclosure will have an addendum to the purchase contract that both buyers and sellers (the owner bank) will need to sign. The addendum supersedes the purchase contract, meaning that if there is a contradiction between the two documents the Addendum will have precedence. This is a very important fact because the purchase contract is written by the buyer's real estate agent from the buyer's perspective but the Addendum comes from the bank and written to be advantageous to the bank. I strongly urge buyers read and understand what they are signing in the Addendum before they actually sign it.
One other feature of Addendums is that they have passive contingency removal dates. A passive contingency removal means that as the calendar date comes and goes the contingency will be removed automatically. In contrast, when dealing with a traditional sales transaction, the buyer (or seller) will have to actually remove the contingency in writing, that it doesn't just get removed automatically. For this reason it's very important to keep an eye on the calendar with relation to the contingency removal periods on foreclosures.
What do you do when the contingency is about to be removed and you're not ready yet? Ask for an extension! This happens a lot, especially for certain contingencies. Loan and HOA Document contingency periods are two that are typically shorter than they need to be and therefore ripe for an extension. As long as the extension is requested before the contingency has come and gone and is for a reasonable amount of time (let's say another week) the seller should be okay with this option. Remember, the bank wants to sell this property or they wouldn't have accepted your offer in the first place, so a reasonable request will probably be accepted.
Repairs
When I'm working with a buyer on an offer to submit on a foreclosure condo I usually recommend that the buyer negotiate hard up front to get the best price. The reason for this is because after the property is in escrow the seller bank usually doesn't reduce price at all. Contrary to this, in a traditional sale if the home inspection discovers a few issues the buyer and seller can come back to the table to negotiate what will be repaired or reduced in price. With a forclosure sale I'd usually not recommend asking for repairs on minor issues. However, if a home inspection discovers a big problem the buyer should always put in a request for repair and see what happens. I recently conducted a home inspection on a foreclosure condo and the process found that the entire heating and air conditioning system was worn out. I got a specialist to give a price estimate and I submitted this to the seller bank for them to repair. They don't usually do the repair and instead offer money back or a reduced price. In this instance the bank could see that if these buyers didn't buy the property they'd be stuck with a property with a defective heating and air conditioning system so they accepted a reduced price close to the estimate of the new system. So again, although a bank usually won't negotiate further on price after an in-escrow price has been agreed upon certain circumstances do warrant further price negotiation.
In today's real estate market foreclosures are still very common. Please feel free to contact me if you have any questions about purchasing your very own Palm Springs Condo.
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Addendums
Typically a bank-owned foreclosure will have an addendum to the purchase contract that both buyers and sellers (the owner bank) will need to sign. The addendum supersedes the purchase contract, meaning that if there is a contradiction between the two documents the Addendum will have precedence. This is a very important fact because the purchase contract is written by the buyer's real estate agent from the buyer's perspective but the Addendum comes from the bank and written to be advantageous to the bank. I strongly urge buyers read and understand what they are signing in the Addendum before they actually sign it.
One other feature of Addendums is that they have passive contingency removal dates. A passive contingency removal means that as the calendar date comes and goes the contingency will be removed automatically. In contrast, when dealing with a traditional sales transaction, the buyer (or seller) will have to actually remove the contingency in writing, that it doesn't just get removed automatically. For this reason it's very important to keep an eye on the calendar with relation to the contingency removal periods on foreclosures.
What do you do when the contingency is about to be removed and you're not ready yet? Ask for an extension! This happens a lot, especially for certain contingencies. Loan and HOA Document contingency periods are two that are typically shorter than they need to be and therefore ripe for an extension. As long as the extension is requested before the contingency has come and gone and is for a reasonable amount of time (let's say another week) the seller should be okay with this option. Remember, the bank wants to sell this property or they wouldn't have accepted your offer in the first place, so a reasonable request will probably be accepted.
Repairs
When I'm working with a buyer on an offer to submit on a foreclosure condo I usually recommend that the buyer negotiate hard up front to get the best price. The reason for this is because after the property is in escrow the seller bank usually doesn't reduce price at all. Contrary to this, in a traditional sale if the home inspection discovers a few issues the buyer and seller can come back to the table to negotiate what will be repaired or reduced in price. With a forclosure sale I'd usually not recommend asking for repairs on minor issues. However, if a home inspection discovers a big problem the buyer should always put in a request for repair and see what happens. I recently conducted a home inspection on a foreclosure condo and the process found that the entire heating and air conditioning system was worn out. I got a specialist to give a price estimate and I submitted this to the seller bank for them to repair. They don't usually do the repair and instead offer money back or a reduced price. In this instance the bank could see that if these buyers didn't buy the property they'd be stuck with a property with a defective heating and air conditioning system so they accepted a reduced price close to the estimate of the new system. So again, although a bank usually won't negotiate further on price after an in-escrow price has been agreed upon certain circumstances do warrant further price negotiation.
In today's real estate market foreclosures are still very common. Please feel free to contact me if you have any questions about purchasing your very own Palm Springs Condo.
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, October 14, 2010
September 2010 Sales Analysis
The following sales analysis compares September 2010 sales data with data from the preceding month (August 2010) and the previous year (September 2009). Data is analyzed by region in the city: South Palm Springs, Central Palm Springs, and North Palm Springs.
South Palm Springs - South of Ramon Road
Overall sales in South Palm Springs are down 10% in September 2010 vs. August 2010, but they are up 22% over September 2009. All of the pricing information, however, has dropped. The price range this September is similar to August, but it is a significant drop over the price range experienced last year. The average sales price this September is down 15% over August and is down 27% over September of last year. The median sales price figures are similar with a 14% drop vs. August and a 29% drop vs. last year. The average price per square foot is down 12% compared with August and down 35% compared with September of 2009. The number of days on the market are similar for all three time periods...115 days, 110 days, and 119 days respectively. The percentage of properties that are distressed did drop 22% vs. August, but the percentage of properties that are distressed had a huge increase of over 3 times the number sold in September 2009.
Central Palm Springs - Between Ramon Road and Vista Chino
The number of condos sold in Central Palm Springs were consistent with last month and last year, experiencing a 22% increase over the sales of August 2010, but an 18% decrease over September 2009. The price range of all condos sold was also in the middle in comparison with last month and last year. The price range was a lot higher than the dismal August 2010 results, but not nearly as high as September 2009. The average price was 30% higher in September than August, but 32% lower than September 2009. The median price was even with August at approximately $105,000, but both of these were a drop of 35% over September 2009. Average price per square foot increased 15% compared with August, but decreased 22% compared with September 2009. The number of days on the market dropped a whopping 40% compared with August and also dropped by 21% compared with September 2009. Percentage of properties sold that are distressed stayed similar in September and August 2010 at approximately 2/3 of all sales, and this was an increase in comparison with last year when the distressed sales was under 50%.
North Palm Springs - North of Vista Chino
In North Palm Springs the increase in sales (66%) over last month looks really dramatic, but with only 6 sales in August anything would look good! Number of sales compared with 2009 were down 33%. The price range of condos sold across all time periods is similar, although in August there were no inexpensive condos sold in the area which impacted sales figures considerably. For example, the average price in September compared with September of 2009 was up 11%, but compared with August it was down 43%. Median price is similar...an increase of 10% compared with last year, but a 57% drop from August. Price per square foot dropped 35% vs. August and also dropped 21% vs. last year. Days on market increased in September 21% compared with August and also increased a whopping 121% compared with last September. The big news in North Palm Springs, though, is the number of distressed sales...80% of all condo sales in the region were distressed in September vs. 33% in August and 53% last September.
I'm sounding like a broken record, but Palm Springs is still experiencing a very volatile condo market. Pricing in South Palm Springs was considerably lower than last year, although the number sold was higher. Similarly, Central Palm Springs experienced lower sales and pricing compared with last year, although there were better sales than in August. North Palm Springs was the main point of difference with last year in the region. Sales were similar or even better than last year, although considerably worse than August 2010. The only issue that is similar across the region concerns the percentage of distressed sales. More and more, across all areas, the condos that are sold are either foreclosures or short sales. For the foreseeable future this trend should continue. This means it will still be a challenging market for sellers. But for buyers, it's a buyer's market and the savvy buyer can get an incredible deal on a Palm Springs Condo.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
South Palm Springs - South of Ramon Road
| September 2010 | August 2010 | September 2009 | |
| Condos Sold | 28 | 31 | 23 |
| Price Range | $29,000 - $350,000 | $36,500 - $388,000 | $69,000 - $456,000 |
| Average Price | $150,779 | $173,203 | $191,424 |
| Median Price | $132,000 | $150,000 | $170,000 |
| Price/Square Foot | $108.71 | $121.77 | $146.30 |
| Days on Market | 115 | 110 | 119 |
| % Distressed Sales (REO or Short Sale) | 43% | 55% | 13% |
Overall sales in South Palm Springs are down 10% in September 2010 vs. August 2010, but they are up 22% over September 2009. All of the pricing information, however, has dropped. The price range this September is similar to August, but it is a significant drop over the price range experienced last year. The average sales price this September is down 15% over August and is down 27% over September of last year. The median sales price figures are similar with a 14% drop vs. August and a 29% drop vs. last year. The average price per square foot is down 12% compared with August and down 35% compared with September of 2009. The number of days on the market are similar for all three time periods...115 days, 110 days, and 119 days respectively. The percentage of properties that are distressed did drop 22% vs. August, but the percentage of properties that are distressed had a huge increase of over 3 times the number sold in September 2009.
Central Palm Springs - Between Ramon Road and Vista Chino
| September 2010 | August 2010 | September 2009 | |
| Condos Sold | 11 | 9 | 13 |
| Price Range | $30,000 - $400,000 | $59,500 - $175,000 | $72,000 - $647,000 |
| Average Price | $143,409 | $110,049 | $210,138 |
| Median Price | $105,000 | $105,500 | $160,000 |
| Price/Square Foot | $133.89 | $116.63 | $170.96 |
| Days on Market | 107 | 176 | 135 |
| % Distressed Sales (REO or Short Sale) | 64% | 67% | 46% |
The number of condos sold in Central Palm Springs were consistent with last month and last year, experiencing a 22% increase over the sales of August 2010, but an 18% decrease over September 2009. The price range of all condos sold was also in the middle in comparison with last month and last year. The price range was a lot higher than the dismal August 2010 results, but not nearly as high as September 2009. The average price was 30% higher in September than August, but 32% lower than September 2009. The median price was even with August at approximately $105,000, but both of these were a drop of 35% over September 2009. Average price per square foot increased 15% compared with August, but decreased 22% compared with September 2009. The number of days on the market dropped a whopping 40% compared with August and also dropped by 21% compared with September 2009. Percentage of properties sold that are distressed stayed similar in September and August 2010 at approximately 2/3 of all sales, and this was an increase in comparison with last year when the distressed sales was under 50%.
North Palm Springs - North of Vista Chino
| September 2010 | August 2010 | September 2009 | |
| Condos Sold | 10 | 6 | 15 |
| Price Range | $42,000 - $235,000 | $113,500 - $250,000 | $48,000 - $232,000 |
| Average Price | $94,445 | $164,367 | $85,340 |
| Median Price | $66,350 | $153,750 | $60,500 |
| Price/Square Foot | $93.81 | $142.55 | $119.12 |
| Days on Market | 117 | 92 | 53 |
| % Distressed Sales (REO or Short Sale) | 80% | 33% | 53% |
In North Palm Springs the increase in sales (66%) over last month looks really dramatic, but with only 6 sales in August anything would look good! Number of sales compared with 2009 were down 33%. The price range of condos sold across all time periods is similar, although in August there were no inexpensive condos sold in the area which impacted sales figures considerably. For example, the average price in September compared with September of 2009 was up 11%, but compared with August it was down 43%. Median price is similar...an increase of 10% compared with last year, but a 57% drop from August. Price per square foot dropped 35% vs. August and also dropped 21% vs. last year. Days on market increased in September 21% compared with August and also increased a whopping 121% compared with last September. The big news in North Palm Springs, though, is the number of distressed sales...80% of all condo sales in the region were distressed in September vs. 33% in August and 53% last September.
I'm sounding like a broken record, but Palm Springs is still experiencing a very volatile condo market. Pricing in South Palm Springs was considerably lower than last year, although the number sold was higher. Similarly, Central Palm Springs experienced lower sales and pricing compared with last year, although there were better sales than in August. North Palm Springs was the main point of difference with last year in the region. Sales were similar or even better than last year, although considerably worse than August 2010. The only issue that is similar across the region concerns the percentage of distressed sales. More and more, across all areas, the condos that are sold are either foreclosures or short sales. For the foreseeable future this trend should continue. This means it will still be a challenging market for sellers. But for buyers, it's a buyer's market and the savvy buyer can get an incredible deal on a Palm Springs Condo.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, October 7, 2010
The Condo Buying Process: Home Inspections
The home buying process, whether it be a condo or a house, can be complicated. There are many things to consider and everything is on a tight timeline. One step in the process that is not required, but that I always recommend, is a home inspection. A home inspection can save a home owner thousands of dollars in unexpected repairs and can help a buyer make the decision to proceed with, or get out of, an escrow. I've participated in many home inspections and work frequently with Walker Novak of Novak Home Inspections. We recently sat down and discussed the differences in doing a home inspection on a condo and a house.
PSCL: You have many years of experience doing home inspections. What would you say are the differences in doing one for a condo vs. a house?
WN: Actually, there isn't much difference to them except that with a house you're concerned with the entire structure, roof to foundation, and with a condo it's really only concerned with everything inside the interior walls of the unit. However, there are some steps that I do when inspecting a condo that aren't specific to the unit, but may impact the buyer's decision making.
PSCL: What's that?
WN: The main thing has to deal with the roof. I go up on the roof to see what the current condition is.
PSCL: Since this is outside the condo itself shouldn't this be an HOA issue?
WN: It typically is an HOA issue, but if there are problems with the roof this could lead to a huge assessment to the individual owners, depending on how the specific HOA operates. If an HOA has plenty of reserves they may pay for the repair out of that, but if they are cash poor the individual owners will have to foot the bill. I like to share roof condition with the buyers so they can then research the issue with the HOA to see what sort of expense they can expect.
PSCL: That sounds like a great idea. What else is unique to the condo buying process?
WN: With a house, I don't get too concerned with the neighbors, but with a condo it can be very important. Any issue in an adjacent condo, particularly upstairs/downstairs can impact your condo. A neighboring unit issue that can have a huge impact on your unit is water. Let's say you have upstairs/downstairs neighbors. The upstairs unit gets a water leak and since nobody is there for 6 months it goes unnoticed. Pretty soon the downstairs unit notices a sagging ceiling with black spots all over it. They've got a potentially big problem, and it didn't start in their unit but rather upstairs. Not only does the upstairs neighbor have to repair their own unit, they also have to repair the downstairs unit. This is something you don't worry about with an inspection at a house.
PSCL: Ugh...sounds like a nightmare. What else do you do to try to avoid this type of issue?
WN: The biggest threat is with the hot water heater. They have a lot of water in them and are usually hidden in the back of a closet with stuff stored in front of them so you can't see them and usually don't have a water pan. I make sure the water heater is operating properly, suggest getting a water pan, and make sure that the heater is accessible as part of my inspection.
Palm Springs Condo Living: Hi Walker, Thanks for joining me today to talk about home inspections.
Walker Novak: No problem.
PSCL: You have many years of experience doing home inspections. What would you say are the differences in doing one for a condo vs. a house?
WN: Actually, there isn't much difference to them except that with a house you're concerned with the entire structure, roof to foundation, and with a condo it's really only concerned with everything inside the interior walls of the unit. However, there are some steps that I do when inspecting a condo that aren't specific to the unit, but may impact the buyer's decision making.
PSCL: What's that?
WN: The main thing has to deal with the roof. I go up on the roof to see what the current condition is.
PSCL: Since this is outside the condo itself shouldn't this be an HOA issue?
WN: It typically is an HOA issue, but if there are problems with the roof this could lead to a huge assessment to the individual owners, depending on how the specific HOA operates. If an HOA has plenty of reserves they may pay for the repair out of that, but if they are cash poor the individual owners will have to foot the bill. I like to share roof condition with the buyers so they can then research the issue with the HOA to see what sort of expense they can expect.
PSCL: That sounds like a great idea. What else is unique to the condo buying process?
WN: With a house, I don't get too concerned with the neighbors, but with a condo it can be very important. Any issue in an adjacent condo, particularly upstairs/downstairs can impact your condo. A neighboring unit issue that can have a huge impact on your unit is water. Let's say you have upstairs/downstairs neighbors. The upstairs unit gets a water leak and since nobody is there for 6 months it goes unnoticed. Pretty soon the downstairs unit notices a sagging ceiling with black spots all over it. They've got a potentially big problem, and it didn't start in their unit but rather upstairs. Not only does the upstairs neighbor have to repair their own unit, they also have to repair the downstairs unit. This is something you don't worry about with an inspection at a house.
PSCL: Ugh...sounds like a nightmare. What else do you do to try to avoid this type of issue?
WN: The biggest threat is with the hot water heater. They have a lot of water in them and are usually hidden in the back of a closet with stuff stored in front of them so you can't see them and usually don't have a water pan. I make sure the water heater is operating properly, suggest getting a water pan, and make sure that the heater is accessible as part of my inspection.
PSCL: I'm sure your clients are grateful for your extra attention to these issues. Thanks for taking the time to talk with us today.
WN: You're welcome.
If you have questions for Walker Novak you can reach him at:
Novak Home Inspections
760-880-1393
If you have questions for me please contact me...I'd love to hear from you:
Alan Wilke
760-464-6693
Thursday, September 16, 2010
Lease Land vs. Fee Simple
I talk to a lot of potential buyers and there are many questions I need to ask them to help them find the perfect property to buy. Some examples are, "How many bedrooms do you need?", "Do you want a condo or a house?", "What part of town do you want to live in?", etc. One question, though, is unique to the Palm Springs area..."Do you want to lease the land or own it (fee simple)?" From many people I get a very strong response..."absolutely no lease land." This is fine, everybody is entitled to their opinions and desires, but in many cases I think the people are not 100% informed about what lease land is and what it means to them as the purchasers of real property. My friends at Orange Coast Title Company work tirelessly in the Coachella Valley to help educate buyers about lease land vs. fee simple land. They came up with a brochure about the topic which I am copying as this week's blog...I hope you enjoy it!
The primary difference between buying land and leasing it is obvious. Leased land reduces the cost of a home by 20 to 30%. Once a structure is built, the land beneath it can be of no other use to the homeowner. So by owning on leased land the homeowner gets the use of the land without the capital outlay and can afford a far more luxurious home for less money. Furthermore, since no one actually owns a home free and clear until the loan is paid off most so called "land owners" don't really "own" their property for the first 15-30 years.
For example, this simple logic has been sufficient to satisfy thousands of home and business owners in the Palm Springs area whose homes and businesses are located on land leased from the Agua Caliente Indian tribe. But for those who like to explore all ramifications here are some more facts to ponder, posed in the form of most frequently asked questions about Indian leased land:
WON'T THE VALUE OF MY REAL ESTATE CLIMB FASTER IF I OWN THE LAND?
While resale values are determined by many things, all available figures indicate that resales of homes on leased land have climbed in exact proportion to other homes in the area. The condition in which you keep your home has far more influence on its resale value than the fact it is (or is not) on lease land.
WHAT ABOUT MY CHILDREN AND GRANDCHILDREN AND WILL I BE ABLE TO PASS A LEASEHOLD ESTATE ON TO THEM?
Of course. You can give or sell your home on lease land just as easily as on fee land. However, if you are concerned about your heirs 65 years from now, there are four realistic questions you should ask yourself:
1) Will they really want a 65+ year-old home when the average life of most California residences is estimated at less than 50 years?
2) Considering that most residences change ownership about every five years is this home really likely to stay in your family for 65 years?
3) If you have a savings of $206 per month ($2,472 per year) by leasing land vs. purchasing over the life of a 65 year lease your savings would total $160,680...even without earning interest. If you kept this monthly savings in an account paying 10% annual interest your savings would exceed $1,250,000 over 65 years. Wouldn't that be a better way to take care of your great -grandchildren?
4) What happens at the end of the lease? Since there is no legal restriction prohibiting the tribe from selling its land you or your heirs nay have the option to purchase if you wish to do so. However, most probably, you would be offered a new lease based on conditions existing at that time. There would be no financial advantage to taking the land back and, as the tribe long ago observed, "One can not eat dirt."
WHY DO SOME PEOPLE COMPARE A HOME ON LEASED LAND TO A VARIABLE ANNUITY LIFE INSURANCE POLICY?
Probably because it's easier to understand! Just as a variable annuity gives you the possibility of gaining from both fixed interest rates and asset appreciation a home purchased on leased land gives you a monthly savings along with the possibility of home appreciation.
It can be an investment hedge whether home prices are rising or falling. During an "up" period, your home will increase in price. In a "down" period, the dollars you did not spend on land, but invested in a fixed interest savings, will continue to increase.
Today, building on lease land is no longer an advantage reserved for business and investment buyers. Now, in Palm Springs and the surrounding communities, it is something any home buying family can enjoy, thanks to the honesty, intelligence and perseverance of those original desert dwellers who were sincere when they said, "Welcome, brother, my home is your home"
What's my take? You can get some great deals on lease land properties...definitely more than the property you'd get on fee land. However, there is uncertainty in the lease. Most lease rates fluctuate with the Consumer Price Index, so you don't know exactly how much the lease payment will be at a point in the future. And the lease does expire, so someday you will have to deal with renegotiating a new term with the tribe. I tell people that as long as the lease has a long life (at least 40 more years remaining on the lease) and the terms are good it is smart to consider buying a property on lease land. But know yourself...if you're uncomfortable with uncertainty a land lease may not be right for you under any circumstances.
If you have any questions or concerns with the issues discussed here please contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
The primary difference between buying land and leasing it is obvious. Leased land reduces the cost of a home by 20 to 30%. Once a structure is built, the land beneath it can be of no other use to the homeowner. So by owning on leased land the homeowner gets the use of the land without the capital outlay and can afford a far more luxurious home for less money. Furthermore, since no one actually owns a home free and clear until the loan is paid off most so called "land owners" don't really "own" their property for the first 15-30 years.
For example, this simple logic has been sufficient to satisfy thousands of home and business owners in the Palm Springs area whose homes and businesses are located on land leased from the Agua Caliente Indian tribe. But for those who like to explore all ramifications here are some more facts to ponder, posed in the form of most frequently asked questions about Indian leased land:
WON'T THE VALUE OF MY REAL ESTATE CLIMB FASTER IF I OWN THE LAND?
While resale values are determined by many things, all available figures indicate that resales of homes on leased land have climbed in exact proportion to other homes in the area. The condition in which you keep your home has far more influence on its resale value than the fact it is (or is not) on lease land.
WHAT ABOUT MY CHILDREN AND GRANDCHILDREN AND WILL I BE ABLE TO PASS A LEASEHOLD ESTATE ON TO THEM?
Of course. You can give or sell your home on lease land just as easily as on fee land. However, if you are concerned about your heirs 65 years from now, there are four realistic questions you should ask yourself:
1) Will they really want a 65+ year-old home when the average life of most California residences is estimated at less than 50 years?
2) Considering that most residences change ownership about every five years is this home really likely to stay in your family for 65 years?
3) If you have a savings of $206 per month ($2,472 per year) by leasing land vs. purchasing over the life of a 65 year lease your savings would total $160,680...even without earning interest. If you kept this monthly savings in an account paying 10% annual interest your savings would exceed $1,250,000 over 65 years. Wouldn't that be a better way to take care of your great -grandchildren?
4) What happens at the end of the lease? Since there is no legal restriction prohibiting the tribe from selling its land you or your heirs nay have the option to purchase if you wish to do so. However, most probably, you would be offered a new lease based on conditions existing at that time. There would be no financial advantage to taking the land back and, as the tribe long ago observed, "One can not eat dirt."
WHY DO SOME PEOPLE COMPARE A HOME ON LEASED LAND TO A VARIABLE ANNUITY LIFE INSURANCE POLICY?
Probably because it's easier to understand! Just as a variable annuity gives you the possibility of gaining from both fixed interest rates and asset appreciation a home purchased on leased land gives you a monthly savings along with the possibility of home appreciation.
It can be an investment hedge whether home prices are rising or falling. During an "up" period, your home will increase in price. In a "down" period, the dollars you did not spend on land, but invested in a fixed interest savings, will continue to increase.
Today, building on lease land is no longer an advantage reserved for business and investment buyers. Now, in Palm Springs and the surrounding communities, it is something any home buying family can enjoy, thanks to the honesty, intelligence and perseverance of those original desert dwellers who were sincere when they said, "Welcome, brother, my home is your home"
What's my take? You can get some great deals on lease land properties...definitely more than the property you'd get on fee land. However, there is uncertainty in the lease. Most lease rates fluctuate with the Consumer Price Index, so you don't know exactly how much the lease payment will be at a point in the future. And the lease does expire, so someday you will have to deal with renegotiating a new term with the tribe. I tell people that as long as the lease has a long life (at least 40 more years remaining on the lease) and the terms are good it is smart to consider buying a property on lease land. But know yourself...if you're uncomfortable with uncertainty a land lease may not be right for you under any circumstances.
If you have any questions or concerns with the issues discussed here please contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, September 9, 2010
August 2010 Sales Analysis
The following sales analysis compares August 2010 sales data with data from the preceding month (July 2010) and the previous year (August 2009). Data is analyzed by region in the city: South Palm Springs, Central Palm Springs, and North Palm Springs.
South Palm Springs - South of Ramon Road
Year over year, and month over month, there wasn't much change in the sales figures in South Palm Springs. The exact same number of condos (31) were sold in August 2010 as were sold in August 2009, however this was a 29% increase over the sales in July 2010. The range of prices for condos was also very similar year over year, again though there was an increase in August over July 2010. The average price of a condo was virtually unchanged in August vs. a year ago, only dropping a little over 1%. The median price did experience a bigger decrease, dropping 9% from August of 2009. The price per square foot dropped by the same 9% compared with August of last year. The number of Days on Market saw an increase this year up to 110 days, a 16% increase over last year. The biggest change in South Palm Springs compared with last year was in the number of distressed properties that closed escrow. A full 55% of all condos sold in the region were distressed in August 2010, a 90% increase over July 2010 and a 72% increase over August 2009.
Central Palm Springs - Between Ramon Road and Vista Chino
Unlike South Palm Springs, Central Palm Springs experienced a huge change in August 2010 compared with July as well as the previous August, and it was not for the better. This region had 9 condos sold in August 2010, a drop of 44% from July 2010 and a decrease of 36% from August 2009. The price range of condos sold had a maximum of $175,000 which was about half of what it was in both July 2010 and August 2009. The average price sold in August 2010 was also 50% less than it was in August 2009 and the median price was even more dramatically reduced at 53% less than it was in August 2009. On a price per square foot basis the pricing in August 2010 also took a dive...39% less than August 2009 and 34% less than July 2010. Days on Market increased dramatically, up 76 over last year and up an incredible 93% over just last month. Finally, two-thirds of all condos sold in Central Palm Springs were distressed properties compared with 31% in July of 2010 and 36% in August of 2009.
North Palm Springs - North of Vista Chino
North Palm Springs, even more than South Palm Springs and lots more than Central Palm Springs, had some bright spots in August 2010. Although the number of condos sold was down a large percentage (40% less than August 2009 and 45% less than July 2010) prices were much improved. The maximum paid in August 2010 was $250,000, 11% more than the maximum in August 2009 and 40% more than the maximum in July 2010. The average price saw a huge increase...60% higher than July 2010 and 44% higher than August 2009. The median price also saw incredible increases...54% higher than July 2010 and 77% higher than August 2009. Price per square foot also saw increases. The average of $142.55 is 28% higher than July 2010 and 23% higher than August 2010. The average Days on Market for North Palm Springs was 92 days this month, 46% longer than the average in July 2010 and 6% shorter than the average in August 2010. One-third of the properties sold in August 2010 were distressed, compared with over half in July 2010 and over two-thirds in August 2009.
Palm Springs is still experiencing a very volatile condo market. Sales in South Palm Springs were comparable with last year, but in Central Palm Springs they were considerably worse than last year, and in North Palm Springs they were considerably better, although there were very few sales. There are some bright spots, but in general it is still a challenging market for sellers. For buyers, it's a buyer's market and the savvy buyer can get an incredible deal on a Palm Springs Condo.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
South Palm Springs - South of Ramon Road
| August 2010 | July 2010 | August 2009 | |
| Condos Sold | 31 | 24 | 31 |
| Price Range | $36,500 - $388,000 | $39,000 - $335,000 | $35,000 - 368,000 |
| Average Price | $173,203 | $179,667 | $175,445 |
| Median Price | $150,000 | $182,500 | $165,000 |
| Price/Square Foot | $121.77 | $128.18 | $133.11 |
| Days on Market | 110 | 131 | 95 |
| % Distressed Sales (REO or Short Sale) | 55% | 29% | 32% |
Year over year, and month over month, there wasn't much change in the sales figures in South Palm Springs. The exact same number of condos (31) were sold in August 2010 as were sold in August 2009, however this was a 29% increase over the sales in July 2010. The range of prices for condos was also very similar year over year, again though there was an increase in August over July 2010. The average price of a condo was virtually unchanged in August vs. a year ago, only dropping a little over 1%. The median price did experience a bigger decrease, dropping 9% from August of 2009. The price per square foot dropped by the same 9% compared with August of last year. The number of Days on Market saw an increase this year up to 110 days, a 16% increase over last year. The biggest change in South Palm Springs compared with last year was in the number of distressed properties that closed escrow. A full 55% of all condos sold in the region were distressed in August 2010, a 90% increase over July 2010 and a 72% increase over August 2009.
Central Palm Springs - Between Ramon Road and Vista Chino
| August 2010 | July 2010 | August 2009 | |
| Condos Sold | 9 | 16 | 14 |
| Price Range | $59,500 - $175,000 | $23,000 - $345,000 | $74,000 - $388,000 |
| Average Price | $110,049 | $181,525 | $221,171 |
| Median Price | $105,500 | $172,750 | $226,000 |
| Price/Square Foot | $116.63 | $155.77 | $162.51 |
| Days on Market | 176 | 91 | 100 |
| % Distressed Sales (REO or Short Sale) | 67% | 31% | 36% |
Unlike South Palm Springs, Central Palm Springs experienced a huge change in August 2010 compared with July as well as the previous August, and it was not for the better. This region had 9 condos sold in August 2010, a drop of 44% from July 2010 and a decrease of 36% from August 2009. The price range of condos sold had a maximum of $175,000 which was about half of what it was in both July 2010 and August 2009. The average price sold in August 2010 was also 50% less than it was in August 2009 and the median price was even more dramatically reduced at 53% less than it was in August 2009. On a price per square foot basis the pricing in August 2010 also took a dive...39% less than August 2009 and 34% less than July 2010. Days on Market increased dramatically, up 76 over last year and up an incredible 93% over just last month. Finally, two-thirds of all condos sold in Central Palm Springs were distressed properties compared with 31% in July of 2010 and 36% in August of 2009.
North Palm Springs - North of Vista Chino
| August 2010 | July 2010 | August 2009 | |
| Condos Sold | 6 | 11 | 10 |
| Price Range | $113,500 - $250,000 | $46,600 - $178,000 | $54,000 - $225,000 |
| Average Price | $164,367 | $102,841 | $114,003 |
| Median Price | $153,750 | $99,900 | $87,062 |
| Price/Square Foot | $142.55 | $111.00 | $115.87 |
| Days on Market | 92 | 63 | 98 |
| % Distressed Sales (REO or Short Sale) | 33% | 55% | 70% |
North Palm Springs, even more than South Palm Springs and lots more than Central Palm Springs, had some bright spots in August 2010. Although the number of condos sold was down a large percentage (40% less than August 2009 and 45% less than July 2010) prices were much improved. The maximum paid in August 2010 was $250,000, 11% more than the maximum in August 2009 and 40% more than the maximum in July 2010. The average price saw a huge increase...60% higher than July 2010 and 44% higher than August 2009. The median price also saw incredible increases...54% higher than July 2010 and 77% higher than August 2009. Price per square foot also saw increases. The average of $142.55 is 28% higher than July 2010 and 23% higher than August 2010. The average Days on Market for North Palm Springs was 92 days this month, 46% longer than the average in July 2010 and 6% shorter than the average in August 2010. One-third of the properties sold in August 2010 were distressed, compared with over half in July 2010 and over two-thirds in August 2009.
Palm Springs is still experiencing a very volatile condo market. Sales in South Palm Springs were comparable with last year, but in Central Palm Springs they were considerably worse than last year, and in North Palm Springs they were considerably better, although there were very few sales. There are some bright spots, but in general it is still a challenging market for sellers. For buyers, it's a buyer's market and the savvy buyer can get an incredible deal on a Palm Springs Condo.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
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