Isaac Bensussen & Associates

The problem was that my Buyer is a self employed individual that wanted to do a "no income verification loan" and wanted to purchase two units with 15% down payment. He got rejected by one bank after another. Finally, the fifth lender offered to make the loan with a 20% down payment or $ 92,000. Not a small amount I must say, but my client wanted the property and agreed with the 20% down payment.

After a week of presenting different documentation, the lender finally told us they had discontinued the program and could not do the loan. Only because I am very stubborn and so is my client, we did not give up. We submitted the loan to two more lenders. Finally, the seventh lender agreed to do the loan but they would not take less than 25% down payment or $ 115,000, plus reserves for 3 months in the amount of $ 10,000.

There is a point in time that regular people have to run out of money. My client told me he could get the 25% down payment or $ 115,000 but there was no way he could get the reserves of $ 10,000. After so much effort we were stuck. I offered my client to lend him the difference and he could pay me back whenever he had the cash. My client is a proud individual and he did not accept the proposal. So what to do?

The property was a Bank owned property. Very little what you can do with an REO. Nevertheless, we took a chance and informed the Seller that my client had reached the end of the line and could not come up with his Lender's cash requirements because he had ran out of cash. We asked the Seller for some help towards the closing costs. After a week, the Seller agreed. We asked the mortgage broker for a slightly higher interest rate in exchange for lesser fees. The mortgage broker worked out the new PITI with a higher interest rate. My client felt comfortable with the new PITI, so eventually, the amount requested by the Lender matched my Clients Savings and Checking's Bank Account and he wired the funds three days ago. I was informed by the Seller that we had closed. I never got a call from the Escrow. That's courtesy. Anyway, Happy ending.  

I know that a lot of lenders at AR are thinking that they could have made the loan with the 15% down payment; MAYBE, but what I learned is that some of the many lenders NEW underwriting requirements are just plain insane.

This blog is directed to all the Buyers that are waiting in the sidelines for prices to drop further.

Last month I checked with one of my mortgage brokers and he informed me that interest rates were between 5.375% and 5.500%. I called him yesterday and he informed me that interest rates went up to around 6%. That would mean that if you are a Buyer looking at homes or condominiums around $ 400,000 and waiting for home prices to drop further, just because of the 1/2% interest rate increase, your purchasing power went down approximately $ 22,000.00. This is playing "Russian Roulette".

If you are purchasing a home or a condominium were you plan to reside for a few years, it's not worth the waiting. Unless you think that the home you are viewing for $ 400,000 it is going to drop to $ 300,000, in my view, an unlikely scenario, you should not wait. If interest rates begin going up rapidly, as it is the case so often, your purchasing power is going to be affected. If the interest rate goes up another half a point, your purchasing power will decrease another $ 22,000.

So, if you were planning to purchase that home that you liked last month for $ 400,000, when interest rates were 5.375%, today, at 6% you will have to purchase the same home for $ 378,000. I do not know if you could do it.  And, if you wait for another month and the interest rates go up another half a point, then, you could not purchase that home unless they accepted an offer of $ 356,000. Even more unlikely.

I keep on bringing up the story of my own home purchase many years ago. I bought my home when the market was up. I was very upset because I had to pay $ 10,000 more than the Bank's appraised value.The Seller told me "you don't have to buy it, there are many other people interested". I bought the home anyway.  After a few years, my home went up in value and I do not even remember why I got so upset. In fact, I do not even remember how much I paid for my home 17 years ago.

My advice to all of you Buyers waiting for prices to drop further. If you are thinking of living in the home, condo or townhouse for a few years, don't keep on hesitating; just "jump in".

Isaac Bensussen http://www.besthomesinlajolla.com/

I arrived in La Jolla California in 1976. Coming from an overcrowded City like Mexico, I had to adjust myself to living in San Diego with a total population of 900,000 instead of Mexico City's 10,000,000. Also, I had to get used to the natural beauty of La Jolla. The ocean, the hills, the weather, the small roads, the charm of the small cottages and the marked difference in building materials. Wood in La Jolla VS Concrete in Mexico City.  In 1976, La Jolla was virtually untouched. I remember driving through many roads where you would pass through empty lots and capture fabulous ocean views. I am afraid most of those lots have been developed to the highest and best use of the land and now show magnificent homes on top of them.   

Since I decided to go into Real Estate I had the opportunity to visit many ocean front properties. I believe in keeping old records and papers for future research. I still keep my binder old book, before computers, where I needed to replace the sold properties and insert the new properties coming into the open market.  

I thought of writing this blog because lately, I have seen many ocean fronts come out to the open market in La Jolla. Some of these ocean front homes have been remodeled and expanded in size but they are still sitting on the same lots. What amazes me is the way ocean front homes went up in value compared to other homes.

In 1981, in the oldest binder that I kept, it shows that  you could purchase an ocean front for   $ 415,000, $465,000, $ 495,000, $795,000, and huge estates for $ 1,500,000, $ 1,800,000 and   $ 2,000,000. Nowadays, the same properties are being sold for $ 4,250,000, $ 5,395,000,   $ 8,800,000, $ 9,190,000, $ 12,000,000, $13,250,000 and the huge estates for $ 25,000,000 and $ 29,000,000. Who would know.

A lot of regular homes that are now worth only $ 1,000,000, in 1981 a lot of them were being sold at the same or higher prices than the small ocean front homes that are now selling in excess of $ 4,000,000.

I guess, everything boiled down to a matter of comfort. You could have bought a larger home and be more comfortable with your family rather than betting on the huge increase in value of smaller, less comfortable ocean front homes. At least, that's what I did.

Isaac Bensussen www.besthomesinlajolla.com

When I take a look at the path followed by very successful Real Estate agents and brokers I find one thing in common. Most of them decided they were going to specialize and become listing agents. A few years ago, if there was a Buyer ready and able, these successful Realtors would show homes to these Buyers and make a sale. Nowadays, they have Buyers' Agents in their teams so they hardly show homes to anybody. Real Estate has evolved like everything else. In my long real estate career, I compare my self with a General Doctor. I kept on making house calls. I treated everything from common colds to delivering babies.

When a big recession fell upon us in 1979 and interest rates went up to 17% so nothing was selling, I decided to sell Via Auction. When that was not working, I became a mortgage broker. After a few years, I came back to selling real estate but I wouldn't  say no to a Buyer, so through the years, I accepted every challenge that came my way. I sold orange groves to people looking for orange groves, I converted and sold condo conversions, I sold avocado ranches. I sold restaurants and business opportunities. Also, I sold apartment complexes and office buildings. When some of my clients wanted to buy out of San Diego, I would drive and sell in Beverly Hills, West Hollywood, Laguna Hills and San Clemente. When I discovered NNN properties, I sold Rite Aids in North Carolina and Advance Auto Parts in Louisiana. I even attempted to trade Real Estate for jewelry.

Last week, I found myself chasing rainbows trying to sell Website Design, Website Hosting and Sale of Domain Names Companies. I had to apologize to all the people that responded because my Internet Buyer turned out to be a Business Broker and forgot to disclose it.

In retrospect and seeing the tremendous success that some Realtors in my area have achieved, maybe, in spite that I had fun doing what I did, I should have specialized. After all, when I do not feel well, I have a Cardiologist, a Urologist, a Pulmonologist, an Internist, a Gastroenterologist, an Otolaryngologist,  an Ophthalmologist and a Dentist. And sometimes even my Dentist sends me to a Dental Surgeon to remove my wisdom teeth, to an endodonthist if I need root canal and to a periodonthist if I have problems with my gums. The age of specialization arrived many years ago and I missed it. My advise to new Realtors. Stick to listing homes and condominiums or stick to selling homes and condominiums, Stick to selling Commercial real estate or Stick to Selling land. Don't chase rainbows if you get bored. In the long run you might regret it.

Isaac Bensussen-www.besthomesinlajolla.com 

There is no better way to get to know your neighborhood than driving without a map and getting lost.

When I arrived in La Jolla, California in 1976, I was captivated by the beauty of the Ocean that seem to be all around you  La Jolla is surrounded by hills with great ocean views. Nevertheless, there are wonderful narrow curvy roads that lead you to the top of those hills and end in cul-de-sacs with outstanding ocean views.

 As a Realtor, I have had the opportunity to view many of these homes that do not have the ocean views but do have the La Jolla Old Charm. Spanish and Contemporary homes going up Lookout Drive and Hillside. I have explored all those roads. Driving around the many La Jolla Beaches there are small streets West of La Jolla Blvd. and West of La Jolla Shores Drive with many charming cottages that lead you to fabulous beaches. With my kids I have swam in all those beaches. Now, after many years in the Real Estate Business, I don't need a map any longer. I can find my way around quite easy.

 Nevertheless, going up Via Capri and looking right at the magnificent coast line all the way to Del Mar, especially when the Ocean has a deep blue color, I can't help myself of being surprised every time and letting a big "Ohh" of admiration.  

Isaac Bensussen-www.besthomesinlajolla.com

On Wednesdays of every week, I try to go to the "La Jolla Caravans" to see the new properties that come out to the Active Market. Sometimes, a property that I want to see, is in the immediate area of another property that I wrote an offer on it at some point. This time, the particular property that I wrote an offer on it was two blocks away from the property that I went to see on Caravan last Wednesday.

The offer I wrote was 25 years ago. I was representing a very wealthy couple from Mexico City that happened to be friends of my wife and I. The particular home, was a beautiful Spanish ocean front in the Bird Rock Area of La Jolla. The home was only 2500 sq.ft. It was perfectly decorated and showed like a model. The view, unobstructed of course, was a South view looking at Pacific Beach, Point Loma and the Coronado Islands. The price, only $325,000. We wrote the offer for full price.

My friends happened to travel a lot on their big boat; I should say small yacht. The wife was the skipper and the husband was the assistant or the other way around. Their trips sometimes took more than 6 months and they always traveled by themselves. That night, before presenting the offer, my friends called me and asked me to hold on presenting the offer, because they wanted to speak with me.

Next morning we met and they informed me they had changed their mind. They had decided that instead of purchasing the home, because of security reasons, they were purchasing a condominium in a security building with a 24 hour doorman. I immediately reacted telling them that ocean fronts can not be duplicated and the appreciation on the home, to my eyes, would be substantially higher than the condominium they were thinking of buying. Also, I suggested that they could have someone living on the home while they were away. My friends are very private people and did not feel comfortable with someone living in the home while they were traveling. I tried to show the home again so they would reconsider but they were pretty firm about their decision.They were sorry they had made me spent my time, so, the offer was never presented.

Time went by and life went on. My friends made huge investments in gold. Gold lost it's lust and they lost a lot of money on their investments. So much money they lost that they were forced to sell their boat. The condominium they purchased, fortunately they were able to keep.

Prices in La Jolla kept going up. The ocean front that I went to see at this Wednesday's Caravan, 25 years later after my botched offer, was smaller and priced at $ 4,500,000. The next door ocean front home came out to the market the previous week at $ 4,900,000 and today, I found out that the home that I almost sold came out to the Active Market yesterday at a whooping $ 9,900,000. I feel bad that my friends decided not to purchase the home at that time. Surely, they could have used the extra cash.

That is why recessions scare me only a little. Prices will go down but eventually will go up and up and up and stay up. That is why so many billionaires and smart people recomend the purchase of Real Estate.

"BUYING REAL ESTATE IS NOT ONLY THE BEST WAY, THE QUICKEST WAY, THE SAFEST WAY BUT THE ONLY WAY TO BECOME WEALTHY"      MARSHALL FIELD.