Sunday, July 22 , 2018, 6:29 am | Fair 63º


Craig Allen: Declining Real Estate Market Still Offers Opportunities

The deals are here in Santa Barbara — with a good agent and a determination to find a home and not just an investment

Last week, I explained my position on the local residential real-estate market.

For those who didn’t read last week’s column, I feel we have yet to see a bottom, still have a good ways to go before we get to a bottom, and even after we bottom, think it will take a long, long time before prices start to rise significantly again. So with that incredibly negative start, let’s look at the local market to try to find the opportunities that exist for those looking to buy real estate for what I would term “the right reasons” — namely, as a place to live for the long term.

Real estate, as they say, has only three important factors to consider when looking to make a purchase: location, location, location! Santa Barbara is, no doubt, one of the absolute best locations on the planet to own real estate, at least in a general sense, and if you buy it at the right time. Within Santa Barbara, location is also important — there are certainly areas and neighborhoods that can offer better opportunities, given the current economic and real estate environments. Additionally, there are distressed sellers who need to move properties quickly, which can offer potential buyers more attractive prices, or from another perspective, less risk to the downside.

This week, I wanted to speak with a local expert to get his perspective on the current Santa Barbara residential real estate market, and to find out where the opportunities exist. I wanted to speak with a true professional and expert who understands every nuance of the local market. Additionally, this expert needed to be intimately familiar with the distressed properties market, to provide insights into the specifics of finding deals on these assets.

Steve Epstein, CRS, GRI, SRES and a Realtor with Coldwell Banker, is a lifelong Santa Barbara resident and has also been a real-estate professional working in this market for 24 years. Further, he is an REO specialist, working directly with bank-owned properties, and has also represented bankruptcy properties on behalf of creditors and has experience in trust and probate sales as well as short sales and other forms of distressed property sales. He is a tremendous resource for information on distressed properties and real estate in general — what to look for, where to find them, the purchasing process, etc.

First, Steve relates that his overall opinion of the local market is that we are “bouncing along the bottom now.” For those looking for a home as opposed to a house, Steve does not believe we will see more than a 5 percent to 10 percent further decline from current levels. What he feels is much more significant is the current low level of interest rates. He makes the point that it doesn’t make sense to wait for another drop of 5 percent or so and taking a chance on mortgage rates rising. Further, he believes there are very attractive opportunities in certain segments of the local market, and that properties well-bought today have very good prospects for appreciation over the long term, say five to 10 years out.

With regard to foreclosures, and any real estate purchase, Steve states that the good deals are where you make them. In other words, there are motivated sellers, including people in distress who have yet to be foreclosed upon, who need to move their properties quickly. A good agent is going to be able to find those motivated sellers and help the buyer find the right home. Many banks are pricing foreclosed properties to get them into contract within 30 days. There is no emotion involved, and most banks want to get these properties off of their books as quickly as possible.

This is very different from a short sale in which the homeowner has asked the bank to take less than the mortgage balance, but the homeowner is still in possession of the property. In these cases, there are a lot of steps that the bank requires the homeowner to go through, including providing tax returns, expenses, etc., to “prove” that they can no longer afford the property. Banks are not as motivated to accept offers quickly on short sales, and, as a result, the process can take many months. Worst of all, the buyers may not know if they are the top or most favored bid until the decision is made, which again, can take a very long time. Steve recommends avoiding this process except under circumstances in which the deal is so compelling that it warrants the time and risk, or if the buyer really has no emotional attachment to the outcome.

A good agent is going to first understand the buyer’s needs and wants, and then will find the best property for that client. Steve firmly believes that this is the time for those buyers who are looking for a home or an investment, to get into the market in Santa Barbara. Steve is seeing foreclosures throughout a wide range of prices, from the $200,000- to the $3.5 million-level. He also believes that the higher-end price points are lagging and that we will begin to see a few more foreclosures in the higher-priced properties in the near future.

Steve relates that finding the right agent is the most critical factor in finding the right property. A relatively small number of local agents are responsible for the vast majority of sales in Santa Barbara. Working with the right agent who understands the market and who has been actively engaged in sales throughout the city and in all areas of the South Coast will help buyers gain the most exposure to available properties, and the right properties that meet their individual needs. A good agent is also not going to want to work with clients who are working with multiple agents. The best agents will help buyers translate their list of needs and wants and their budget into the right home at the right price in the right neighborhood.

While I believe we have yet to see a bottom in the real-estate market, I do believe we are closer to a bottom than a top, and that there are attractive deals out there for those buyers looking for a home as opposed to an investment. By working with a qualified and experienced agent, buyers will have the most complete picture of the local market, and the best chance of finding the right property to suit their specific needs.

Craig Allen, CFA, CFP, CIMA, is president of Montecito Private Asset Management LLC and founder of Dump Your Debt. He has been managing assets for foundations, corporations and high-net worth individuals for more than 20 years and is a Chartered Financial Analyst (CFA charter holder), a Certified Financial Planner (CFP) and holds the Certified Investment Management Analyst (CIMA) certification. He blogs at Finance With Craig Allen and can be contacted at .(JavaScript must be enabled to view this email address) or 805.898.1400. Click here for previous Craig Allen columns. Follow Craig on Twitter: @MPAMCraig.

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