 Kate in the Valley, my favorite sidelined househunting blogger, comes off the sidelines tonight to file an update: prices are falling in one of her preferred neighborhoods, and she's still not biting:
"You might remember that back in June I visited a little 3 bed + 2 bath house in Fashion Square (a.k.a 'the house where it all started') that was listed at $825k. When I told the agent that I thought that was way too high, she offered me a little cash back to sweeten the deal. Needless to say, I didn't go for it. Anyhoo, it's been almost six months and the house still hasn't sold. But the agent gave me a call again recently. Yup. She wanted me be the first to know (because, apparently, she still does not read my blog) that the house is currently listed at $694k and: 'there's room to negotiate!'
"The new list price represents a nearly 16% decline over the last six months (assuming you offered to pay list but, given the agent's sales pitch, why would you?). I still think it's too much and wouldn't be surprised if it dipped into the low $600s before it finally moves. And this isn't the tale of one desperate seller either; the whole neighborhood has taken a significant hit in recent months.
"So what does this mean for me? Well, for starters, it means I'm really glad we didn't buy a house this year. It also means that some of the allegedly bubble-proof neighborhoods in the Valley are starting to deflate much faster than the city-wide statistics reveal. But it doesn't mean that I'm going to put in any offers right now or any time soon. The price corrections have only just begun."
Thanks, Kate.
Comments? Thoughts? Be polite. Email story tips to lalandblog@yahoo.com.
 Whew. Kate in the Valley is back. We thought for a moment we had lost her. (Was is something we said?) Or that maybe she bought a house and decided, "It's none of their business what I paid!" No, she's still looking, and in no rush to buy. Her latest:
"Two months ago I wrote about price reductions in the Fashion Square area of Sherman Oaks so I thought I should get back to you with what the neighborhood currently looks like. As you'll see below, only two homes have sold in this neighborhood since I started watching it. There have been double digit price reductions on plenty of homes but a few sellers are deep in denial and offering no price reductions after one-hundred-plus days on the market. A few new listings obviously disregarded the high number of days on market and considered those ancient listings to be comps because they set their prices accordingly. But, by and large, this neighborhood's listings have gone from a mid-$800k range to a low-$700k range. The high-$600k range seems to be on the horizon because a few listings have recently been reduced to that point.
"I'm currently watching the Northwest corner of Studio City, bound by Coldwater Canyon and the 101, because I think it will be the next to take a nose dive (stay tuned!). But Mr. Kate and I have parked our down money in a high-yield savings account, had the carpets steam cleaned in our month-to-month rental condo, and accepted that we will stay put for at least another six months. I would even be happy to wait another year because I suspect that by then the coveted South of the Boulevard homes might be affordable again. But enough about me! Let's get to the numbers:
Read more Kate cleans the carpets, stays put »
 We are always happy when the weekly post from house-hunter Kate in the Valley shows up in our email inbox. We never know what to expect, and we're never disappointed. This week Kate blogs in defense of Zillow. Enjoy:
"I was reading Zillow's discussion boards today, and I happened to click on the 'Zestimates' topic. (Zestimates are home value estimates prepared and presented by Zillow.com). Nearly every one of the over-200 post to this category this month was from an angry seller. These sellers were convinced that a low Zestimate is: (1) categorically wrong; and (2) the main factor preventing them from selling their home. A lot of sellers went so far as to demand that their home be completely deleted from Zillow's database (something that Zillow does not do, by the way).
"Personally, I don't think a stray Zestimate ever kept anybody from buying a home. To the contrary, Zestimates, coupled with the other information available at Zillow, gave me the confidence to bid when I first started my house hunt (before y'all run to the comment section to tell me not to buy a house right now: I know! But try and focus on the topic for a minute. Focus…. Focus….). While Zestimates are automated, and not based on personal inspections and evaluations of individual properties, I find them to be a helpful yard stick. I don't think Zestimates are infallible by any means; if I visit a house and I think it's worth $600k, and it's listed at $600k, I'm not going to walk away because Zillow says it is worth less. Indeed, a cursory review of the site reveals that an unusually low estimate sometimes happens when a home hasn't changed hands for decades and, as a result, the tax basis is a bit lower than the neighbors. But I do think Zestimates are helpful especially when combined with the four-direction aerial views of the home and lot.
"Looking at the aerial maps, you can see (without ever leaving your desk!) how close a home really is to the freeway, whether it's on an alley, close to commercial developments, or on a tree-lined street. You can see how the home is situated on the lot and whether the pool takes up the whole back yard or just a small corner. I will mentally adjust the Zestimate based on these facts. And, after I've visited a home, I might come back and enter additional information I have gained about the home to create a personalized estimate for the property. This information, combined with my own market research, gave me a little more peace of mind. The bidding process is so stressful, a little peace of mind can do a lot cure cold feet. With that in mind, I find it really hard to believe that anybody was about to bid on a house, glanced at a single Zestimate, and just changed their mind and walked away. Indeed, I can guarantee that at least one house hunter was eased into bidding by Zillow."
Thanks, Kate.
Comments? Insights? Other -- informed -- opinions of Zillow?
 One of the great things about the Internet is that it makes information available to everyone -- if you care enough, you can become an expert. So Kate in the Valley isn't just a house-hunter who blogs; she's an expert on the areas where she wants to live. The chart above is Kate's creation -- it shows home sales in all the neighborhoods she's interested in, most of them peaking in August 2005. Kate's latest:
It seems like everybody is talking about August sales volumes this week, yet I couldn't find anything about the neighborhoods I search. It's frustrating that Los Angeles is treated as a single homogeneous real-estate entity, which it clearly is not. So I did what any frustrated house hunter would do: ran the numbers myself. I ran searches by zip code at MelissaData.com, where they provide a list by month of the number of homes sold and the average price. Their information comes from the local county recorder's office. I ran seven ZIP Codes representing the southern San Fernando Valley: 91604 (Studio City), 91423 (Sherman Oaks East); 91403 (Sherman Oaks West); 91436 (Encino West); 91306 (Encino East); 91356 (Tarzana); and 91364 (Woodland Hills).
What did I find? That about half of these ZIP Codes had peak August sales volumes in 2005 and the remaining ZIP Codes peaked in 2004 (not 2003 like the rest of Southern California). Which makes me think that if I want a house in these neighborhoods (and I do) it will take a little longer here than it might elsewhere in SoCal.
The biggest sales volume decline was in Tarzana, selling a whopping 98 homes in August 2005 and a mere 24 in August 2007 (down 75.5%). Encino West was not far behind, selling 92 homes in August 2005 and 30 in August 2007 ( down 67.39%). Studio City fared the best of the lot, selling 66 homes in Aug 2005 and 41 in August 2007 (down 38.88%).
I also looked at Melissa Data's reported changes in August sale prices over the last six years. Almost all ZIP Codes peaked in August 2006. Surprisingly, the southwestern San Fernando Valley is showing a year-over-year sale price increase; Woodland Hills, Tarzana, and West Encino are all up from last August. The biggest year-over-year sale price decline was in Sherman Oaks West with a 13.22% price cut since August 2006, followed by Studio City with a 12.60% decrease for the same period. It will certainly be interesting to see what volumes are like during the holidays this year.
Graphic by Kate
Comments? Thoughts? Insights?
 Kate in the Valley is back, watching price reductions like a hawk and trying to make sense of a market that defies easy explanation:
Last week I was talking about how scary the drop in the market was because it seemed to be happening so fast. This week I look around and think it's more like two steps forward, one step back. For example, there's a street in the hills of Sherman Oaks called Contour Drive that has at least three homes for sale. The first two have dropped significantly since they were originally listed:
13545 Contour Dr. (MLS # FR2055214 & F1732673) $478/ sq. ft.
Price Reduced: 07/23/07 -- $1.599M to $1.495M
Price Reduced: 09/03/07 -- $1.495M to $1.349M (down 15.63%)
13553 Contour Dr. (MLS # F1722523) $389/sq. ft.
Price Reduced: 07/12/07 -- $1.025M to $950k
Price Reduced: 09/05/07 -- $950k to $895k (down 12.68%)
But the third -- a flip -- came on the market last week at $1.169M:
13566 Contour Dr. (MLS # F1732137) $779/sq. ft.
I've seen all three houses. None of them are fixers and none of them are state of the art. What could be the justification for such dramatic price differences? I cannot guess. And it's not just new listings. I've seen more than a few price increases recently. For example, in Encino, a little house was on the market for 172 days. It went through a lot of price reductions and then they inexplicably raised the price:
15560 Otsego Street (MLS # F1703604)
Price Reduced: 04/04/07 -- $875k to $859k
Price Reduced: 04/13/07 -- $859k to $829k
Price Reduced: 04/22/07 -- $829k to $779k
Price Reduced: 06/07/07 -- $779k to $739k
Price Increased: 08/30/07 -- $739k to $805k
The same thing happened in North Hollywood:
5101 Strohm Avenue (MLS # : B2100128)
Price Reduced: 04/16/07 -- $1,000,000 to $850,000
Price Reduced: 07/18/07 -- $850,000 to $835,000
Price Reduced: 08/07/07 -- $835,000 to $749,000
Price Increased: 08/09/07 -- $749,000 to $950,000
Of course, everybody is saying, "Prices are sticky. It's going to take years for this correction." But I guess I imagined a slow, steady decline, not this spasmodic limping along.
Thanks, Kate.
Comments? Insights? Any explanations on why prices rise after being reduced?
 Kate is back, still blogging, still looking for the future home of Mr. Kate. This week she explains her current strategy and tells us about the houses she has her eye on. Enjoy:
One of the most common questions I get asked is: "Why haven't you bought a house yet?" The answer to that question changed dramatically since I began my search. At first, it was because the listings in my target neighborhoods and price range were few and far between and (luckily!) I ended up on the losing end of several bidding wars, as you know from one of my earlier posts.
Eventually, people urged me to expand my search area to include neighborhoods north of the 101 where bidding wars were not as common. So, in June, I went looking in an area called Fashion Square. Fashion Square is bound by Hazeltine and Woodman, Magnolia and Riverside, and is named after the adjacent Westfield Shopping Center.
I figured these homes had to be more affordable than homes south of the 101, as they were not in the hills and not walking distance to Ventura Boulevard's restaurants and boutiques. But they weren't. As of June 30, there were 11 homes in this neighborhood listed for sale between $800k and $900k (remember, these are mid-century tract houses we're talking about). I couldn't believe people were paying that much for these homes, so I decided to watch and see who would pony up.
After two months (that's two months of watching these listings, many of these homes have been listed in excess of four months), how many of those original 11 listings do you think sold? Well, one definitely sold. As detailed below, it was an REO that sold for nearly $400k less than its previous recorded sale. One went inactive, and no sale data is available so it seems to have merely expired. Four of the 11 are still priced between $800k and $900k, but two of them have seen at least 8% reductions. And the remaining five have been reduced below $800k. (In fairness, a couple of other homes in this neighborhood came on the market in July and then went inactive, but here again no sale data is available for them and they were not part of the original 11 listings).
Read on below: Kate gets specific about the houses she's monitoring, and the price reductions she's tracking.
Read more Kate watches, waits and fears a falling knife »
 Kate in the Valley, who guest-blogs for us about her house-hunting experiences once a week, knows what she likes in a house. She also knows what she doesn't like:
"After seeing scores of homes, I've noticed that certain common features (all within a seller's control) make a big difference in how attractive their home is to me. Below is a list of some features that I find most enticing and most discouraging in a property. It's not an exhaustive list, but it's a fair start.
THE GOOD:
(1) A nice big covered front porch. The vision of Mr. Kate and I spending summer nights sitting on our porch, waving to passing neighbors, is virtually irresistible. If you've put inviting patio furniture and pretty potted plants out, I'm sure to give your house a little extra consideration.
(2) A high quality shaded deck out back for entertaining. On a small tract house, usable outdoor rooms help me forget about the limited square footage but, for an outdoor deck to be usable in the Valley, it really needs to be shaded.
(3) New(er) plumbing, electric, roof, and a/c. It's so nice if you've already done this. I'll pay extra to not have to deal with contractors tromping through my house in the first few weeks that I live there.
(4) Credits. For example, if you have a big ole dead tree in your yard and you do not want to remove it yourself then put a tree-removal credit right in the MLS description. I'll think you are honest for admitting the flaw and reasonable for offering to cover the cost even if you won't take care of the problem yourself. But more importantly, I won't be distracted by the big ole dead tree in the yard when I'm thinking about making an offer on your house."
Read below to find out the no-no's -- what turns Kate off.
Read more The good, the bad, the Valley »
 Houses sit on the market, lenders fail, markets fall, hedge funds blow up, but Kate in the Valley keeps on looking for a house. We're glad, because that means she keeps on writing her house-hunting diary. Enjoy.
I've taken the bait and made some rookie mistakes in my house hunt (as y'all know). The bait for Rookie Mistake Numero Uno can be found in tons of MLS descriptions, it reads: "All offers considered" or "Bring all offers." I naively thought this meant: "Seller is willing to negotiate." Ha ha ha! Nothing could be further from the truth. More than once, I was the dummy that that took the bait and submitted an offer right away only to get iced for weeks on end while the listing agent attempted to drum up other bids using my offer as the lure. "I already have one offer, this property is going to move fast!" the listing agent no doubt crowed at every other prospective buyer.
And that statement is, of course, the bait for Rookie Mistake Numero Dos. I thought that "I already have one offer, this property is going to move fast!" meant the house was virtually sold. Yeah, not so much. If the seller actually liked the offer, he'd be in escrow not acting like a barker on the carnival fairway. After getting sucked into this bidding war game a couple of times, I flat out refused to participate. "Oh, you already have an offer in? Okay. Well, I guess it's not the house for me." There's always another house, especially these days.
The bait for Rookie Mistake Numero Tres happens at the open house. The listing agent will ask: "Are you already working with an agent?" This question seems so innocent but if you're fool enough to say you don't have an agent, then you can be sure that this one will hound you day and night until she breaks down your very will to live. The phone calls and emails will be non-stop. After saying that I would consider using one listing agent's services, I turned to leave the house and he literally screamed after me: "I need clients!" Yes. He. Did. An agent in the Fashion Square district, after learning I was unrepresented, ran up the street behind my car flailing her arms because she noticed I didn't leave any contact information on the sign-in sheet. Mr. Kate was stunned. A duo I met in Studio City have been sending me emails for three months that say things like: "We talked to the listing agent on Property X for you… they are willing to take $50k below list!" First off, I have never once responded to any of their emails or seen any properties with them, why on earth would they be talking to listing agents on my behalf? They optimistically sign each email with something like: "We're out there working for you!" No you are not. I just put my name on your sign in sheet, I didn't bloody hire you. I finally started leaving a junk email address that I rarely check on the sign-in sheets; I just couldn't take it anymore. This house hunt definitely has been (and still is!) a learning experience."
Comments? Insights? Be polite.
Read Kate's house-hunting blog here.
 We knew that Kate in the Valley was a patient house-hunter; this week she tells us, in her weekly diary, where her patience runs very thin: when anyone starts talking about direct aid to homeowners at risk of foreclosure.
"So, earlier this week, I was pretty unhappy about mortgage rates going up even though this is probably necessary to put more downward pressure on housing prices. And, just I was swallowing that bitter pill, I read that Hillary Clinton said she supports a bailout for homeowners with bad loans. This statement pushed me over the edge:
"'The unfortunate fact is, many people have gotten into the mortgage market who are being exploited and abused by boiler-room mortgage-lending operations that are just like selling phony penny stocks or the old traveling salesmen with the snake oil.'
"Cry me a river. First off, how are you going to separate the homeowners who knowingly misrepresented their income to qualify for a loan from those who had no idea that the loan officer plugged in make-believe numbers without their knowledge? Certainly you can't expect me to support the government using my tax dollars to bail out the many people who got into the mortgage market thinking they were going to get away with something by fudging the numbers. I also don't think government aid is necessary when other remedies exist, like suing the mortgage broker for fraud (if in fact a fraud has been committed upon you) or just selling your house.
"And don't tell me about the tragedy of people losing their homes. First off, we are talking about people who bought in the last several years using high-risk loans to fuel spending beyond their means. It's not like they are losing the family farm, the very land that their father and their father's father built up with blood, sweat and tears. It's just a house they lived in for a couple of years – a house they very likely bought with zero down. It's not like an act of God is depriving them of all their worldly possessions; their own fiscal irresponsibility is forcing them to forfeit something that they have almost no investment in anyway. Read more of Kate's anti-bailout rant below.
Read more Chapter 8: Bailout talk riles Kate »
 Still house-hunting, our guest blogger Kate in the Valley is still confused: who are these people bidding way over the asking price for dumpy houses?
"Maybe I am a bit out of the loop, but I just discovered PropertyShark.com. It is completely amazing. The sale information is accessible so much more quickly than on Zillow and the level of detail is astonishing. As I was exploring this fantastic site, I entered an address of the house that Mr. Kate and I last bid on.
"The house was originally listed at $780k but when no offers came in, the home was re-listed $730k. It was a small 2 bed/1.5 bath in Sherman Oaks that needed work. A whole lot of work. The back half of the house didn't even have a subfloor. The kitchen was semi-gutted as were both of the baths and there was a huge dead tree in the backyard that would cost thousands to remove. So we bid $715k even though we felt this was high for the property. We really liked the neighborhood and we are so tired of the process, so we just bid.
"The counter came back with the multiple offer box checked (there was one offer in addition to ours) and the price was $745k. We walked and the house went into escrow with the other bidder. The sale closed on July 13 so I figured the information would not be available on Property Shark yet, but it was. And it was shocking.
"The sale price was $789,909. First off, nine-hundred and NINE dollars? Whiskey tango foxtrot? Seriously, did the nine dollars make a difference? Second, this house sold for approximately sixty-thousand dollars over list? When I could have bought it for a mere fifteen thousand over list? I presume that this was one of those cash-back-at-close deals. But I can't imagine that this house would honestly appraise at that level. And finally, there are plenty of other houses (with three bedrooms, even!) for sale in this neighborhood for less. At $720k, this house was almost a deal but, at $790k, this is absolutely the worst value in the neighborhood. It just doesn't make any sense. But I suppose this transaction offers some insight as to why, even though sale volumes are way down, sale prices still appear to be going up."
Thanks, Kate
Comments? Thoughts?
Read Kate's blog here.
 Kate in the Valley is an optimist -- she's still looking for a house, her blog looks better than ever, and she's still writing a house-hunting diary for us. Her latest entry:
"High home prices are not the only barrier to this house hunt. The other big barrier is Mr. Kate; he is a terrible house hunter. Yes. He. Is. If not for me, Mr. Kate would buy a house that was right on Sepulveda, sandwiched between two apartment buildings and backed by an alley. He really would so long as the house was more than 1,700 square feet, South of the 101, in move-in condition, and was 10% or 15% below our budget.
"I, on the other hand, will not even look at a house if there is an apartment building on the same block. Give me a pretty street and a good-sized lot, and it almost doesn't matter what the house looks like; I think I can fix it. In fact, I really want to fix it. I will fall in love with the bones of a house and go home to do a three-dimensional schematic with some CAD software I have. I will immerse myself in magazines and catalogs looking for the right range top and the right shower fixtures; I have an embarrassing volume of paint chip catalogs. Alas, Mr. Kate bristles at the thought of any remodeling, big or small. He simply dreads it.
"At one point, I took to flat out lying to Mr. Kate about the time required to remodel so that he would agree to bid on a house. "Add 10 feet to the back of the house? Oh, they can have that done in a few weeks. Did I say a few? I meant a couple. It'll be done before we move in! Don't worry!" Mr. Kate was not fooled. As a result of my, well, let's call them "optimistic estimates," he now automatically adds four weeks to any remodeling time frame I give him. Seriously, he suspects it will take two days -- and four weeks -- to paint a living room.
"You'd think that after watching hundreds of episodes of HGTV shows with me, he would warm up to fix-it projects a bit. Yeah, as it turns out, not so much. After all that HGTV watching, the only things that changed are: (1) he now hides the remote from me; and (2) he "accidentally" deletes an awful lot of my shows from our TiVo. But I suppose our very different house-hunting criteria will work out for the best. I would probably get myself in too deep with a big remodel project, and he would have us living in the only house ever constructed on a freeway median."
Thanks, Kate. Thoughts? Comments? As always, be respectful. This is a family blog. Read Kate's blog here.
 Our favorite house hunter and guest blogger, Kate in the Valley, has been house-hunting for six months. Is she growing desperate? Not a chance. Here's her latest:
"Some of my friends have suggested that maybe, after six months of fruitless house hunting, Mr. Kate and I should consider expanding our target neighborhoods to include less expensive areas. 'Have you ever considered Northridge? Or maybe Chatsworth?' they say. 'You can get so much more house there!' To their surprise, we have done the exact opposite. And, if you look at the market, we aren't alone.
"Maybe you read the L.A. Times story about SoCal housing sales hitting a 14-year low? While I was reading the article, it started to dawn on me that my own house-hunting drive has declined right along with the market. It's not that I don't want a house anymore, it's that my standards have gone way up. Before I wanted almost any house at my price point. Now I want a very particular house at my price point.
"When we started our search, we couldn't believe how expensive everything was. We began rushing out to see little 2 bed/1 bath fixers because it was all we felt we could afford in our target neighborhoods, and such listings were few and far between. We would stand in the itty bitty living room (usually on a rust-colored high-low shag carpet that smelled vaguely of cat) and try to talk ourselves into liking the shabby little shack before it flew off the market within days of listing.
"But last month I saw a first: three such fixers on the market simultaneously. This month two of them are languishing on the market, and two more have been added to keep them company. Mr. Kate and I aren't even going to see them. We can do better, I think. Rather than expand my target neighborhoods, we have literally narrowed it down to particular streets, floor plans, and even lot sizes. And we have not increased our budget by one thin dime. Maybe that sounds like we are petulant 9-year olds who are taking our ball and going home. But so what? You want our money, don't you? Show us something worth buying."
Thanks, Kate.
Read Kate's very own blog here.
 Note: Guest Blogger Kate in the Valley is back, still house-hunting and still trying to figure out the real estate game. Her personal blog is "May 5 & Everything After", and here's her latest for us:
I am kind of taking this new listing personally. Yeah, I feel personally offended that it is listed at $899k (not to be confused with $900k). That's $676 a sq. ft. for those of you keeping score at home. This seems like an extraordinary price for a 1,329 sq. ft. house on a 5,900 sq. ft. lot located north of the 101. But the agents in the area tell me "Hey! This is Sherman Oaks!" Fine. It's Sherman Oaks. So where exactly was the house located when it sold six weeks ago for $630k?
Let's turn our attention to the MLS description:
"Located in a prime area, close to shops & eateries, this remodeled traditional home offers newer ktch w/ stainless steel appliances…"
"Newer" kitchen? So it's not "new" it's just "newer"? As in, the kitchen was in place when you bought it for $630k? It's certainly a nicely upgraded kitchen, but it's not like that's a Viking range with a commercial grade hood and wall-mounted ovens. In fact, I'm pretty sure that's a slide-in range from Sears that retails around $1,200 (but it does look like it's brand new). What else does the description say?
Read below to see the listing.
Read more Kate confused by price hike »
 Blogger's Note: Kate in the Valley is back -- still house-hunting after five unsuccessful bids, still blogging. In Chapter 3 of her diary, she explains her plan to single-handedly restructure home financing and why it didn't work:
"Want to hear about this great idea that I latched onto? Well, it turned out to be not such a hot idea after all, but I'll get to that later. Anyhoo, I thought it would be Super Smart to restructure the traditional home purchase offer. Traditionally, when you buy a house you just give the purchase money to the seller and the seller pays the 5% commission out of that. But when you think about it, you are agreeing to pay 5% more for the house, and that translates to a bigger down payment, a bigger mortgage and bigger property taxes every year. So I figured it would be brilliant to subtract the 5% off the purchase price and pay the agents' commissions separately myself. Seems like no big deal, right? Wrong.
Let's say I agreed to pay $750k for the house. Traditionally, the seller would give the agents $37,500 in commissions and take the remaining $712,500 to pay off his expenses, etc. I need to cough up $150k for the down and take out a $600k mortgage. My property tax is $9,375 per year.
But if I just give the seller his $712,500 directly and then pay the 5% commission to the agents separately, the 5% is reduced to $35,625 (saving $1,875) because it is based on $712,500 and not on $750k. The seller is getting the exact same thing, only the agents' commission is reduced.
My 20% down is likewise reduced to $142,500 (saving $7,500). My mortgage is reduced to $570k (saving $30k principle and 30 years' interest on that). My property tax is reduced to $8,906.25 (saving $468.75 each year I own the home). Sure, it requires a little bit more cash upfront to pay the commission separately from the purchase money, but the savings are meaningful, so I absolutely loved this idea!
Guess who absolutely hated this idea? The agents.
Read more: What happened when Kate bid on a house using her new-fangled commission structure...
Read more Kate's Commission-Cutting Crusade »
 Blogger's Note: Today we welcome L.A. Land Diarist "Kate in the Valley." Kate has been house-hunting for six months and blogging about it at "May 5 & Everything After" -- and we like her style. We hope you will too:
Hi! I'm Kate. Remember? From last Sunday? Well, guess what? One thing led to another and now I'll be here each week to share my house-hunting adventures with you. You love it, right?
I’ve been seriously house hunting for the last six months (six!), dragging one extremely bored Mr. Kate from open house to open house, without success. Not for lack of trying, though. We've bid on five houses so far. One problem is that we only go after below-market-price properties in popular neighborhoods. Each time it was a little different, but essentially it came down to a bidding war where somebody was willing to do something that we either couldn’t do (like pay all cash with a 21-day escrow) or wouldn’t do (like waive all inspections).
Every time I tell my parents what the winning bidder agreed to, they are completely shocked. Of course, they haven’t bought a house in more than 40 years, and a lot has changed since then. On their house hunt, back in 1963, my parents ventured forth relying on nothing more than their friendly real estate agent.
(More below: Kate has looked at more than 60 houses and expects to pay 40 times what her parents paid for a house.... Read more "Kate in the Valley" below)
Read more Kate in the Valley: Five Bids, No House »
 Good morning. We noticed our in-box was filling up with fascinating (to us, at least) stories about real estate fraud. So we made an executive decision: This is Real Estate Fraud Week at L.A. Land.
First out of the box, a good one. Kate, the voice behind the quirky, Valley-based blog "May 5 & Everything After," writes about an agent who was determined to give her $40,000 cash back at closing -- even though she didn't want it!
Read the whole thing here, it's worth your time. Kate describes her conversation with an agent about a house in Sherman Oaks -- a house Kate feels is worth about $725,000.
"Me: You want me to write an offer for $800k, and take back about $40k, so I am giving the seller only $760k.
Agent: Yes! Yes!
Me: But I pay 5% commission on that higher sales price?
Agent: Well... yes but you are getting cash back for your closing costs and improvements...
Me: Again, I am paying 5% commission on $800k instead of $760k, and my property tax basis will be $800k instead of $760k?
Agent: Well, the property tax is only 1.25%
Me: Every year."
So what did Kate finally tell the agent? "Trust me, I know how it works: You get a bigger commission and you get to delay the inevitable price crash in your little pocket neighborhood. The sales data for the area will reflect artificially high prices so honest people with decent incomes and good credit scores who used to be able to afford the area no longer can. And what do I get? A $40k loan that I don't want or need. As a bonus, I will not only pay interest on this wholly unnecessary $40k loan but I will pay an additional $2,000 sales commission to you and my agent up front because that $40k is being treated like purchase money. But that's not all! No! I will also have to pay an additional $500 in property taxes every year I own the house because the records will reflect an artifically high purchase price."
You go, Kate.
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Photo Credit: May 5 & Everything After
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Kate in the Valley, my favorite sidelined househunting blogger, comes off the sidelines tonight to file an update: prices are falling in one of her preferred neighborhoods, and she's still not biting:
