When Is a Seller Not a Seller?

When a seller has a preconceived, misconceived notion of their property’s value, do you have a seller? Not in this market.

One prospective seller called me up to tell me that he had heard Santa Barbara was ‘under-priced’ compared to other parts of the country and world. Irrespective of how much truth there is to this notion, it does not help a seller negotiate a higher price in today’s Santa Barbara market. It does, however, bolster a ‘buy and hold’ approach to Santa Barbara real estate. If you are a seller who wants to wait for prices to jump back up to match ‘other markets,’ I cannot tell when that will occur, but I do not think a six-month listing is long enough. In other words, if you want to list your home, price it to sell in today’s market.

Top 10 Warning Signs an Agent Has a Difficult Listing

10. One of the neighbor’s cars is up on blocks in the driveway.

9. One of your seller’s cars is up on blocks in the driveway.

8. The seller asks whether you would take a 30-day listing.

7. Your leg reminds the family dog of his first girlfriend.

6. The seller says he enjoys the ‘coolness’ of his house and you discover the sun does not shine within 100 feet of the house.

5. The seller asks to be present at all showings so that he can show the buyer his receipts for all the improvements that were made.

4. The house is not only not a good ‘drive-by,’ it is more like a ‘Drive-in.’

3. The house smells old and musty even though it was just painted and re-carpeted.

2. The quickest drive to the house is not the same as the directions you give to agents and their buyers.

1. The seller calls you with the license plate number of a car that slowly drove past the house and asks you to find out whether they are interested.

Apartment Sales and Rental Update

Steve Golis, co-founder of The Radius Group, says there are three ways to ascertain the value of apartment units: price per unit, gross rent multiplier and cap rate (or rate of return). When prices go up, the cap rate goes down (assuming rents are constant), and down it went in Santa Barbara for 2006.

Looking at apartments with five or more units, in 2006 there were only two sales in Lompoc and Santa Maria.

In Santa Barbara the per-unit price is approximately $202 for buildings with 10-plus units and $233 for buildings with five to nine units. This per-unit price represents about one-fifth of the median price for a single family residence. The 2007 prediction is to see a $232 price per unit across the board. This would be an average, with location and condition contributing to price.

One path for some new owners of apartments was to evict existing tenants, remodel and re-rent at a higher price. One example were 650-square-foot, two-bedroom units that were renting for $1,300 and then became $2,200 after renovation.

January 2007 apartment sales started strong, again, with plans to rehab and raise rents.

UCSB has shown a 31% increase in students over the last six years. This translates to more tenants vying for the existing housing stock.

Sales/Leasing Update

Commercial real estate is strong on the South Coast, according to Bob Tuler, a principal at The Radius Group. Why? Sellers are coming out of 1031 exchanges, favorable interest rates, low vacancy, rising lease rates and limited inventory.

Office space reached $540 per square foot and retail tipped $570 per square foot.

Overall retail lease rates are up 19% over 2006 to $3.55. This jump was helped by downtown State Street retail lease rates soaring over $4 per square foot.

West Palm Beach, Florida has the lowest vacancy rate in the country while Santa Barbara comes in second. My mom lives in West Palm Beach and if you are in a jamb, she will rent you her spare bedroom. Yes, I am mixing commercial information with residential, but mom does not own commercial property.

Better yet, if you are single, maybe I can introduce you to my mom.