Boni: Real Estate And Emotions
Boni gives her take on LA real estate.
Wow! Such controversy. I always knew that real estate was extremely emotional for people; right up there with divorce and death. But the interest and debate generated by "Flipping Out" is unreal! I deal with clients' emotional roller coasters daily and believe it or not, what you see Jeff going through on the show and how crazy he gets is everything that Mr., Mrs., Miss, or Ms. experiences while going through the process of buying or selling their homes.
Good Market/Bad Market. It makes no difference. During the last upswing in the market (1997 to 2006) prices were too high, houses sold before open houses and multiple offer situations with no contingencies were the norm. Buyers were miserable unless they "got" THE house and if they didn't, the agent was at fault. But they kept on BUYING. Sellers also found things to stress about too: "How come my house sold so quickly, it must not have been listed high enough..." Agents struggled to keep sellers realistic about not overpricing because even in the good market houses that were overpriced for what and where they were sat on the market for months.
Interest rates. The favorite topic of conversation everywhere these days. As far as I understand it; the drop in the rates was not due to the rising home prices. I believe that the Federal Reserve Bank lowered the interest rates because they determined the economy warranted lower rates. They set the rates and made money cheap to buy and everyone was happy! Jeff started his business just as all of this was happening; the LA real estate market was coming back and interest rates were moderating. He paid market price and often for homes that were not only at inflated prices over the previous year, but house that needed work! His costs in were no different than the rest of the buyers. He also put money into the homes and actually not only improved the product for future owners but for the banks holding the paper. He raises the value of their asset. He is no different then the businessman who finds a need, fills it, develops it and then sells it at a profit.
An often missed but critical piece to the puzzle is the change in the Primary Residence Capital Tax Gain Law. After 1997 the change allowed home owners to sell their homes (not income or second homes) and keep any profit made up to $250,000 for individuals and $500,000 for couples. No requirement to buy another house of equal of greater value and you can live in a house for two years and do it again and again. In, fact many many people did just that several times if they were fortunate to be in a location where property values had a upward run for five or more years. Guess where one of the steadiest and longest runs happened: LA, and yes, Los Feliz, which was under-priced compared to the more fashionable West Side of Los Angeles, did really well for a lot of people. Jeff Lewis among them. So combined with their tax free $$$, lower interest rates screaming 24/7 and rising values, homeowners began treating their home sweet home as a personal ATM machine. As long as conditions were right everybody was HAPPY. BUT oops guess what? It had to change sometime. If it is too good to be true...it is too good to be true. Reality, no pun intended, is back and it seems that everyone wants to find someone to blame.
Somehow I don't think it was Jeff Lewis who was responsible for the sub-prime disaster, for the adjusting house prices or for people not being able to afford the home they wanted because they can't qualify for the loan now. But people are STILL buying houses. The people who buy Jeff's and Ryan's homes are generally in the Entertainment Industry, as are a great percentage of those who buy anything in our areas of LA. We are not talking about anywhere else here. These people buy homes that are perceived to be done and professionally DONE. Does not not matter what price point either. In LA is it all about the "SHOW" and Jeff and Ryan are among the best at producing a HIT. Carrie and I have been working with them for years.
We work closely with them in finding projects, in fact many agents will call us and say that they have something Jeff might like. We often write offers that go nowhere. When we do get the offer accepted, we schedule inspections, arrange for title and escrow documents to be completed, not to mention the pages of real estate disclosures required. We meet with them and talk about the market and where the house might be when it is completed, what is selling well and what we feel is going on out there. When to put it on and what we think the price will be. When they are ready to sell we start the marketing; photographers, the marketing ad copy, web sites, holding open houses. We are always available to show the houses to agents and buyers. Once we have an offer we start the paper work all over again and then there are the buyers' inspections, etc, etc. We have done this over 10 times and Jeff and Ryan respect us enough to put their business in our hands. Needless to say, our relationship with them is unique, private and is based on mutual respect. Any disagreements we have are short-lived. I trust that viewers know that situations are not always depicted as they really are on TV.
Thank you to EZE Easement for giving the August figures for Los Feliz but you really need to see more detail to understand the figures. If anyone wants more info you can check out boniandjoe.com and click on our realtybites blog for facts, figures and current articles on LA Real Estate. And you can access info about the different areas we cover on the show. Wow, that was more than I thought I had to say!
Oh yes, in case you forget out there; "Flipping Out" is a TV show...