The current market is bottoming out and real estate performance continues to be highly localized by zip code and neighborhoods. To say the entire market is good or bad is like saying the average temperature in the United States is 79 degrees, when obviously that is not accurate. Here in San Diego we have seen tremendous activity and interest in the lower price ranges. Over the past two weeks I have written offers for clients on properties that had received 20, 13, 11, and 8 offers in the first week on the market. In the past, properties were usually listed slightly above the target price and sellers would come down until a sale was made. But that has given way to a newer strategy. Now, these properties are now being priced with "energy pricing" which means they are probably listed about 10% under the target sales price in the hopes of generating aggressive activity, and it's working! Homes in the lower price ranges, especially in the equity or bank owned sales, are showing market times of a week or so, while the short sales and anything that is not energy priced is staying on the market longer. I am now recommending to my clients that we set their search maximum price about 10% below their target to allow for the over-bidding that will probably occur. Activity in the upper end, especially in any home that requires jumbo financing, is slower.
Buyers: Don’t be surprised by a hierarchy on loans while sellers compare your offer to others. Obviously cash is king, but be prepared to put as much money down as possible, as sellers right now are favoring conventional loans with high down payments over FHA & VA funding. Also, be prepared to lose the right to maintain an appraisal contingency on any bank-owned (REO) home. Sellers are requesting that buyers pay the difference between the appraised value and the purchase price. You can view all homes for sale, including foreclosures, online at www.SanDiegobythesea.com.
Sellers: “Energy” pricing your property will produce the most showings and offers. Not all buyers can make all-cash offers, so it’s very important to understand and scrutinize the type of loan the buyer plans to use as well as their initial deposit amount. Now, more then ever, it’s important to employ a professional real estate agent to negotiate your most favorable terms as you head into escrow. This way, you can verify that the buyer’s funds and loan type are legitimate. A prudent and thoughtful marketing strategy is always crucial to make your property standout from the rest. Remember, homes do not sell by happenstance. Visit www.SanDiegobythesea.com to see how we would sell your property.
Types of Sales Now on the Market
In today’s real estate market, we typically find three (3) main types of sales, plus several other less common types.
Equity Sale: This occurs when the owner of the home is selling it and still has equity available, due to the fact that they have owned the home for a long period or they made a large enough down payment to create equity in spite of the decreasing prices. These are often the least frustrating types and often offer the most benefits to the buyer, namely full disclosures, easier negotiations regarding repairs, and more direct communication for the listing agent. These sellers must price their property competitively with those shown below if they expect to attract buyers.
Bank Owned (REO): This occurs when a lender has foreclosed a home because the owner failed to make the required payments. In such cases the listing agent negotiates directly with a lender representative. Since the lender has never lived in, or maybe ever seen, the home they provide no disclosures and often sell the home exactly “as-is” without making any repairs. They also typically take away the buyer’s right to maintain an appraisal contingency as well as other benefits a buyer might enjoy when purchasing from an equity seller. If these transactions close after the agreed upon date the buyer can expect to pay per diem late charges. Occasionally the lenders will agree to a buyer credit to help cover closing costs of repairs. Lenders typically counter-offer with a long addendum that explains their position that is usually a “take it or leave it” proposition. These homes can be in poor condition if the owner damages it on the way out.
Short Sales: These occur when the owner still is on title but cannot sell the home for enough money to pay off the loan(s). They may or may not provide disclosures, depending on whether or not they still live in the property and the condition may not be good. When an offer is received the seller typically signs it because it he will receive no money when it closes. The lender then requires the seller to provide a hardship package that usually contains close to 100 pages of documentation to justify the need for such a sale. Once the lender receives the package it can take up to (and sometimes more than) 8 months to get an approval, during which time they verify the value of the property and negotiate the final settlement with the owners. The long waiting period poses potential risks to the interest rates and prices. These transactions can be very frustrating.
Estate Sales: These occur when the family of a deceased person sells their property for the estate. They can also be called “Probate Sales”. These are similar to an equity sale but may not offer the disclosures if none of the previous occupants survived. It is not unusual for these to involve delays due to the court involvement.
Equity Sale: This occurs when the owner of the home is selling it and still has equity available, due to the fact that they have owned the home for a long period or they made a large enough down payment to create equity in spite of the decreasing prices. These are often the least frustrating types and often offer the most benefits to the buyer, namely full disclosures, easier negotiations regarding repairs, and more direct communication for the listing agent. These sellers must price their property competitively with those shown below if they expect to attract buyers.
Bank Owned (REO): This occurs when a lender has foreclosed a home because the owner failed to make the required payments. In such cases the listing agent negotiates directly with a lender representative. Since the lender has never lived in, or maybe ever seen, the home they provide no disclosures and often sell the home exactly “as-is” without making any repairs. They also typically take away the buyer’s right to maintain an appraisal contingency as well as other benefits a buyer might enjoy when purchasing from an equity seller. If these transactions close after the agreed upon date the buyer can expect to pay per diem late charges. Occasionally the lenders will agree to a buyer credit to help cover closing costs of repairs. Lenders typically counter-offer with a long addendum that explains their position that is usually a “take it or leave it” proposition. These homes can be in poor condition if the owner damages it on the way out.
Short Sales: These occur when the owner still is on title but cannot sell the home for enough money to pay off the loan(s). They may or may not provide disclosures, depending on whether or not they still live in the property and the condition may not be good. When an offer is received the seller typically signs it because it he will receive no money when it closes. The lender then requires the seller to provide a hardship package that usually contains close to 100 pages of documentation to justify the need for such a sale. Once the lender receives the package it can take up to (and sometimes more than) 8 months to get an approval, during which time they verify the value of the property and negotiate the final settlement with the owners. The long waiting period poses potential risks to the interest rates and prices. These transactions can be very frustrating.
Estate Sales: These occur when the family of a deceased person sells their property for the estate. They can also be called “Probate Sales”. These are similar to an equity sale but may not offer the disclosures if none of the previous occupants survived. It is not unusual for these to involve delays due to the court involvement.
Buy foreclosures now - before it's too late
CNN - August 5, 2009
In many markets, if you want to buy a repossessed property, you better come with your best offer first -- and fast.
NEW YORK (CNNMoney.com) -- You've heard of speed dating? It's got nothin' on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they're going to come away with bupkus.
REOs, the industry term for homes repossessed by lenders and put back on the market, are often selling in a day -- sometimes in less.
"We're seeing REOs go very quickly. Offers come in immediately after the listing comes on the market, within 24 hours," said Brad Geisen, founder of Foreclosure.com. Some homes have been put into contract in less than 90 minutes.
In Stockton, Calif., foreclosure ground zero, the market has changed radically. Last summer, Cesar Dias became famous for founding the "foreclosure tour," in which he packed potential buyers on a bus and ferried them around to some of the thousands of distressed properties.
Today, the foreclosure tour in Stockton is history. There are too few REOs.
"For every listing that comes out, we have 10 buyers," said Dias, an agent with Approved Real Estate Group. "We had a lot of inventory last summer. Now we're down to 1,500 listings -- from more than 5,000."
San Diego buyers face the same trend. "Agents have one or two REO listings now, compared with 15 or 20 a year ago," said realtor Adrianna Delgado of the Delgado Group.
And there's almost no negotiating, no back-and-forth, after the initial bid. "We don't get a counteroffer," said Delgado. "The sellers just ask for your highest and best bid. If you're not prepared to send in your best bid the first day, you may as well stop looking."
In Florida there are so many buyers for foreclosure listings that real-estate investment companies, which had been snapping up properties, are now facing stiff competition, said Vanessa Grout, VP for acquisitions at New Valley, a real estate investment fund.
Even in distressed Detroit, REOs are still in high demand. "For a good house that's not too beat up, in a good neighborhood, there's no lack of buyers in this market," said Andy Sakmar, founder of Century 21 Sakmar in the Motor City suburb of Rochester. "There are a lot fewer of these properties than a year ago, and the super buys get multiple offers."
Priced for speed
The biggest factor in the feeding frenzy is, of course, rock-bottom prices. Banks are pricing homes to move.
Sakmar tells of an REO that recently went on sale in a community of mostly $300,000 homes. It was in good shape and should have sold for $200,000, in Sakmar's opinion. Instead, the bank listed it for $129,000.
"It drew thirteen offers in two days," he said.
That kind of cut-rate pricing is very common, according to Foreclosure.com's Geisen. Instead of holding onto REOs for the best prices -- and paying the property taxes and maintenance and heating costs -- banks are selling the homes as quickly as possible.
"In this market, if they can liquidate them fast, it makes more sense to get them off the books," he said.
The trend is causing intense agita for buyers. "People feel like they're getting left out," said Dias, the agent in Stockton. "We show a house on the weekend and it's gone by Monday."
"There are plenty of buyers ready to move," added Mark Brandemuehl, a spokesman for Movoto, a California real estate broker that specializes in foreclosures. "They tell their agents to make bids right away, as soon as they see something suitable come on the market."
Bubble markets
The hot spots for this fast-paced foreclosure activity are former bubble markets where foreclosures soared -- places like California cities Sacramento, Riverside and San Bernardino.
In Sacramento, for example, the inventory is down to less than 30 days, making it a cut-throat market. The agents specializing in REOs "have nothing to sell," said Brandemuehl.
On average, inventories of California homes under $300,000, the most popular price point for foreclosure buyers, have shrunk drastically, from a nearly 10-month supply a year ago to less than three and a half-month supply today, according to the California Association of Realtors.
Nationally, the number of bank-owned properties diminished by 26% from June 2008 to June 2009.
The industry attributes the drop in inventories to foreclosure prevention efforts by President Obama and various state governments. In particular, they cite moratorium programs that, at the very least, postponed foreclosures.
The bad news is that as the moratoriums lapse, more REOs will likely hit the market.That's because these efforts tend to delay foreclosure rather than stop it.
"Every lender I talk to has been telling me there's every indication that a tsunami of new properties coming to the market later this fall," Sakmar said.
Geisen sees the same flood, but he attributes it to consumers failing out of Obama's foreclosure-prevention program, Making Home Affordable. He believes that many of the modified loans will fall back into foreclosure -- especially if the economy doesn't perk up soon.
In fact, last year the U.S. Comptroller of the Currency found that 53% of loans that were modified in the first half of 2008 fell back into arrears. Although, that was before Making Home Affordable standardized the terms and qualification process.
Still, Geisen said, "There'll be another wave of foreclosures. The wave that Obama stopped -- temporarily."
In many markets, if you want to buy a repossessed property, you better come with your best offer first -- and fast.
NEW YORK (CNNMoney.com) -- You've heard of speed dating? It's got nothin' on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they're going to come away with bupkus.
REOs, the industry term for homes repossessed by lenders and put back on the market, are often selling in a day -- sometimes in less.
"We're seeing REOs go very quickly. Offers come in immediately after the listing comes on the market, within 24 hours," said Brad Geisen, founder of Foreclosure.com. Some homes have been put into contract in less than 90 minutes.
In Stockton, Calif., foreclosure ground zero, the market has changed radically. Last summer, Cesar Dias became famous for founding the "foreclosure tour," in which he packed potential buyers on a bus and ferried them around to some of the thousands of distressed properties.
Today, the foreclosure tour in Stockton is history. There are too few REOs.
"For every listing that comes out, we have 10 buyers," said Dias, an agent with Approved Real Estate Group. "We had a lot of inventory last summer. Now we're down to 1,500 listings -- from more than 5,000."
San Diego buyers face the same trend. "Agents have one or two REO listings now, compared with 15 or 20 a year ago," said realtor Adrianna Delgado of the Delgado Group.
And there's almost no negotiating, no back-and-forth, after the initial bid. "We don't get a counteroffer," said Delgado. "The sellers just ask for your highest and best bid. If you're not prepared to send in your best bid the first day, you may as well stop looking."
In Florida there are so many buyers for foreclosure listings that real-estate investment companies, which had been snapping up properties, are now facing stiff competition, said Vanessa Grout, VP for acquisitions at New Valley, a real estate investment fund.
Even in distressed Detroit, REOs are still in high demand. "For a good house that's not too beat up, in a good neighborhood, there's no lack of buyers in this market," said Andy Sakmar, founder of Century 21 Sakmar in the Motor City suburb of Rochester. "There are a lot fewer of these properties than a year ago, and the super buys get multiple offers."
Priced for speed
The biggest factor in the feeding frenzy is, of course, rock-bottom prices. Banks are pricing homes to move.
Sakmar tells of an REO that recently went on sale in a community of mostly $300,000 homes. It was in good shape and should have sold for $200,000, in Sakmar's opinion. Instead, the bank listed it for $129,000.
"It drew thirteen offers in two days," he said.
That kind of cut-rate pricing is very common, according to Foreclosure.com's Geisen. Instead of holding onto REOs for the best prices -- and paying the property taxes and maintenance and heating costs -- banks are selling the homes as quickly as possible.
"In this market, if they can liquidate them fast, it makes more sense to get them off the books," he said.
The trend is causing intense agita for buyers. "People feel like they're getting left out," said Dias, the agent in Stockton. "We show a house on the weekend and it's gone by Monday."
"There are plenty of buyers ready to move," added Mark Brandemuehl, a spokesman for Movoto, a California real estate broker that specializes in foreclosures. "They tell their agents to make bids right away, as soon as they see something suitable come on the market."
Bubble markets
The hot spots for this fast-paced foreclosure activity are former bubble markets where foreclosures soared -- places like California cities Sacramento, Riverside and San Bernardino.
In Sacramento, for example, the inventory is down to less than 30 days, making it a cut-throat market. The agents specializing in REOs "have nothing to sell," said Brandemuehl.
On average, inventories of California homes under $300,000, the most popular price point for foreclosure buyers, have shrunk drastically, from a nearly 10-month supply a year ago to less than three and a half-month supply today, according to the California Association of Realtors.
Nationally, the number of bank-owned properties diminished by 26% from June 2008 to June 2009.
The industry attributes the drop in inventories to foreclosure prevention efforts by President Obama and various state governments. In particular, they cite moratorium programs that, at the very least, postponed foreclosures.
The bad news is that as the moratoriums lapse, more REOs will likely hit the market.That's because these efforts tend to delay foreclosure rather than stop it.
"Every lender I talk to has been telling me there's every indication that a tsunami of new properties coming to the market later this fall," Sakmar said.
Geisen sees the same flood, but he attributes it to consumers failing out of Obama's foreclosure-prevention program, Making Home Affordable. He believes that many of the modified loans will fall back into foreclosure -- especially if the economy doesn't perk up soon.
In fact, last year the U.S. Comptroller of the Currency found that 53% of loans that were modified in the first half of 2008 fell back into arrears. Although, that was before Making Home Affordable standardized the terms and qualification process.
Still, Geisen said, "There'll be another wave of foreclosures. The wave that Obama stopped -- temporarily."
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