Missed part one? Read it here.

Now that we know what to look for, and where and we know you can purchase it, it is time to start looking. There are three different kinds of homes being marketed today

Short sales:
These are sales that the seller owes more than the house market value. These all require the approval of the lender or lenders involved, because they are the ones that are going to lose money in the transaction. These sales can take a very long time to process, especially if there is more than one lender involved. Waiting times can be as much as six months before you will know if your deal is acceptable. In the meantime, things may change for you, for the seller and of course during that time the seller is accepting offers that compete with yours (including raising the price, which is what the lender wants). A lender may go along with a short sale if the percentage of price reduction is manageable against the cost of foreclosure. As a buyer of a short sale, you need tremendous patience. Nothing will move fast, unless the bank has preapproved the amount of the short sale.

Foreclosures:
Homes that are owned by the bank are called REOs or Real Estate owned. These are liabilities on the banks balance sheet and they are motivated to sell them but terms can be somewhat daunting.

• The home will be sold “AS IS” no repairs or replacement will be done. This does not mean that you are not entitled to an inspection or full disclosure, it just means that the bank is not going to do any repairs whatsoever. You must make sure you have a clear idea of the condition of the property.
• The home will be sold with a limited deed meaning that the bank is not responsible for liens that may have not been cleared through the foreclosure.
• The bank will require a sales addendum (among other things) that allows them to market the property until closing and if they get a higher offer, they have the right to accept that offer and cancel yours.

Regular sellers:
These are the people that have decided to sell their home and there is no financial problems requiring a bank to be involved. These owners want to sell but sometimes have a higher assessment of the market value for their home. The secret to working with them is to make sure you have competent representation on your side to show them what the actual value should be. If the owner is realistic in his pricing, this is the easiest purchase to make.

There are other things to watch for. The ads for auctions make them sound like you are going to get the deal of a life time. But in reality, now that the market has shifted, the auction is a place to create enthusiasm among uneducated buyers and get the price up. If you have ever been to an auction, you know what I am talking about. The pitch becomes quite fevered and before you know it, you have bought something you don’t want for more money than you want to pay. Definitely not the way to buy a home you intend to live in.

In negotiations that involve banks, you a dealing with people that do not have an emotional commitment to the home, but they do care about the money. Don’t think that you will be able to out negotiate them. They are working on perhaps thousands of deals and you are only working on one. They have heard it all before.

With a regular owner seller, terms can become an acceptable way to get what all parties want. A fair deal. A seller may be more inclined to providing interim financing, or willing to offer a lease purchase, or maybe pay closing costs. The higher up the price scale, the more creative the deal can become.

Well, that kind of sums up the market. This is an incredible opportunity to buy a property that will suit your needs for a price that is better than you expected. It is a time to not be afraid. And working with a competent team to help you realize your dream is the best way to get it done.

How can we help you move forward?

The first thing to assure happiness in your family life is to make sure you live in a home that you can afford. Today, millions of families have found themselves in circumstances they would have never imagined. Home values have declined well below what people owe, and there is little hope that prices will recover quickly. Couple that with the highest unemployment and underemployment in decades and what you end up with is what economists call “de-leveraging”. Most of us call it being deeply in debt and trying to figure out how to get out of the whole.

So, if you are in this position, what should you do? First sit down and honestly assess your financial situation and develop a plan of action. Stop any impulse buying, cut back on any unnecessary expenses. Quit using credit cards as piggy banks and develop a plan to pay off the most expensive balances on the credit cards first, then when the card is paid off, add that money to the next credit card so you can accelerate the payoffs. See if you can sell any cars that have loan or lease payments that are excessive. Exchanging your current car for a cheaper one can save money on payments and insurance. Pay off anything you can, but remember that you need to keep cash for a rainy day as well. Do not keep money in a bank where you have credit cards or loans. Try to work out payment plans with anyone you can. If you are sincere, lenders will work with you rather than lose all of the money.

You need a place to live. If you can continue making payments on your home, do so. But if you are in a “hardship” situation, meaning you have lost your job, fallen into ill health or are trying to sell your home but you owe substantially more than it will sell for, talk to your lender about a loan modification or short sale. Make sure you talk to the person who can help you get a decision. Banks are not in business to assume a loss on your behalf, but in cases that demonstrate an actual hardship, you can get relief. Loan modifications usually result in lower payments for a longer term, or an adjustment to the principal balance to help bring payments in line with what you can afford (not what you would like to pay).

There are significant risks to you concerning short sales. You should seek the advise of an attorney before you sign any documents. You need to make sure that you stay in control of the process. For instance, did you know that in a short sale, you can still be held liable for the difference between what the bank gets and what you owe? The bank has five years to exercise their claim. Do you want that hanging over your head? It may be better to actually go through a foreclosure rather than the short sale. While a foreclosure hurts your credit rating, it clears you of responsibility for any remaining debt if the home has been occupied. Plus, negotiating a short sale is difficult at best, especially if you have more than one lender.

Keep in mind that we are all taught that not paying our debts is a bad thing, but when circumstances will not allow you to manage a plan to get out of debt, there are credit counseling groups that can help. Make sure you choose a reputable one, non profits are usually the best. Talking with an attorney about bankruptcy is another option.  One thing is certain, you won’t be able to get on track if you can’t get off the treadmill. Millions are in your position, and getting out of it should be your highest priority. If you feel trapped because you made the mistake of getting over your head, or the circumstances of today’s economy have put you too far behind, do what you need to do to get out of that trap and on with your life.

How can we help you? Call us to see if we can offer practical advice.

Selling a home in today’s market can be a pretty scary thought.

There are so many homes on the market, prices seem to be plummeting and buyers are just looking to “steal” the properties.  You may actually owe more than the home is worth in today’s market.  What do you do then?

First and foremost, real estate is local, right down to your home.  Second, if we look at the facts, things may not be as bad as you think.  

First let’s analyze the sales prices and sales rate historically.

If we look at long term sales rates for the metro area since 2001 it becomes readily apparent that the average resale rate in the valley is about 100,000 sales per year except in 04 and 05.  That is when everything really spiked.  Then if you look at what happened after, sales dramatically slowed until this year when the sales rate picks up.  The important thing to note is that if you put the peak in the valley, our 100,000 sales per year would have happened.  To me, this means that the market is returning to normal. Prices follow the same trend.  Today, the median price matches up to the median price in about 2004.  As the overall market and economy reaches equilibrium, we will see prices increase at a rate consistent with inflation.  This means that if you bought prior to 2004 and did not borrow additional funds on the home, you are probably in pretty good shape on the pricing of your home.  If you bought during the boom, or took out a loan on the extended value of the home, you are probably underwater.

There are differences in what is going on.  In general, the lower price ranges are performing better than higher.  And the higher you go, the lower the performance.  This is a natural trend because the people who can react the fastest and move into homes are renters.  That allows the person who sold the home to the renter to move up to the next home and so on, so there always has been a lag.  This time there is an additional factor.  Because during the boom, people could buy more home due to the financing that was available, many people over reached. During the recessionary period, the first people to be affected were in the lower price ranges, but as the recession has continued, we are seeing more affluent people having trouble making payments and the number of distressed properties are increasing now.  This has also contributed to the lag and probably means that price reductions in the higher ranges are not over yet.

Let go over what you should do now.

1. Price your home to sell.  That doesn’t mean be the lowest on the street, but make sure that you consider the following elements.  

• What has been the recent history for sales in your neighborhool.
• What is currently listed and how long have they been on the market.
• How does your home compare to the others on the market right now. Be brutally honest, because potential buyers are.

2.Do what you need to do to make the home showable.  You only get one chance to make a first impression.

• Street appeal.  How is the landscaping and exterior paint?  If a buyer doesn’t get out of the car, it doesn’t do you any good.
• Get rid of any excess furniture etc.  You want rooms to look expansive.
• Get rid of any controversial  things.  Paint the red wall.  Get rid of the def leopard posters
• Get rid of clutter in closets and garage.
• Make sure everything works, and everything is clean.
• Order an inspection and fix anything on the list.

3.When the home is being shown.

• Make sure everything is picked up, beds made, dishes put away, trash thrown out.
• Put pets in a safe place or take them with you.  Leave the home.
• Make sure the realtor with the people knows about any pets or kids if they are there.  No one likes to be surprised.

4.When you get an offer, don’t be offended.

• In this market, everyone has been conditioned to offer low prices.
• Take some time and analyze the offer.  Is the buyer qualified?  What are all of the terms?  
• Make sure that before you counter, there is a reasonable opportunity for the home to appraise.  Otherwise, you will be back to the table.

If your house is worth less than you owe, do this before you put it on the market.  
    

• Do you need to sell now or can you wait until better times when prices move up?
• If you must sell, you must talk with your bank and explain the hardship.  Get them to agree with allowing a short sale and get  them to commit to taking whatever you get for the home.
• They are your partner, and not a very good one.  They are slow and may actually put conditions upon the sale that nobody can live with
• Get legal advise.  Lenders can come back on you for deficiencies 5 years after the sale.
• List the home with a qualified agent, who knows how to negotiate short sales.  The agent is not going to be able to talk to the lender, only you.

Can I be of service to you as your listing agent?

A lot of questions.
Is it a good time?  Can I get a good deal or are prices going lower?  What is involved?  So much confusion, I read something different every day.

Buying a home is different now than it was in the last 10 or 15 years.  Recently, buying a home was about the monetary investment.  How much could you make?  Don’t buy the largest or smallest home on the block.  Finance as much as you can.  

Now, we don’t know what to think.  Housing values are going down.  Thousands of families are losing their homes and the investment they represented.  The news doesn’t seem to get better.

The fact is things are getting better and they are better for people who buy homes for the right reasons.  First and foremost, a home provides shelter for its occupants.  But after basic shelter needs are met, we want more.  A home provides a refuge from daily life.  It gives us a place to interact with family and friends.  It is a place where we can enjoy hobbies or do anything we (legally) want to do without fear of others stopping us.  But the ability of a particular home to meet those needs changes over time.  Our family size changes.  Our needs and wants expand and contract with our income.  Economic conditions change and sometimes add to the cost of maintaining a home and our lives.   These are the reasons that we should purchase a home, to improve our life somehow, to make sure that the environment in which we live most of our lives is something that enhances our life.  And over the long run, homes have proven to be one of the best investments we can make even if the appreciation rate is low or negative in the short run.  

Let me explain that last point first.  Most of us are thinking how much our homes (and our stock portfolios) have lost over the past few years.  It is time to quit dwelling on that and look at the opportunities that moving on provide.  Lets say you live in a $500,000 home (at the peak) and it is now worth $400,000.  That is a 25% decline in value.  But if you bought that home prior to 2004, it is likely that the current value of the home is not much different than you paid for it and you may still have gained appreciation.  If we looked back to when I started in this business, we told people that a home would appreciate at about the rate of inflation.  That meant that if you bought a home today, you would have enough appreciation over the first year or so to cover the costs involved with selling that home.  Of course, you also had a mortgage in which the payments included paying off some of the principle each month, which also increased your equity.  Improvements you made to the home could increase the price as well.  We were encouraged to make an additional payment now and again.  And if we decided to move, to put all of our equity into the new home.  The end game was not to get wealthy, it was to end up with a home that was paid off and the home could help us enjoy our retirement either by having no payments or by selling the home and having the equity help us keep our income up.

Taken in this context, most of us will find that the past few years of pricing declines will not be as burdensome as they look today.  Sure people who purchased a home at the peak, and over bought to their means may have a longer term problem. But if we look at what is going on already in the market, we are seeing homes selling at an increasing pace and at increasing prices throughout the market.  This trend is going to continue.

So the first thing we have to look at is how much equity do we really have in our current home.  And if we move to a new home that satisfies our needs, and we can purchase it at a significant discount to the peak prices of a few years ago, we may not be off much from where we would have been if the housing bubble had not occurred.

Does that make sense?
Ok, lets look at the market today.  What are the conditions?  First, it appears that the bottom of the market was reached in the spring of this year.  Sales are increasing and prices are increasing as well.  It is true that more foreclosures will be coming on the market, but it appears that the over supply of homes is coming to an end.  Why is this? Well, interest rates are low and prices have come off of their peaks by as much as 50%.  This makes a new home much more affordable and it is the affordability that is drawing in new buyers by the droves.  Also the general economic news is improving and when this happens, people have more confidence to make long term decisions.  Third, new construction has virtually dried up meaning that there is no new supply being created but at the same time, household formations etc are going up.  In fact within about three years, there will be a shortage of homes if this trend continues and we all know what that means.  You might ask, but what about all of the foreclosures.  Just because someone moves out of one house does not mean they don’t need a place to live.  Those people are going into rentals or other housing arrangements that reduce the supply of housing, increase rent rates, which increases the value of apartments and rental properties.  That is why you see investors buying up many of the homes in the lower price ranges.  The bottom line is that we have shifted from a buyers (oversupply of homes) to a balanced market and we are heading for a sellers market soon.

This trend started in the lower price ranges and has now moved up into progressively higher ones.  It will eventually get to all markets, but there is still time to get good values in the $500,000 and up range. New homes especially in the custom home area, will not be built to a significant degree until the sales prices reach the point where construction and development costs are less than the purchase price.  

So what should you consider when you start thinking about moving. 

We have put together a check sheet of questions that will help you decide what you should look at, where should it be and how much can you afford.  Let’s go thru those now.

1. What is it that is causing you to think about moving?  What isn’t right about your current situation.

• Is the house too small or too large?
• Is it too far away from work?
• Are you looking to be in a different school district?
• Have your hobbies or activities outgrown your home?

2. Once you have answered that it gets easier to answer this one.  What will it take to meet those needs in your new home?  Think about the ideal home and create it in your mind.

• How will you use the space in the new home?  Sometimes just thinking about more or less rooms is not the answer.  It is also how is the space laid out.  With a proper allocation of space, you can actually find a home that will be smaller and meet your needs better.
• How do you want the rooms arranged?  Go through each room in your ideal house and think of the uses it will be for. For instance if you’re a painter and would like a room that acts as a studio, the amount of light in that room and that the surfaces are easy to clean will be important.  You might also want this room to be in a more private area of the home, so it can be messy at times without affecting the rest of the home.  If you have students at home, do you need space for them to study and be on computers where you can see what is going on?  Kids need their private space, but it is also important to keep track of what they are doing.
• How about the yard?  A big lot or small?  Do you want a pool?
• Now think about where is the house going to be?  Your realtor will need you to define this closely because of laws about steering etc.  You can tell your realtor about the neighborhood you want to be in and the requirements that you have, but they cannot make assumptions for you.

3.Find out what you can buy before you look.  In today’s market you need to get a loan commitment from a lender up front.  This will save time by making sure you look at properties you can afford and make negotiations easier when you find the house you want.

• It lets you know what price your new home should be, and how much you will need to put down.
• When you find the home you want, a loan commitment tells the seller that you are serious and ready to purchase.  They will take your offer more seriously.
• It will allow you to cut the time between sale and closing which is good for everyone.

How can we help you move forward? 

READ PART TWO »