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Market Update for August 14, 2008: Foreclosure Trends and Saving Money by Buying Green

Hello.  My name is Douglas MacDonald and welcome to this weeks MarketwatchListings update– your guide to buying and selling Bay Area Real Estate for Thursday August 14, 2008.

 

Dataquik news, one of the largest companies that tracks real estate sales, reports that Bay Area foreclosure activity is up 314% compared to the same time last year.  The biggest increase was in Santa Clara County and Contra Costa County.  However, all counties, even San Francisco are up.  Most of the loans that went into default were originated between September 2005 and November 2006 – the height of the loose subprime lending standards when you didn’t even need to prove your income or assets.  Whoops was that a mistake or what?

O.K. so how can you as a soon to be homebuyer take advantage of this trend?  After all, with so much inventory to choose from, how is one to know if now is the right time? As I mentioned last week, Goldman Sachs has written a report which you can download for free at the end of this post that shows California home prices need to fall by as much as 35-40% from their all time highs in order to come back to normal appreciation and median affordability trends for the past 10 years.  Therefore, if the market has corrected by 35-40%, then you are looking good.

 

Everyone talks about saving money by buying a foreclosure – and you can- but no one is talking about saving money once you own a foreclosure…. What do you mean you ask?

Well…as you probably know, the cost of heating, cooling, using water and powering a house has been steadily going up over the past few years.  Gas prices are at record highs at the pump and our PG&E bills are doing no better.

 

What I have discovered and been telling my clients about for the past year will surely save you hundreds of dollars every month once you buy your home.  The secret is to get an Energy Efficient Mortgage.  An Energy Efficient Mortgage is a particular home loan that requires you to get an energy audit of the house you are buying.  The auditor runs a cost benefit analysis and if the numbers work, which they often do, you can upgrade some of the key components of your home and save money for the life of your loan.

 

The loan may let you finance the purchase of new energy efficient appliances such as refrigerators, dish washers and things like air conditioners, furnaces, dual pane windows and extra home insulation. If you would like more information on an Energy Efficient Mortgage, just click thet the FREE home loan report button on the side of the blog and I’ll get that information to you right away!

 

Also, for our Insider MarketWatch Subscribers, I’ll be posting a video tour of the top 5 buys in the Vallejo Area including Benicia and American Canyon  - these homes either have no pictures on the MLS or really bad ones, so you would never think of giving them a second look – but through my research and documentation you will now have exclusive access. 

 

Our Insider Marketwatch Subscribers will also get the scoop on the three best places for lunch in the greater Vallejo-Benicia and American Canyon Area and I’ll show you what the best dishes are and how affordable it is to eat great food.  Remember, our Insider Marketwatch program is free.  All you have to do to become a member is simply click the Marketwatch button on the side of this blog and your subscription will start right away.

Thanks for watching and I look forward to seeing you next week!

 

http://www.irvinehousingblog.com/wp-content/uploads/2007/10/california-valuations.pdf

 

Market Update August 5, 2008 - How to Spot the Best Priced Homes

The Federal Reserve Bank today met and left interest rates unchanged. With the rising cost of oil and commodities, there are serious inflation fears and many on the Federal Reserve Banks Board have called for raising rates.

However, on Wall Street today, oil has dropped to $119 from its all time high of almost $145 per barrel in July. Commodities as a whole from metals to crops have also fallen sharply in the past few days which is good news for consumers. Hopefully this will translate into lower prices at the pump and grocery store soon.

O.K. where does that leave you as the soon-to-be home buyer…In very good condition indeed. Although some easing in commodity and oil prices has recently occurred, it is likely that rates will increase by the end of the year. Based on historical trends, the Federal Reserve generally does not raise rates during an election year. However, once the election is over they are likely to act. Raising rates is the number one and only way the Federal Reserve can fight inflation. There is also a large supply of foreclosed homes on the market.

A Report issued by Goldman Sachs this past October 2007 stated that California home prices need to fall by 35-45% from there 2006 all time highs in order to come back into the natural appreciation and median income trends of the past 10 years. Therefore, if you find a home that you like that is priced 35-45% lower than its all time high, you can be fairly certain that the neighborhood has corrected and prices are stabilizing.

In the following article I found three homes in the Vallejo market that are particularly good buys for both location and price and they have also corrected by approximately 40%. Please remember that when you are shopping you need someone who can find the bargains and run a property history search to determine if the market has corrected enough to make the property a good buy.

We offer a free service to buyers that does just that – locates and sends you the best buys. It is called our Marketwatch Service and without cost or obligation we send you the newest hand-picked listings that meet your criteria every two weeks like clock work. We screen them for price, quality and location. All you have to do to start this service is just click the MarketWatch button on the right hand side of this blog.

It would be a shame to overpay for a home when it is so easy to get a list of homes pre-screened for price and value. Click the Marketwatch button now.

Todays Top Three Vallejo Buys

The Vallejo market is experienceing a large turnover of quality foreclosures. As soon as a quality property in a nice neighborhood comes on the market and is reasonably priced, there are often multiple offers. Today I looked for homes that were built from 1980 on, with at least 3 bedrooms and 2 baths and had at least 1700 sf. I looked specifically at non-short sales. I found three homes to be priced well and in good to very good condition. Please click below to see them.

Secrets of Buying a Bank Foreclosure

 

So you would like to buy a bank owned property?

 

You’ve watched the late night infomercials and you’re ready to do the bank a “favor” and take the problem off their hands.  Plus, you expect to make “a killing” in the process.  Sounds great and it just might happen, but first you should take a look at some facts and get prepared.

 

REO vs. Foreclosure

 

An REO (Real Estate Owned – Bank Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction.  You see, most foreclosure auctions today do not even result in any bids.  After all, if there was enough equity in the property to satisfy the loan, the owner probably would have sold the property and paid off the bank.  The overleveraging of homes, where more is owed than what the property is worth is the reason why so many homes end up at a foreclosure trustee sale.

 

Trustee

Sale

 

When a homeowner falls about 90 days behind on their payments, the Mortgage Loan Servicer files a notice of default (NOD) with the County Recorders Office and delivers a copy to the home owner.  This starts a 90 clock for the home owner to

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ing their mortgage current.  If the home owner does not cure the default within that 90 day period the Mortgage Loan Servicer files a notice of Trustee Sale which is usually 21 days later.

 

At the prescribed date and time, the Trustee runs the foreclosure sale. Many times foreclosure sales are run in public on the local Courthouse steps. The foreclosure sale begins with a minimum bid that generally includes the loan balance, any accrued interest, plus attorney’s fees and any costs associated with the foreclosure process.  In order to bid at a foreclosure auction, you must have a cashiers check in your hand for the full amount of your bid.  If you are the successful bidder, you receive the property in its present as-is condition, which may include someone still living in the property - that becomes your problem to evict.  Most foreclosure buyers never get to see the inside.  It is also common for the owner to take the appliances, and strip the inside of the house.  Some times the owners destroy the inside of the home out of anger or spite.  There may also be other liens against the property.

 

Since what is owned to the bank these days is almost always more than what the property is worth, very few foreclosure auctions result in a successful Trustee Sale.  The property then “reverts” to the bank.  It becomes an REO, or “real estate owned” property.

 

 

 

 

REO Properties for

Sale

 

The bank now owns the property and the mortgage loan(s) no longer exists.  The bank will handle the eviction if necessary, and do some minor repairs.  They will negotiate with the IRS for removal of any tax liens and payoff any home owner association dues and back property taxes.  As a purchaser of an REO property the buyer will receive a title insurance policy and the opportunity to investigate the property.

 

A bank owned property may be a great bargain.  Do your home work before making an offer.  Make sure the price you pay (if you’re successful) is comparable to other homes in the neighborhood.  Consider the cost of renovations, including the time to complete them.  Don’t get caught up in a bidding war and pay over market value. 

 

How Banks Sell REO’s

 

Each bank/lender works a little differently, but they all have similar goals.  They want to get the best price possible and have no interest in “dumping” real estate cheaply.  Generally banks have an entire department set up to manage their REO inventory.

 

Once you make an offer to purchase, banks generally present a “counter-offer”.  It may be a higher price than you expect, but they have to demonstrate to investors, share holders and auditors that they attempted to get the highest price possible.  You can also counter the counter offer.

 

Your offer will probably have to be reviewed and approved by several individuals and/or companies.  Even once an offer is accepted, the bank insert wording like, “subject to corporate approval within 5 days.”

 

Property Condition

 

Banks always want to sell property in as-is condition.  Most will provide a section-1 pest certification, but not unless you include it in your offer and negotiate the point.  They will allow you to get all the inspections you want (at your expense), but they may not do the repairs.

 

Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.

 

Even though you agreed to “as is,” always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections.  Sometimes they will re-negotiate to save the transaction instead of putting the property back on the market, but don’t take that for granted.

 

Banks do not want to see a lot of property disclosures; they are exempt from the California Seller’s Transfer Disclosure Statements (TDS).  If there are real estate agents involved, wither representing you or the bank, those agents are required to provide you their disclosure statements. 

 

 

 

Making an Offer

 

Before making an offer you should ask the following:

 

• Are there any inspection reports?
• What work has the bank agreed to?
• Is there a special “as-is” form?
• How long does it take the bank to accept an offer?
• How does your agent deliver the offer?

 

Offers are usually faxed to the bank.  The listing agent needs your originals.  There is no formal presentation.  Keep in mind:  nothing happens evenings and weekends (banks are closed).

 

Since there is no face-to-face presentation to the bank, you must provide the listing agent with a pre-qualification or better yet, a pre-approval letter and buyer biography to pass along.  Make your offer easy to accept.  Since we are also Mortgage Brokers, we can handle your financing and supply a pre-approval letter.

 

Hopefully these tips will manage your expectations.  Remember that REO’s sell close to full market value and are not the deals represented on late night television.  They are also usually the most aggressively priced – lowest priced – home in the area.  As such, the bank is looking for a quick sale.  However, I have seen banks refuse many “low-ball” offers. Offers that are just way below comparable sales are usually ignored or rejected outright.

 

We reprent Buyers at Trustee Sales – CASH REQUIRED

 

If you have a minimum of $500,000 cash available, we will act as your buyer

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oker to help you find a foreclosure and bid at a Trustee Sale.

 

Foreclosure Tracking

 

We track all foreclosures in the East and North Bay Areas.

 

Short Sales and REO you can finance

 

If you are a patient person and don’t mind waiting 2-3 months after rendering an offer to purchase to find out if it is accepted, we can help you purchase a “Short Sale” and arrange the financing.  Both short sale homes and REO properties can be purchased with zero down payment.  At this time of the market cycle, REO’s are the best place to start and short sales should only be considered as a last resort.

Short sales are homes that have been purchased or refinanced in the past few years with 90% - 100% financing.  The property values have gone down and the home owner is generally (but not always) behind in the payments.

 

In order to avoid a foreclosure or simply out of necessity an owner agrees to sell their house for less than what is owed.  The seller does not receive any money in a Short Sale since more is owed than the house is worth.  The lenders generally don’t want to wait to get the house back in foreclosure and know it is likely to be in poor condition if they do foreclose.  The lender also knows they are going to lose money and would rather take the loss now, rather than later.

 

The problem is that you may not know if your offer is accepted by the lender for 2-3 months.  Lenders are inundated by short sale requests and they have a very long turn-time to respond back.  Moreover, the seller can actually present other offers to the bank which may result in your losing out on the property after waiting weeks for a response.  The process is frustrating and there are too many quality foreclosed homes on the market to bother wasting time with short sales.

 

We can send you a list of all the foreclosed REO homes in your price range and submit your offer and negotiate on your behalf.  There are a lot of steps involved in the buying process; Give us a call at 707-649-5116 and we can answer any of your questions.

 

Most real estate agents know practically nothing about “Short Sales” and how to get them approved, Foreclosures – Buying at Trustees Auctions or Purchasing REO’s directly from a bank.  Trust me, you will need all the help we can provide.  Best wishes in your home search.