Short video on upside and downside of buying Bank foreclosures.http://www.veoh.com/videos/v18571450XncRAr2p
Market Downswings offer Buying Opportunities. Short Term Sellers take the HIT!
We are all challenged with the market undulations. At times, it feels like we are on a rollercoaster ride and we are helpless to do anything but HANG ON. But for many long term homeowners, the paper loses on the market fluctuations will have little or no effect.
And here is why:
Real Estate always follows trends and market cycles. Market corrections are inevitable. We have been on an upswing market trend in San Francisco since 1999. The good news is that after the market corrects itself, the 50 year market performance statistics reveal that the market eventually recovers and, in time, the prices go even higher than the last high.
FOR FIRST TIME BUYERS: The reduced prices in the market allows for many FIRST TIME BUYERS to afford home ownership. There is also a $8000 first time buyer credit available for those that qualify.
FOR SELLERS: For sellers trading up, what you lose based on past higher values on the sale of your home, you will pick up on the now lower values if you purchase of another home.
SHORT TERM SELLERS take the hit: The people who get hurt in market swings are the short term buyers and sellers. If you are a recent home purchaser and if you are forced to sell because of financial needs, a job transfer to another area and you do NOT replace this property with another property in the area, then you may suffer financially from the downturn.
Some of you remember, as I do, the real estate market in 1980 when interest rates peaked over 18% interest on FHA 30 year Loans. There was recession, and then there was recovery. Then there was the up market swing in the 1980s with yet another correction. In the 1990’s we had the DOT COM boom and then another correction.
The TRUTH about real estate markets is this:
There is ALWAYS a market…good or bad.
There are ALWAYS buyers and sellers.
Any given market is determined by an offer from a willing buyer and acceptance from a willing seller.
Buying opportunities occur when there is less competition and increased inventory.
And such is our present market.
Over the last year many home buyers have been panning for GOLD with SHORT SALE offers. The typical short sale scenario is that the seller is upside down on the mortgage(s) and the buyer is hoping to capitalize on market conditions. However, most buyers have been very frustrated and disappointed with the results. Even if the seller agrees to take the buyer’s offer price, the lack of ANY response from the lenders, time delays, and the volumes of paperwork involved have made the experience less than satisfying or rewarding.
There is an old saying that “too many cooks ruin the stew” and such is often the case with short sales. The problem is there are too many people involved with self-serving interests and trying to hold the deal together can be challenging. Short sales are a moving target and the buyers and sellers can be left hanging out to dry with nothing to show for their efforts but frustration and wasted time, not to mention money spent on appraisals, inspections, and other reports. Statistics show that only about 30 -35% of short sale offers are accepted and only about 10% to 15% of short sale offers actually come to fruition. With changing market conditions and the time delays, buyers may be better off purchasing property on the open market. In years past, many lenders have been receptive to short sales. But my experience last year (2008) was that most lenders were so buried with short sale requests (mostly in other counties) that they did not even respond to short sale offers in San Francisco. The lenders chose to take distress property into inventory through the foreclosure process, vacate the premises (absent the homeowner or tenant), then list and sell the property to the highest bidder on the open market.
However, all this being said, the process has now been streamlined to make short sale offers easier to accomplish. Some of the big players, Bank of America and Wells Fargo have announced new cooperative programs to help expedite the SHORT SALE process. BofA has increased staffing, updated training and created a dedicated short sale call center at (866) 880-1232. Of course, MONEY is always an incentive. On May 14, the Treasury Department announced a PLAN to “provide incentives for servicers and borrowers to pursue short sales.” Treasury will pay a servicer $1,000 for completing a successful short sale, it will pay the borrower $1,500 to assist with relocation expenses, and it will pay second-lien holders who release their claims up to $1,000. Lenders are now giving the short sale process a second look as a less costly means to rid excess inventory and many sellers are finding a quicker and potentially less self-destructive way to get out from under over-encumbered property.
On February 18, the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the U.S. housing market. As promised, two weeks later on March 4, the Administration published detailed program guidelines.
Are there foreclosures in San Francisco? The answer is YES, but not a many as in other Bay Area counties.
While San Francisco property owners face market slow down, some sellers are caught on the uptick adjustments of subprime loans and/or credit crunches.
The majority of our foreclosure sales are on the lower priced homes and in the fringe neighborhoods. However, there are DEALS out there for those that are READY, WILLING, and ABLE to move fast. During the 1970’s and the early 1980’s, I purchased over 50 foreclosed properties and I will share my experience with you.
Do your homework FIRST.
- Find a good lender and get pre-qualified. Make sure that this lender will loan on “as is” or “fixer” properties.
- Familiarize yourself with the market and the areas of preference. If you do not know the market, you will not know if the property is a good deal. If the property is a good deal, chances are that you will NOT be alone as there are other buyers out there to compete with.
- Find good representation. The old saying of “BUYER BEWARE” applies. Foreclosures do not have the same disclosures required on non foreclosure real estate sales. Make sure your agent is experienced and knowledgeable in this area. A good Realtor can help provide you with competent contractors and inspectors to supplement the disclosures and guide you through the process.
- Give yourself an “OUT” clause on the purchase contract. Property Inspection contingencies, Pest Inspection contingencies, appraisal and loan contingencies all allow for time frames to complete inspections and for deposits to be returned to the buyer if the buyer is not satisfied with the results.
- Be thorough and comply with the purchase contract. Once lenders agree to the price and terms of a purchase contract on a foreclosure, they are less willing to make concessions.