One lazy day last month I was sitting at my computer when an email comes over from a client.
"Tim, the house we made an offer on last month is back on the market. It is on the market for a lot less than we offered. Can you tell me what is up with that?"
What happened next was truly puzzling. It also is something that most clients (and this Realtor) don't fully understand.
First, a little background. The home is in Lake Arrowhead, CA. My client is looking for a second home. We went up to Arrowhead in April and looked at 7 homes (5 REO, 1 Resale, 1 Short Sale). As usual my client loved the short sale. It was a quaint Chateau just outside of the "woods" in Lake Arrowhead. The home was built in 1963 and has a very nice view of the lake. However, because it is outside of the "woods" it does not have access to the lake. The home was listed for $279,900. We ran a comp check and determined that this might be a bit high, yet we made a full price offer because of the short sale status. The listing agent said that they had already done a BPO and had approval at $325,000. Side-note...it is amazing to me how many listing agents list homes BELOW their approval price.
After a few weeks of waiting, the bank came back saying, "we will not go lower than $315,000." I advised my client not to raise their offer. I felt that the home was actually overpriced at $279,900. We sent over comps on the property showing the bank closed sales in the area (out of the "woods") for $240,000. We let them know that we were still willing to pay $280,000 (my clients really liked the place).
"No," the bank said.
My client was disappointed. We moved on. We have continued looking in the area finding nothing that knocked their socks off.
After a very short month...I got the above mentioned email.
The house was back on the market for $218,000. This bank had an offer for $280,000 that they would not accept 28 days before. On this day, they were about to accept a "full price" offer of $218,000. Literally, they cost themselves $62,000 + any foreclosure fees (usually $20,000-30,000).
We have a couple theories as to why this happened. 1.) The seller didn't qualify for a short sale, so the bank would rather foreclose than help out the seller. 2.) The lost mitigation departments at banks pay their employees more for the disposition of an REO than they do for a short sale.
These are just theories...all we know for certain is that when short sales are involved banks make no cents!
Showing posts with label Realtor. Show all posts
Showing posts with label Realtor. Show all posts
Friday, June 6, 2008
Sunday, June 1, 2008
Where is the best deal?
As we walked into the front door, the finely appointed furniture and the wood floors stood out to me. We had just been through four or five bank owned homes and this one was not. This home was being sold by some folks with a lot of equity who need to be closer to their kids school. We moved through the meticulously cared for rooms, the kitchen, into the fully landscaped backyard and marveled at the differences in the places we had seen that day. Absent were the mysterious odors, gone was the dust from another Realtor leaving a window open, there was no dead grass in the backyard...instead those things were replaced with candles, posters from kids favorite rock bands, antique furniture, and an amazing pool in the backyard. My clients fell in love.
My weeks are usually consumed by wandering in and out of many vacant homes throughout Riverside County (Corona, Riverside, Lake Elsinore, Murrieta, Temecula). Homes where you need to have a creative mind to see the potential of what might be. These homes are missing kitchens, they have holes in the wall, they have mangled carpet (or tile, or wood), dead grass in the front yard and no landscaping in the backyard, they have left behind desks in the garage and sometimes trash all throughout the backyard.
This dichotomy presents a big problem. My clients are looking for turnkey homes. They want to get the best deals AND they want the home to be perfect. Clients usually want Wal-Mart prices with Saks Fifth Avenue service. However, this place usually does not exist. And when it does, it is listed for $318,000 and sells for $385,000...true story of a home in Corona 6 weeks ago.
In today's market, buyers need to understand that turnkey means that there is a seller (not the bank) involved. A seller who measured their kids in the kitchen doorway. A seller who used to have Thanksgiving dinner in the dining room. A seller who had barbecues in the backyard for the Fourth of July. A seller who last year knew their house was worth at least 30% more than it is today. A seller who has a mortgage on this home.
The bank usually isn't too worried about the condition of the property. The bank cares about none of these things. The bank cares about one thing, the bottom line (which usually is 92% of market value).
As we walked out of the house, my clients looked at me and said, "we want this one."
I knew...I could see it in their eyes.
They made a decision that is so hard for buyers to make today. They made their decision based on the location of the property, based on the needs of their family, based on what they wanted. They wanted turnkey...and they paid top dollar for it. Most buyers want the best home in the neighborhood for less than the worst home in the neighborhood.
Unfortunately, they spend a lot of time looking at homes, writing a lot of low offers while someone else is moving into their home.
My weeks are usually consumed by wandering in and out of many vacant homes throughout Riverside County (Corona, Riverside, Lake Elsinore, Murrieta, Temecula). Homes where you need to have a creative mind to see the potential of what might be. These homes are missing kitchens, they have holes in the wall, they have mangled carpet (or tile, or wood), dead grass in the front yard and no landscaping in the backyard, they have left behind desks in the garage and sometimes trash all throughout the backyard.
This dichotomy presents a big problem. My clients are looking for turnkey homes. They want to get the best deals AND they want the home to be perfect. Clients usually want Wal-Mart prices with Saks Fifth Avenue service. However, this place usually does not exist. And when it does, it is listed for $318,000 and sells for $385,000...true story of a home in Corona 6 weeks ago.
In today's market, buyers need to understand that turnkey means that there is a seller (not the bank) involved. A seller who measured their kids in the kitchen doorway. A seller who used to have Thanksgiving dinner in the dining room. A seller who had barbecues in the backyard for the Fourth of July. A seller who last year knew their house was worth at least 30% more than it is today. A seller who has a mortgage on this home.
The bank usually isn't too worried about the condition of the property. The bank cares about none of these things. The bank cares about one thing, the bottom line (which usually is 92% of market value).
As we walked out of the house, my clients looked at me and said, "we want this one."
I knew...I could see it in their eyes.
They made a decision that is so hard for buyers to make today. They made their decision based on the location of the property, based on the needs of their family, based on what they wanted. They wanted turnkey...and they paid top dollar for it. Most buyers want the best home in the neighborhood for less than the worst home in the neighborhood.
Unfortunately, they spend a lot of time looking at homes, writing a lot of low offers while someone else is moving into their home.
Wednesday, May 14, 2008
Zip Realty
Zip Realty combines the power of the internet and the service of a traditional Realtor (me). You have access to search the same homes other Realtors search, putting you in control of your home buying experience. Additionally, our website offers a wealth of information such as financial calculators, information on schools, and demographics. Having said all of that, Zip Realty, really does have an amazing website. We allow all homes onto our websites…not just home listed by Zip Realty. Also, our search engines are very powerful. You can include/exclude/etc short sales or fixers…and you can search either by home value or monthly payment. Please click on the Zip Realty logo to the left...and you can visit our site. IF YOU DO...PLEASE REGISTER AND SELECT ME AS YOUR REALTOR!!! I will do an amazing job helping you buy a home.
I will write more later on a HUGE benefit of Zip Realty!!!
Tuesday, May 13, 2008
Closing Costs
What are closing costs? This is a VERY common question that I am asked. And it is very quickly followed up with...how much are closing costs? Most of the time they will be less than 3% of the purchase price. The percentage might be higher, the lower the purchase price. Let me first describe closing costs...they are the costs associated with escrow.
Title Insurance: $1,000
Escrow fees: $500
Notary fees: $150
Misc fees: $500
This is not the end of the story...closing costs also include the fees associated with obtaining a mortgage. Typical fees for a mortgage are 1-1.5%...to the mortgage officer (this is also known as "origination fee"...or "broker fee"). The lender is also going to add fees. As you can see we are quickly approaching the 3%.
Lastly, pre-paids are part of closing costs. When you close a loan...you are required to pay interest for the rest of the month in which the loan funds (example...the loan funds on May 15th...31 days in May...you would owe pre-paid interest for 16 days...the actual cost depends on your interest rate). Also, the lender may require you to pay pre-paid insurance. And it is likely that you will be responsible for paying a portion of the years taxes.
When negotiating closing costs with your lender..the areas with the most wiggle room are the "mortgage fees". Title insurance and escrow fees are going to be mostly the same from company to company...however, a lot of mortgage officer's require a lot of other fees (like processing fees, etc...). The biggest area of negotiating is the "origination" or " broker" fees.
Title Insurance: $1,000
Escrow fees: $500
Notary fees: $150
Misc fees: $500
This is not the end of the story...closing costs also include the fees associated with obtaining a mortgage. Typical fees for a mortgage are 1-1.5%...to the mortgage officer (this is also known as "origination fee"...or "broker fee"). The lender is also going to add fees. As you can see we are quickly approaching the 3%.
Lastly, pre-paids are part of closing costs. When you close a loan...you are required to pay interest for the rest of the month in which the loan funds (example...the loan funds on May 15th...31 days in May...you would owe pre-paid interest for 16 days...the actual cost depends on your interest rate). Also, the lender may require you to pay pre-paid insurance. And it is likely that you will be responsible for paying a portion of the years taxes.
When negotiating closing costs with your lender..the areas with the most wiggle room are the "mortgage fees". Title insurance and escrow fees are going to be mostly the same from company to company...however, a lot of mortgage officer's require a lot of other fees (like processing fees, etc...). The biggest area of negotiating is the "origination" or " broker" fees.
Sunday, May 11, 2008
Short Sales
Short sales are very hard to read, and are not always a good deal. Let me try to explain the process. In order to sell property as a "short sale"...the owner must "qualify". In order to "qualify", they (the owner) must submit documentation (bank statements, financial statements, tax returns, etc) proving that they can no longer afford their mortgage. A "short sale" is an attempt by the owner to sell the property short of foreclosure AND what they owe. In order to get the lender to look at the "short sale", they need to submit an offer from someone willing to purchase the property. Therefore, the primary motivation of the owner and the listing agent is to get the initial offer...NOT listing the property at market value. After the lender gets the initial offer (and the owner's financial statements), the lender orders an appraisal and BPOs (this is where the lender asks a few Realtors in the area how much the Realtor thinks the property is worth). This process takes 2-6 weeks...to just get an approval! After the approval, they must now accept an offer from a buyer. After they accept an offer, escrow is opened, which typically last 30 days.
Short sales are not necessarily a good deal because...1.) they are often listed below market value and banks are typically trying to sell the property for approximately market value, 2.) you are agreeing to a price on a property 10 weeks before closing the transaction. This can cause 2 problems, 1.) the buyers lender may not approve of the deal after that much time (interest rates may rise, loan programs may go away), 2.) the buyer is agreeing to a price on a property 10 weeks before it may close escrow (in a declining market the home may actually be worth significantly less before escrow closes).
Short sales are not necessarily a good deal because...1.) they are often listed below market value and banks are typically trying to sell the property for approximately market value, 2.) you are agreeing to a price on a property 10 weeks before closing the transaction. This can cause 2 problems, 1.) the buyers lender may not approve of the deal after that much time (interest rates may rise, loan programs may go away), 2.) the buyer is agreeing to a price on a property 10 weeks before it may close escrow (in a declining market the home may actually be worth significantly less before escrow closes).
The primary thing to be considered when making an offer on a short sale is the market value of the property NOT the list price.
Saturday, May 10, 2008
I really want to buy a home...where do I start? pt. 3
The fun begins after the offer is accepted. In a normal environment...you have 17 days to remove all contingencies. Contingencies...
1.) home inspection
2.) home appraisal
3.) loan approval
The home inspection is a vital part of any home purchase. This is where an inspector comes out to the home and thoroughly inspects the property. He looks at the condition of the property (nothing cosmetic...i.e. carpet, paint, etc.). He is going to check the appliances, the utilities, and see if there are any other major items that he believes need to be further inspected.
The home appraisal is another inspection. However, the appraiser is inspecting the property compared to other properties...in an effort to assign a value to the property.
For both of these inspections...it is recommended to have a licensed inspector. Also, remember...most of the time these inspections are going to be paid for by the buyer. This means typically in the first 10 days of escrow...the buyer will be responsible for paying approximately $750.00. Here are some links to look into inspectors and appraisers...
http://www.ashi.org/
http://www.nachi.org/
http://www.appraisalinstitute.org/
1.) home inspection
2.) home appraisal
3.) loan approval
The home inspection is a vital part of any home purchase. This is where an inspector comes out to the home and thoroughly inspects the property. He looks at the condition of the property (nothing cosmetic...i.e. carpet, paint, etc.). He is going to check the appliances, the utilities, and see if there are any other major items that he believes need to be further inspected.
The home appraisal is another inspection. However, the appraiser is inspecting the property compared to other properties...in an effort to assign a value to the property.
For both of these inspections...it is recommended to have a licensed inspector. Also, remember...most of the time these inspections are going to be paid for by the buyer. This means typically in the first 10 days of escrow...the buyer will be responsible for paying approximately $750.00. Here are some links to look into inspectors and appraisers...
http://www.ashi.org/
http://www.nachi.org/
http://www.appraisalinstitute.org/
Monday, April 28, 2008
I really want to buy a home...where do I start? pt. 1
I get asked this question a lot. My experience tells me that people have many different "places" to start. Here is my opinion of the home buying process...
1.) Pre-approval - this is the part that everyone dreads. You have to give very personal information to a complete stranger who then is going to tell you how much of a house you qualify to buy. The process is short and typically painless. You call a bank or a mortgage officer (by the way...I have plenty to refer you to if you don't know who to call), and tell them that you want to buy a house. They will ask for your income, credit information, etc...and tell you how much you can afford...usually folks decide how much they can afford by the payment.
2.) Get out and start looking - this is the fun part. You have an opportunity to view many homes (tons in fact...there are over 2,700 homes available in Corona, 1,000 in Lake Elsinore, 1,600 in Murrieta, and 1,300 in Temecula). The process can also become tedious and overwhelming because of the inventory. I recommend viewing 6-8 homes at a time...when you look at more than that...the homes tend to start blurring together (which house had the granite counter-tops, did this one have the slate kitchen, what did the loft look like in the house on Main St, etc...).
1.) Pre-approval - this is the part that everyone dreads. You have to give very personal information to a complete stranger who then is going to tell you how much of a house you qualify to buy. The process is short and typically painless. You call a bank or a mortgage officer (by the way...I have plenty to refer you to if you don't know who to call), and tell them that you want to buy a house. They will ask for your income, credit information, etc...and tell you how much you can afford...usually folks decide how much they can afford by the payment.
2.) Get out and start looking - this is the fun part. You have an opportunity to view many homes (tons in fact...there are over 2,700 homes available in Corona, 1,000 in Lake Elsinore, 1,600 in Murrieta, and 1,300 in Temecula). The process can also become tedious and overwhelming because of the inventory. I recommend viewing 6-8 homes at a time...when you look at more than that...the homes tend to start blurring together (which house had the granite counter-tops, did this one have the slate kitchen, what did the loft look like in the house on Main St, etc...).
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