Posts Tagged ‘Foreclosures’

Sacramento Area Foreclosure Numbers

I’ve just processed the sales data for the past March, so it’s time to start looking at the numbers as we always do. Rather than start out going county by county, this month I thought it would be interesting to take a look at how foreclosures and short sales are stacking up between Sacramento County, El Dorado County, and Placer County. The famous saw about real estate, “location, location, location” applies as much — indeed, probably more — to market statistics as a whole than it does to individual homes.

What we seem to be seeing for March is that, compared to a year ago, banks are more willing to just foreclose on a home in Sacramento County rather than processing a short sale. The number of foreclosures rose 20.2% from March of 2010 to March of 2011 in Sacramento County, while at the same time, the number of short sales fell 10.4%. At the same time, sales of non-distressed homes also fell by some 17.7%. The result is that, for March at least, the overall sales volume was fairly flat (actually down less than 1%), from 1845 homes sold in March of 2010 to 1833 sold this March.

Investors and others are grabbing foreclosures in a very short time indeed in Sacramento County, resulting in inventory levels of only two months county-wide.

Sale of non-distressed homes were also off in El Dorado County by 16.9% year on year, while foreclosure sales soared by 31.7% during this period. The number of short sales also rose during this time by 13.2%. Overall for all categories, unit volume rose during this time by 6.3%, from 175 homes in March of last year to 186 homes this year. As in Sacramento County, short sales continue to make up the bulk of the inventory, with foreclosure inventory at a low 2.7 months.

Compared to El Dorado and Sacramento Counties, the picture in Placer County looks almost good, with year on year volume up an encouraging 14.7%. More surprisingly, of the three counties, Placer was the only one that saw a substantial increase in the number of non-distressed homes sold (14.5%) . Foreclosures rose only 1.3% during the period, but short sales rose some 34.9%. The inventory of short sales in Placer County is high but slightly less than that of Sacramento and El Dorado Counties at 10.1 months. Not surprisingly given these numbers, Placer County saw the smallest year-on-year price drop, at 5.8%, versus 7.2% for El Dorado County and 8.4% for Sacramento County.

Wanted, Owner Occupants — Sacramento Area HUD Homes

This article is part of our How To Buy A Home Series (Learn More, Subscribe)

There is one type of foreclosure property that you should know about, especially if you are a buyer who plans to occupy the home (as opposed to an investor).  That category is the HUD foreclosure or “HUD home”.   HUD homes are homes that have had an FHA buyer who defaulted on the loan.  Remember that FHA is a program that insures the lenders against risk when they participate in this low-down-payment government program.  Therefore, when an FHA home is foreclosed, the lender submits a claim to HUD, who pays the claim, takes possession of the property, and puts the home on the market as a HUD home.

Why should you care?  Well, on a non-HUD foreclosure, here’s what you’re up against.  First, you’ll be competing with investors who are cash buyers.  Lenders don’t like having homes in inventory, and they prefer an escrow that is quick and painless, where the home is sold in “AS IS” condition.   Moreover, if you’re a first time buyer with only a modest down payment, you should realize that many (not all) banks with foreclosures don’t like to do FHA financing, because they know that FHA imposes certain minimum housing standards — and often foreclosed homes have major work that needs doing to bring them up to these standards.  The cash buyers have access to the home as soon as you do, so naturally this makes competition fierce, and accounts for why we typically only have about 2 months of homes in inventory.

With a HUD home, you stand a better chance, for several reasons.  First, it’s a matter of HUD policy to give preference to owner-occupants.  If you are prepared to stay in the home for one year or more, you will have the first chance to bid on HUD homes.  For the first thirty days a HUD home is on the market, it’s “No Investors Allowed” — HUD only wants to look at bids from owner-occupants.

Second, if you’re a first time home buyer especially, you should know that HUD offers extremely attractive terms.  Some HUD homes are available with FHA financing, and some of these are eligible for FHA 203K rehab loans, meaning you can finance the repair work that needs to be done to bring the home up to FHA standards.  On some HUD homes, HUD will pay up to 3% of the price of the home toward your closing costs, and on some, you can bring in a down payment as little as $100. So for $100 and the remainder of your closing costs, you can own a home.

Imagine that, owning a home for a couple of thousand dollars, and being able to successfully compete against cash buyers.

To find out what HUD Homes are available in our area, your best resource is HUD’s official web site, HUDHomestore.com.  New HUD homes come on the market every day, so be sure to sign up for email updates in the areas you’re interested in.  HUD is its own beast, and many folks have found that these email updates will serve you even better than the MLS.

We’re very excited for the opportunities for buyers in HUD homes, and can refer you to a reputable HUD agent who can help you if you find something you like.  I’m also pleased to announce that that “reputable HUD agent” will soon be Lockwood Real Estate, since I just got back from submitting my Selling Broker application with HUD.  As I write this there are currently 46 Sacramento County HUD Homes, with more being listed every day.  As lending standards have tightened making FHA far more important in recent years, of course in this economy with many folks losing their jobs, this has meant more FHA foreclosures.  Unlike foreclosures on conventional loans, however, you don’t have to be a real estate mogul to take full advantage of what’s available.

If we  can answer any questions for you about HUD homes that you see in the MLS or on the HUDHomeStore web site, please send us an email or give us a call at 877-735-5657.  To learn more about HUD homes and other things you should know when you’re in the market for a home in the Sacramento area, why not subscribe to our How to Buy a Home Newsletter today.  Your email address is safe with us.

Short Sale Pros and Cons — Myth versus Reality

There’s a lot of misinformation about short sales, and at least some of that is coming from the real estate agents who get paid to do them.  To be sure, there are some advantages to doing a short sale, but they may not be what you’ve been told, especially if you’ve met with any over-zealous listing agents recently.

The Myths

  • An Approved Short Sale Will Save You From Foreclosure If ever there was an appropriate for the Yogi-ism “It ain’t over till it’s over”, it’s in the short sale.  What happens in a short sale will often defy logic.  To be sure, the bank may stand to lose more money on a foreclosure than a short sale, but that’s not true of foreclosure2the loan servicer (the company working for the bank to collect the payments, and, in the absence of payments, to foreclose).  Some of these fees are triggered by the foreclosure itself, so make sure the bank and the servicer are communicating.Certainly simply having your home on the market alone will not stop the foreclosure process.  Your prospects for success improve if the bank accepts your buyer’s offer, but like it or not it’s the banks and their servicers who are in control up to the end.  When and if the escrow closes and the deed on the sale is recorded with the county, you’ve successfully escaped foreclosure.  Until then the best you can do is try to keep the communication open with the bank, work with a good listing agent, and hope for a successful outcome.
  • A Short Sale Will Save Your Credit

    Generally, a bank won’t approve a short sale unless you are behind on your payments.  Unfortunately, simply being late on your payments already has a serious impact on your credit.Moreover, it doesn’t appear that any difference between short sales and foreclosures on the impact on credit scores is minimal.  In 2010, VantageScore Solutions, a company that aggregates data from the three major credit bureaus, did a study of the impact of various foreclosure-related scenarios on consumer credit.  The study revealed that a short sale impacts your credit just about as much as a foreclosure.  For those borrowers whose credit was clean otherwise, the average short sale cost them 120–130 points.  In a foreclosure, if they continued making (presumably reduced) payments, they lost 115–125 points.  In a foreclosure where they were behind in their payments, they lost between 130–140 points.

The Reality

Even though the chances are good that a short sale won’t save your credit, there are a some advantages to doing a short sale over letting the bank walk away with the keys.

  • Knowing You Did What You Can To Avoid ForeclosureLet’s face it, most people want to fulfill their obligations if they can, and even though there are plenty of folks in the same boat in this economy, they feel there is a certain stigma attached to losing their home by foreclosure.  For this reason, being able to walk away with the feeling that you sold your home instead of having lost it is perhaps one of the main intangible benefits of a short sale.
  • Being Able To Buy Another Home Sooner Although your credit is affected more or less equally by a short sale and a foreclosure, there is still an advantage to a short sale in terms of how soon you will be able to buy again – assuming you want to and you can get your credit in order again.   According to Fannie Mae guidelines, a buyer is eligible to buy a home within two years after a short sale, but has to wait up to seven years to buy after a foreclosure, though this period may be as short as three years if there are extenuating circumstances such as sickness, severe injury, or job transfer.This is important because Fannie Mae — along with the other major Government Sponsored Enterprise, Freddie Mac – buys some 50% of the loans in the US market from banks.  Being able to resell your loan is one of the things lenders look for in a borrower, so as a practical matter, the guidelines in the secondary market make a huge difference in your ability to get financing later  on.

Are there good reasons to do a short sale?  To be sure, but if you decide to go that route, we believe you should go into it knowing what to expect.

Foreclosures: Contradictory Messages and Different Numbers?

The California Association of Realtors announced recently that foreclosure sales have increased 92.3% year over year in March 2010. In February 2010 this increase was 24.2% as compared with February 2009. This information comes directly from ForeclosureRadar’s March foreclosure report. Elsewhere there is information that real estate prices are set to fall once again.

I just want to jump into this and clarify the difference between foreclosure sales as reported by companies like ForeclosureRadar and this website. Our information comes solely from the MLS and what our website calls “foreclosure sales” are those homes that have been placed on the open real estate market by banks and listed by a real estate broker. These homes are considered REOs, or “real estate owned” by the bank, houses that have been foreclosed on by banks due to lack of mortgage payment by home owners.

Most companies that keep track of real estate sales data that are not primarily a real estate brokerages also count the “sale” of a home back to the bank as a foreclosure sale, which is why their numbers always appear more numerous than our totals. In their case, the foreclosure of one home can appear twice – one sale to the bank, the other to a homebuyer, while we would only count the latter. It is an important difference to remember.

FHA No Flip 90 Day Law

First off, I would like to say the best thing about being part of the Association of Realtors® is the legal hotline. Where else would you have lawyers sitting around the phone waiting to answer your legal questions? For free?

I recently had the opportunity to use the broker’s legal hotline provided by the California Association of Realtors® because we had a question about the 90 day no flip law of the FHA. I think now that most loans are FHA loans I think it’s a law I should mention here and discuss in brief. (Of course, the disclaimer stands: I’m not an attorney and am not providing legal advice.)

If you wish to read the law for yourself, you can click here. Referred to as “24 CFR section 203.37a” or more commonly the “90 day anti-flip law” of the FHA it disallows you from selling the home (or even having it under a sales contract) you have bought with an FHA loan for the first 90 days of ownership. There are various other requirements regarding appraisal and so forth for period after the first 90 days as well.

Now you might say, who’s flipping? But the fact is, many people are, albeit for small profits. From what I hear, the number of bank-owned properties on the market are dwindling and although some Realtors® expect to see more listed later this year, the quality of REOs on the current real estate market leaves quite a bit to be desired. This may have just contributed to the perfect scenario for small profits in the quick-flip area. Rehabilitating REOs and then selling them on the open market might be welcomed by eager home buyers who have trouble finding decent homes that are not REOs (too much competition) or short sales (too unsure.)

Whether the inventory goes up from here with more REOs coming on the market according to predictions or it doesn’t, watch for more of these kind of flip homes as the bank-owned homes start to look less and less attractive because of their condition. As the market starts to recover, we may just see more flips before it stabilizes.

If you’re considering it, just make sure you know the laws around it!

New Homes vs. REOs

During a recent conversation with one of our top producing agents at Elite Properties, Mike Keleshian, he mentioned something that I thought would be worth mentioning on the blog. He said that new homes are lately very possibly beating bank-owned homes as better bargains for home buyers and they are definitely options a home buyer should keep in mind when shopping in this market.

Really?

When one thinks of great bargains in this current real estate market, we tend to think of mainly bank owned homes. While it is true that prices have fallen overall because of the number of foreclosures in the market brought about by the number of bad loans out there, it is also important to remember that prices have fallen for all the homes.

While banks usually price their inventory at rock bottom prices to get rid of it, other homes in the neighborhood are also affected. Their prices have also fallen. (As you probably already know, prices are based on comparable sales of nearby homes. If all the homes in the area are foreclosures and their prices are depressed, the prices of the subject properties fall as well.) So it’s not just the foreclosures that are underpriced – brand spanking new homes have also lost value and are now cheaper than they used to be.

Can a Realtor® Show me New Homes?

Absolutely. In fact, one of the biggest changes that has occurred because of the real estate slowdown is that new homes are now featured regularly in the Metrolist MLS that all Realtors® in the area use. In the past, Realtors® were not welcome in new home subdivisions – and if you can remember the time – home buyers were picked by lotteries and long waiting lists.

Today, the situation is completely different. Home buyers have huge incentives to buy these new homes, whether it be free upgrades or better financing. Some homebuilders are also throwing in luxury vacations and so forth to entice home buyers. Of course, while you’re not really considering a luxury cruise as soon as you buy a new home it is important to know that the home buyers now hold the cards.

What about the Financing Aspects?

If you’re a first time homebuyer in this market, the world is your oyster! Besides the tax credit to first time home buyers, new home builders are now giving you incentives in terms of financing your home purchase. These incentives include a lower interest rate (i.e. lower than what you could get from the bank or any mortgage broker – they discount a point or so) if you use their preferred lender, various upgrades like granite counter tops, landscaping and / or custom paints and so on. Sometimes, builders will even offer to pay a year or two of your mortgage payment.

To compare this with a bank-owned home is to see the advantages of buying a new home right away. Bank owned homes typically need you to jump through their hoops – get pre-approved with their own lender, shorten your timelines to get a loan and various other financing issues. Why not look at new homes and take advantage of the incentives offered to you?

What are the Other Advantages?

I remember attending an appraisal class once and although the emphasis was on how to use comps for Realtors® the appraiser discussing details said something pretty unequivocally – Never compare a new home to a resale home. Why? Simply because it’s a new home!

But besides the fact that some people prefer homes where no one else has ever lived, the fact remains that a new home is something of a novelty for which people will pay a premium. Just from the practical side of things as well it has suffered less wear and tear and less depreciation than a resale home and usually much less than a home that has been foreclosed on someone for non-payment. (Of course, if there were no finances available for the mortgage payment, we can assume there is deferred maintenance on the home.)

It is up to the individual home buyer to decide whether or not he or she prefers a new home subdivision to a resale home, but it is however a choice that should not be ignored if you’re in the market for a home today. There is a host of choices out there and it’s a good idea to at least check each one out before making a decision!

REOs vs. Short Sales: What’s the Difference? Part 2

This is part two of the series REOs vs. Short Sales and today I want to discuss what benefits and disadvantages REOs and short sales offer the home buyer.

It’s all about Price… Or is it?

I mentioned in the earlier post that most home buyers mistakenly believe a short sale is a better deal and more deeply discounted than an REO simply because the word “short” appears in the term. This is a mistake. The truth is that home prices are determined by comps – comparable properties around the home and then adjusted for price. Ideally, the way you should determine if a home on the market is a bargain is by getting your Realtor® to get you a comparative market analysis. This will show you the sold prices of homes in the neighborhood that are similar to the one you are considering buying. It will also show you the asking prices on all other homes that are currently active listings.

Most REOs are priced on the low end. In fact, I have seen many that are grossly underpriced to encourage multiple offers and as such command a higher than asking price. So be sure to ask your Realtor® for a CMA.

As compared with an REO where the home buyer knows the bank’s rock bottom price, with a short sale one can never be sure. This is because the listing agent who is advertising the property and has put it up for sale has done so at the request of the home seller. Since short sales require the bank’s approval (to forgive the mortgage principal) the appraisal or Broker Price Opinion has not been done yet. It is only after the bank receives an offer do they sound out a real estate agent of their choosing to give them an idea of what the house would sell for. The price you see on the tag is not what ultimately the selling price, which leads nicely into the next topic.

Escrow and Other Timelines

To really find out what the bank wants for the home takes time. The biggest difference between an REO and a short sale really is that a short sale can take much, much longer. The reason behind this is obvious – with an REO the lender has already requested an appraisal and knows what the property should sell for in its current condition and has priced it as such. With a short sale, that entire process of getting an appraisal is yet to be done. Also, with a short sale, there has to be a reason for the lender to approve it. Since the lender would be forgiving the principal on the mortgage with little repurcussion for the homeowner, the home owner is required to provide bank statements, tax returns and so forth to prove genuine financial hardship. The simple fact that the house has lost value is not enough. This takes time as well.

Perhaps the best thing homebuyers can do is decide how long they are willing to wait and start the home search as soon as that period is up. There is even a short sale addendum that limits the time home buyers wait for a response. Although response times seem to have become shorter, it is still in the home buyers’ best interests to decide a timeline for themselves and stick to it to find a good discounted house.

Escrow timelines for short sales begin the day approval is sent over by the bank. This is usually when the home buyer has to start the loan process with his bank. REO escrow timelines start with the acceptance of the offer by the bank. Be forewarned, though: banks are notorious for taking all the time in the world to get back to you regarding your offer, but they take the timelines they give you – the home buyer – very seriously. They are known to include heavy fines in their offers for delayed closing of escrow, so be sure you can close before you remove contingencies!

Inspections & Disclosures

As every real estate investor knows, homes that smell cost less. The idea really is to find out what causes the smell. Of course, I’m using figurative speech here, but the truth is that with both short sales and REOs one might never know what exactly is wrong with them. Inspections thus become imperative. The reason is that the bank has never set foot in the house it has listed as an REO. With a short sale, you have a slight chance that the home sellers will be honest about what needs repair, but they are trying to get out from under the house and I wouldn’t count on any huge disclosures. The problem is that with both thes situations, the sellers have been under financial duress and so have not maintained the property. There are probably many issues of deferred maintenance which you as the home buyer should at least know about, so hire a good home inspector and leave nothing to chance.

So there you have it. Ultimately, I think it really comes down to a choice for the home buyers to decide how they can acquire a home which needs little work, in a good location that will appreciate as fast or faster than other homes in the area for the least money today. But remember that Realtors® are your biggest allies in this regard. Happy home shopping!

REO vs. Short Sale: What’s the Difference? Part 1

This question seems to come up a lot with home buyers, so I would like to deal with it in detail. I will be covering this topic in a two part series. Today we’ll discuss how REOs and short sales come to the real estate market. Since most homes on the market currently that are bargains are REOs and short sales, (sorry, non distressed sellers, but it’s true!) it is important that home buyers, especially first-time home buyers understand the difference between these two options.

What is an REO?

REO stands for Real Estate Owned. It usually means real estate owned by a bank or a lender. It is also referred to as a bank foreclosure, a bank-owned home, a bank repo (a word I detest, by the way), a repossessed house or simply a foreclosure. REOs find their way on to the open market when a home buyer who has bought the home with a mortgage does not make payments. The lender has given him the loan secured by the value of the home. In other words, the home buyer has said to the lender, “Give me the money to buy this home worth so much and I will pay you back with interest every month for the next 30 years while I live there. If I don’t pay you, you can take the house back,” and then has defaulted on his payments.

In this case, the lender has to “take the house back” through a legal process called foreclosure. First, the homeowner is given a notice of default. This is also recorded in the county clerk’s recorder’s office and is public record. The homeowner is given enough notice to be able to “cure” the loan by paying the back interest and principal. If he does not cure the loan the house is then open for auction. If no one buys it at the auction, the home then becomes real estate owned by the bank. Most banks are not interested in owning real estate.

Then What?

Two things happen. When a bank owns real estate, it stays on its books as a bad loan. A bank can only have a certain percentage of bad loans, so they are motivated to get rid of the house as soon as they can. Also, they understand that now their cash flow which should have been coming from the mortgage payments is stagnated, so they have less money to lend. Remember that a bank can only make money by lending money. So they hire a real estate agent.

The process by which they hire a real estate agent to sell the home can get a little complicated, but in the most direct way they ask for a broker price opinion (also called BPO or a rough appraisal) of the property and then list the home. That is how an REO ends up on the open market. Usually, until the house sells, it is up to the listing agent to maintain utilities, keep the home clean and get rid of debris inside the house. The agent can then bill the bank for it at close of escrow.

What is a short sale?

A short sale attracts many home buyers simply because of the term. They are erroneously led to the assumption that because a house is selling “short” it must be at a discount. Nothing could be further from the truth. While it is possible that the house is selling at a much lower price than its competition, a short sale could also be grossly overpriced. A “short sale” simply means that the sellers of the property are asking the lender to accept the current market value of the home as a sale price, which is less than the value on the note (loan) which secured the home. Thus, they are asking the lender to forgive the principal on the loan instead of foreclosing on the house. The assumption is that forclosures cost the lender money and hurt the seller’s credit score far worse than a short sale does. This is arguable and best discussed with an attorney. In my experience, clients have had the same damage to their credit.

How does a Short Sale get on the Market?

In most cases, the homeowners realize they are in financial trouble and cannot make their payments. In a better real estate market, this is not a problem. If they have paid down most of the principal on their total mortgage, they can sell the home. In other words, if the market value of the house is higher now than when they bought it, they can usually sell it without a short sale. The problem now of course is that the real estate market is trending down. So most homeowners who bought their homes in the upturn cannot sell them without a substantial loss.

At this point, the homeowners call a Realtor® and ask that the Realtor® speak with the bank and try and negotiate a short sale. The Realtor® becomes the listing agent and the seller’s real estate representative and works with the lender to approve the short sale of the property.

Most lenders currently are considering short sales seriously. We are definitely seeing the tide turn. But home buyers should be aware that just because a house is placed on the market as a short sale at a certain price that the lender will approve of the sale at that price. That, in my opinion, is the essential difference between REOs and short sales. With an REO, you know the sale price. With a short sale, the lenders don’t give out the information before the home is placed on the market and buyers are left playing the guessing game.

So now you know how REOs and short sales make it to the market. In the next part, I will discuss what some of the pitfalls are with both these options and also what, if any, are the benefits of buying either a short sale or an REO. Yes, that would be besides just the discounted price.

What’s so Scary about an REO?

Happy Halloween everyone! And if you’re wondering what’s the scariest thing on most home buyers’ minds today, you’ve come to the right place for an answer. Although most buyers are excited about the opportunities REOs (foreclosures – REO stands for Real Estate Owned by a bank, for the uninitiated) present in today’s real estate market, especially in the greater Sacramento area, I find that many are also concerned about buying a home that can have many unseen problems which may not show up until long after escrow closes. Today, I am here to address some of their concerns. Boo!

How a Home becomes an REO
As explained earlier, an REO is a foreclosure. When you buy a home in California, unless you pay cash for it, chances are you will have to finance the purchase. A home is financed in much the same way a car is financed – you sign legal documents called “a note” for a loan. The lender gives you the money which you agree to pay back with interest over a term of (usually) 30 years. If you default on the loan, the lender can then take the home back and sell it to someone else. The legal process of taking the home back for default on a note is called foreclosure. Although the process in California includes a trustee who is given the note and who is notified by the lender to begin foreclosure proceedings in the event of non-payment the basic idea remains the same: default on the mortgage and lose the home.

The lender is required by law to send a homebuyer who has defaulted on the loan a Notice of Default. This notice is recorded at the county clerk recorder’s office in the county where the property is located and is a document of public record. This means that anyone with an interest in the property may see it. The notice states when the lender is planning on foreclosing, ie. the date of the trustee’s sale and the outstanding amount the homeowner can pay to cure the default and stop the trustee’s sale.

Usually, as you can imagine, the default is not cured and the trustee auctions the property to anyone who will buy it. If there are no buyers at the trustee’s sale, the house becomes a foreclosure and is referred to as an REO – real estate owned by the lender.

What you should Know about an REO as a Homebuyer

Most lenders are not in the business of real estate; they are in the business of finance. And so, the house acquired by a bank through a foreclosure is usually put back on the open market. To come up for a sales price for the property, the bank hires a Realtor® and asks for a BPO – a Broker Price Opinion. The Realtor® appraises the property based on similar properties also known as “comps” and offers to list it. Since most foreclosures are fixers, they are usually placed on the market for a substantially discounted price.

As a home buyer of a bank owned home, your concerns are justified. An REO is usually a fixer. The most obvious reason for this being the family that was foreclosed upon was low on finances. If they didn’t have enough to make their mortgage payments, chances are there are quite a few things about the house that went unrepaired. This is also called deferred maintenance. Deferred maintanence can be a small problem, like a leaky faucet, or can hide bigger problems, like a leaky faucet that rotted the bathroom sub-floor.

You should also be aware that as a purchaser of an REO, you don’t receive full disclosure about the house. The bank is not required to provide you with a Transfer Disclosure Statement, partially because the lenders have never been in the home and are unaware of what exactly is wrong with it. They are also unaware of other problems a property may have, like boundary line disputes, and are unable to let you know if, say, there has been a death on the property.

How to Resolve your Concerns

Does this mean you are left completely at the mercy of Chance when you decide to buy a foreclosure? Sure, the price is deeply discounted, but does that make up for everything else? While that may be a question only you and your pocketbook might be able to answer, here is the most important pointer to take the sting out of potential problems: Always, always, always get the inspections!

Brokers recommend a variety of inspections, including pest, roof, septic system and a complete home inspection. Disregarding any of these inspections can be a big mistake on the part of a homebuyer. While most banks will not repair any items listed as potential or real problems during these inspections, you can get an idea of how much work is involved in making the home as habitable as you want it and decide if the asking price is worth the risk and work involved. The price you pay for the inspections (approximately $1000 for all included) is well worth its weight in gold.

You, The Smart Homebuyer

Okay, great! So you got the inspections done! The home seems structurally sound, but it looks like the roof can’t be certified. Can you knock off $10,000 from the asking price because the lender won’t put a new roof on? Not so fast! You should take into account the fact that the lender has already figured deferred maintenance into the price of the house. While there is no overt harm in making a lowball offer, you should also apply the comps in the neighborhood and balance them against your own timeline and budget for a house. Also remember that escrows today take longer (45 to 60 days as opposed to the 30 days from a while ago) because lenders are more careful about checking documentation.

With so many bargains out there in foreclosures, if you are serious about buying a home at a deeply discounted price, chances are you will find what you are looking for. So, go ahead. Get the facts, look hard and deep and don’t be scared to make an offer when you find the right one!

Before Foreclosure: Before you Walk Away

While I was having my early morning cappuccino today, made with a rather indulgent birthday gift I gave my husband, this impassioned email sent to us by someone who had been to our website caught my eye:

“Their loss is your gain” Very tacky marketing! We loved that home & left it in great condition. We worked with your representive [sic], I actually that [sic] about sending her a thank you note. Were [sic] is your empathy! I truly hope someone can purchase the home that I designed & finish it right. I hope that you are happy that your posting sent me & my family into tears again. OUR LOSS? Yes we did have a loss I am sure you do not care about exactly what our loss was/is. Did it occor [sic] to to [sic] that terminal illness could have played a roll [sic]? You should think again before marketing a foreclosed home in such a ruthless way.

I hurried off a reply explaining that the marketing was not ours. We never use tacky terms like that and are hugely empathetic to sellers in this market, especially ones that have ended up in a foreclosure / short sale situation through no fault of their own and genuine financial hardship. Unfortunately, there are so many others that simply want out of their homes because they are so called “upside down” in them that even the banks are having a hard time distinguishing between the genuine cases and the ones that just sick of falling house values.

So let me reiterate: this post is for those with genuine financial hardship. Here are some of the steps you can take before you decide to walk away from your home.

Determine if there is Genuine Hardship: As I mentioned earlier, some people in this market simply want out of their homes and the mortgage agreement because they see the value depreciating. Depreciating value in itself is not a reason for the bank to accept a short sale. You must prove genuine financial hardship. Remember that the mortgage agreement you signed when you bought the home is a contract and letting someone out of a contract requires a strong reason. Depreciating value of an asset is in itself not a good enough reason.

Get on the Phone: The single biggest mistake people make when they are beginning to have trouble making payments is to avoid all phone calls. As a landlord, if the rent doesn’t get to me in the specified time and the tenant does not call, it is my first red flag. I can tolerate the rent being late for a long time if there is communication. Your mortgage holders have the same thinking. They really don’t want to foreclose. They just want the payment. So, your first response to a difficult financial situation should be to call your creditors. That would include your credit card companies, the IRS, your mortgage holders and so on. You might be able to get your mortgage holders to rewrite the loan (and have a different monthly payment and terms) and stay in your home.

Keep in mind also that a home is a secured debt, which means it is secured by your house. If you stop making payments, the mortgage holder can take your home. Your credit cards are unsecured debt. If you stop making payments on those, the credit card companies cannot technically come after your home. If you have the stomach for it, you can keep your home and see about negotiating with other creditors.

Begin Building a Case: A banking job is very paperwork-heavy. Remember the thick stack of documents you signed as a home buyer? Well, to get out of it, the stack will be just as thick. Start collecting any and all documentation of your hardship. Collect bank statements for the last entire year, tax returns for the last five years, pay stubs for the last year and all other documentation you have which shows and documents the reasons for your hardship. This may include a letter from your employer if you have lost your job, a medical letter if you have a disability or illness, medical bills, IRS bills – anything to establish in the eyes of the negotiator that you are not someone who simply wants out. A paper trail is very important to a successful short sale.

Start Looking for an Apartment or Rental Home: Do not plan on living in the house until the date of the foreclosure. While this might seem like a good idea on the surface because you are not making mortgage payments and getting free rent, remember that every month of a missed mortgage payment hurts your credit score – something most landlords check when you apply for a place to live in. Even if the short sale does not go through, you will have to leave and need a replacement place to stay. There is no doubt about that. Your credit is going to be in a downward spin. The smartest thing you can do now is get a place to live and explain to the landlord that you are losing your home.

Try to get an Approval or a Dollar Amount: This is unfortunately the toughest part of a short sale. Before you call a Realtor®, send in the paperwork to the bank and try to get an idea of what price they will accept. Lenders are notorious for not telling you their price and having you wait for an offer before they send someone out for a broker price opinion. The problem with this approach is that the buyers tend to get tired of waiting and walk away. If you can get the bank to send someone out before an offer comes in, it saves time (lesser time also means your credit will be hurt less) and you are more likely to get a home buyer to make an offer. This does require that your paperwork be complete however, so make sure to get that sent into the bank and follow up with them.

Call a Realtor®: At this point, all a Realtor® has to do is advertise your house as an approved short sale, be open to an offer and send it over to the bank for final approval. Approved short sales can close in less than sixty days. Also remember that you do not have to pay either Realtor®, as would be the case in a traditional sale where the seller pays the Realtors® involved. In this case, the lender would be the one making the payment for services rendered. That is why the lender will often ask for a net sheet from a title company before the final approval is issued.

Don’t Forget your Accountant! Your short sale or foreclosure may have tax ramifications and perhaps legal ones as well. Be sure to talk with your tax preparer and attorney regarding these. Deciding to walk away from your home is a difficult and painful process – one that we hope you never have to do. But if it is inevitable, I hope the tips in this post help.

Sacramento County Real Estate Market Update

Greetings, market statistics fans!  Straighten up those pocket protectors and hang on to your slide rules, because it’s time once again for us to catch up on our REM sleep with yet another thrilling installment of our never-ending saga:  Sacramento (County) Real Estate Market Updates!

And the crowds went wild.

The good news:  905 units sold in February, up some ten per cent from January.  Unit volume was even up marginally from last February — and, yes, this still holds true when you adjust for the leap year.  February’s unit volume was the highest since last July, when 977 units sold.

The average home sold for $273,603 in February, up slightly over January’s average of $269,301, but down 29.9% from last February’s average sale price of $390,043.  The median sale price of $249,000 was down 29.2% from last February’s median of $353,000.  Sold price per square foot is down 28.8% from February to February, at $162.76 this year versus $228.63 last year.

The 905 units that sold in February is not bad for a late winter month where the average over the preceding twelve months was 968 units per month.  Currently there are 9,866 homes on the market, which works out to be 10.2 months of inventory.  33.9% of the homes in active inventory are short sales, but as we’ve reported earlier and a variety of our colleagues in other markets have reported since, the closing rate for short sales is much lower, at 6.6% in February.  Bank foreclosures (REOs), in contrast, make up 28% of the current active inventory (2,763 of the 9,866 available units), but in February they accounted for 59.2% of the homes that sold in Sacramento County (542 out of 905 total sales).

Sacramento Area Foreclosures, Short Sales, Condos, etc. etc.

We’ve updated our listings database.  It was getting pretty long in the tooth there.

Most people who are users of our web site(s) probably don’t know it, but many of our web sites including this one, our Roseville real estate site and our Elite Properties company site actually rely on two different databases of listings.  When you use our search page, for example, you’re using a listings database that’s our IDX company gets from our Metrolist database.  These listings are updated daily, so when you do a search, you’re looking at listings that are within twenty-four hours of being as current as the ones that we as Realtors® can look at..

In addition to the search tools that our IDX company provides, however, we also wanted to allow you to browse for certain types of listings.  One thing our IDX system doesn’t do, for example, is show you short sales and foreclosures.  Because we don’t have direct access to the database our IDX company uses, we’ve created a second database that we can use in various ways.

For example, our foreclosure search page lets you search for foreclosures and short sales, or browse them by county.  Similarly our new homes section let’s you see homes that have just been built that are listed in the MLS, and our condo pages contain links to condos grouped by price and county.

As we mentioned above, we’ve also used this database on some of our other sites.  Many clients find us through our the maps of listings by zip code that we maintain on our company site.  These maps include zip codes in El Dorado County, Placer County, and Sacramento County.  Within each zip code you can find active listings and get recent market data.  We publish similar data for Placer County only on our Roseville site.

Unlike our IDX system, which is updated automatically on a daily basis, these other resources are updated manually as time permits.

We realize that from a software perspective, that’s not the brightest way to do it.  But if you’ve ever tried to get someone from Metrolist to call you back about a data feed, you probably have a good idea that it’s not half-dumb from an organizational perspective.

The good news is, it’s up to date now.  So as my wife is fond of saying, “Get your red hot houses here!”

Enjoy.

How Much are Sacramento County Short Sales / Bank Foreclosures Discounted?

I took a few minutes today to look at the discounts for short sales and foreclosures based simply on list prices.  In other words — how much are they discounted before you negotiate with the seller? 

Foreclosures may have a little more negotiating room between list price and sale price, but not as much as you may think.  The reason is that homes that are priced well to begin with tend to get more competition, so even in the case of bank owned foreclosures, buyers typically only negotiate something between 5-6% off the list price for foreclosures, as compared to about 4% for all sales.

The real bulk of the discounts for foreclosures and short sales already appears in the MLS.

So with that, let’s look at the results.  How much are foreclosures and short sales discounted in Sacramento County?

In active inventory, the list price for non-distressed sales are currently averaging $228.62 per square foot.  Short sales are discounted, on average, 27.8%, with the average list price for short sales being $165.00 per square foot.  Foreclosures are discounted even more — 36% compared to non-distressed sales — with the average REO in Sacramento County currently listed at $146.19 per square foot.

One caveat, however.  If you look at short sales and foreclosures on a neighborhood by neighborhood basis, you generally see foreclosures still having better discounts than short sales — but the overall magnitude of the discounts are somewhat less than they are when you look at the entire county.  This is because part of the 27.8% and 36% numbers reported above reflects the fact that in many cases more expensive areas also have fewer foreclosures. 

In Antelope, for example, Short Sales are currently listed at a discount of 26.3%, and foreclosures are currently discounted 30%, from their non-distressed counterparts.

“Only” 30% off?  That’s still not bad!

Sacramento County Real Estate – Market Update January, Part II

In our Sacramento Real Estate Market Update for January, Part I, I began rounding up the usual statistical suspects, but I decided to leave some of them to a future post, since I wanted to spend some time in part one having a discussion about the recent upsurge in demand.

Left out of part one was a discussion of where we are with respect to foreclosures and short sales. In January of 2007, foreclosures and short sales collectively made up only 7.3% of all sales. Foreclosures accounted for 4.6% of all sales, while short sales accounted for 2.7% of all sales. That’s about one home in every thirteen.

In January of 2008, in contrast, foreclosures and short sales accounted for 67%, or just over two out of every three sold homes. Of these, the vast majority are foreclosures, which accounted for 60.5% of the total sales in January, even though they only make up 27.5% of the current active inventory. Short sales make up even more of the active inventory at 32.1%, but in January only 6.5% of closed transactions were short sales.

How To Ruin Your Credit And End Up In Foreclosure in Ten Easy Steps

I’ve been thinking about all the news about foreclosures.  I work here in the greater Sacramento area.  Though I live in El Dorado County, which (along with Placer County) has experienced relatively few foreclosures, Sacramento County currently has more than fifty per-cent short sales and foreclosures in inventory.  Now granted, that’s not necessarily a huge number compared to all the homes in the area, since obviously being in financial trouble triggers a sale — most folks who own homes aren’t in foreclosure, and aren’t selling at any given time.  Still, it’s enough to get my attention.

A caricature of Realtors® is that we’re always pushing home ownership on unsuspecting victims.  I think the general consensus lies somewhere between the idea that we have hypnotic powers of persuasion to lure our victims into contracts they don’t want (much like the famous Hypnotoad, shown at right) or — less charitably — that we hit people over the head with shovels to get them into our cars, then take it from there.

Those Educated Internet Buyers – What’s a Poor Hypnotoad to Do?

Unfortunately, your standard Jedi / Hypnotoad mind tricks only work on the weak minded.  Most people I meet here on the Internet have too many information resources at their disposal to be an easy mark for these unscrupulous amphibians.  That’s probably why none of my buyers has (to my knowledge) ended up in foreclosure yet. 

Still, there may be some of you out there who are just itching to do it, so for those of you with a real hankering to financially self destruct, here are . . .

Ten Easy Steps to Foreclosure

  1. State your income. 
    You may have heard that stated income loans are for the self-employed.  Don’t you believe it!  Full doc loans are harder to do so your lender doesn’t like them, and I know you want things to go smoothly for your lender out of gratitude for the wonderful loan he’s getting you, right?  And you don’t mind paying the extra half point or so to go stated, do you?  While you’re at it, forget about the fact that overstating your income is loan fraud, a federal crime.  A smart buyer like you isn’t afraid of some wimps at the FBI, are you?  The more you say you make, the nicer house you can get.  That’s why they call them “liars’ loans”, after all.
  2. Don’t Pay To Run Your Own Credit – Your Lender Will Do It FREE!
    Here’s the thing.  If you run your own credit, you might conceivably talk one or more loan officers into checking into different loan programs for you.  That’s not good.  This might educate you as a consumer, and you might find eventually bump into a lender who’ll explain things to you.  Learning is the first step on the road to making stupid loan payments on a conservative loan package.  How are you going to get foreclosed on if you make loan payments?  Huh?  Plus, running your own credit doesn’t count as an inquiry, and your loan officer is counting on you worrying about making multiple inquiries, so letting them do it free for you locks you in quite nicely, doesn’t it?  So stay away from sites like MyFico.com.  I’m not even going to link to them because you’ll only end up running your credit and getting confused.
  3. If your lender tells you you can afford the house, you can afford the house.
    Although most knowledgeable foreclosure-philes generally frown on talking to more than one lender because one or more of them might turn out to be ethical, one thing you should do is get as many opinions as you can about how much house you can afford, and go with the highest amount.  You’ll get a much nicer house that way.  If someone in your family has a calculator or spreadsheet or other budgeting tool and suggests a lower amount, you should argue with her until you get the most house that that nice lender said you could.  In fact, you should probably be looking at homes that cost more than that, because you can always talk the seller down.   And maybe you’ll see something you like even better that way.
  4. Always remember:  your lender can refinance you later.
    Remember, the market’s going up! Up!  Up!  Sure, it’s going down now, but it’s going up in a few minutes.  (I think I heard it’ll be fine by Wednesday.)  The reason you don’t need to figure out a conservative loan that you can live with is that the market’s going up, and if you refinance later you can buy more house now!  Wasn’t it nice of that nice lender to tell you that you could refinance later?  He must really be trying to help you by offering to do that extra loan for you.  That stupid lender who said you could afford less house was only going to do one loan, and didn’t even offer to refinance you later.  He must just be lazy.
  5. Refinance early, refinance often.
    Now that you have a really killer house, do you really still want to be seen driving that old broken down car of yours?  You have this great big garage, and all you’ve got to show for it is a five year old import.  You have some equity now.  Don’t you deserve a Hummer?  Besides, your equity’s not doing you any good unless you put it to use.  You’ve already by now picked out a hard working lender who generously doesn’t mind refinancing you, so go for the gusto!  You only live once.
  6. Remember, the market will go UP!
    And of course, it’ll go up just in time!  So you don’t need a conservative loan.  In fact, come to think of it, hopefully you bought when the market was going up.  You don’t want to buy when prices are low, because good heavens, they may get lower (and what would your friends say to that).  Plus, if the market’s going down, the best way to pay for your house is with some kind of boring loan, and you won’t be able to refinance or get yourself a Hummer.  If you learn how to get foreclosed on, you can buy high when homes are popular, and then you won’t have to sell low, because the nice people at the bank will sell it for you.
  7. If you can afford the lowest payment, you can afford the house.
    One of the great financial instruments of the twentieth century was the Option Arm, or “Pick-a-Pay” loan.  You may have heard that they’re appropriate for the self employed too, or for people whose cash flow varies.  But you’re not going to believe that either, are you?  (See “State Your Income”).  With a pick-a-pay loan, you get to pay either a lot of money on the loan, or just a little bit of money on the loan.  You’re not going to be a chump and pick the fully amortized 15 or 30-year fixed payment, are you?  That payment will be huge!  You won’t be able to buy as much house that way!  You might have to settle for a lousy older home or condo or rent for a few more years while you save.  Through the miracle of Negative Amortization, you can own the big brand new mansion you really want now!
  8. Never mind what negative amortization means.
    You don’t need to know what negative amortization means.  “Negative” and “mort” — anything that sounds THAT depressing isn’t something an upbeat mansion-owner like you should spend time on.  You shouldn’t worry about it anyway, because the amount of negative amortization on the loan is limited, and you’ll still have the loan when you hit the limit.  I want you all to stop worrying about negative amortization right now, and never, ever, ever, look it up.  Also while you’re not looking things up, don’t look up what happens when you hit the limit.
  9. The best thing to do with a document you don’t understand is sign it.
    The quicker you sign, the quicker you’ll get the keys to your new house!  Do you want to move in and throw a party for your friends, or do you want to waste your life reading and asking philosophical questions?
  10. While we’re on the subject of reading…
    There are books on Amazon.com and lots of great consumer web sites that talk about loan programs, managing money, etc., but hopefully by now you’ve learned enough about ruining your credit to avoid all that highbrow academic stuff and get down to the real fun of shopping for the absolute most house you can afford, with a big garage for your new SUV!  Besides, reading makes you sleepy.

(This shouldn’t be necessary, but here it is:  You should be afraid of the FBI, and loan fraud is a serious crime.  This article is meant to be humorous and tongue in cheek only, and instructive only in a reverse-psychology sort of way).

Sacramento County Real Estate 2007 Year In Review – Franklin / Freeport

Depending on where you focus your attention, there’s news, there’s good news, and there’s bad news.

We began our look back on Sacramento County real estate in 2007 with a look at the overall “big picture” for the Sacramento County Real Estate Market for the entire year. Later last week, we reported on one area in the county market that’s consistently held it’s value better than others and enjoy’s low inventory and brisk sales, East Sacramento.

This week we turn our attention to an area that may well be the “worst case” in terms of rising inventory and price declines for Sacramento County, Sacramento’s Franklin / Freeport area (95823). I should probably point out before we begin that I have not sampled all the MLS areas, so my sense that Franklin / Freeport may be the worst case comes from the foreclosure numbers. There may be other areas that have fewer foreclosures but more inventory or lower prices, for example.

Franklin’s decline in 2007 has been rapid. Comparing full year numbers first, the average price lost 19.2% of its value from year to year, and dropped 21.1% in terms of sold price per square foot. The median sale price in 2006 was $314,850, in 2007 it fell 20.6% to $250,000. In 2006 one per cent of sales in Franklin were foreclosures. In 2007, that number was 41.6%.

Comparing December of 2007 to December of 2006, we find that by December, the trend of selling more and more foreclosures and deep price drops had continued apace. By the end of 2006 the average sale price was $282,327. A year later the average had fallen 34.9% to $183,914. Another way to say this is that the average home in Franklin lost slightly more than 1/3 of its value in a year. On a sold price per square foot basis, Franklin closed out 2006 at $200.21 per square foot, and had fallen to $126.61 a year later, a decline of 35.8%.

The percentages of short sales and foreclosures available in Franklin / Freeport are staggering. Almost three fourths (73.9%) of inventory in Franklin / Freeport is either a short sale (35.9%) or foreclosure (38.1%). At the same time, if you needed a case study of REOs outselling short sales, Franklin / Freeport is it. Last month no short sales closed, but twenty-five of the twenty-nine closed sales in the area were bank owned properties. That works out to 86.2%, or close to 7/8 of all sales.

The contrast between East Sacramento on the one hand and Franklin / Freeport on the other shows how local real estate markets are. East Sac enjoys less than three months of inventory and a brisk seller’s market where the prices have remained flat while nationwide prices are falling, while Franklin / Freeport currently has almost two years (23.6 months) of inventory, and homes there have lost two thirds of it’s value in a year.

If you’re a buyer or seller, the right question to ask is not “How’s the Market” overall, but “How’s the Market” for your particular area. Is there an area you’re interested in particularly? If so please contact us and we’d be happy to get you specific market data or comparable sales.

Sacramento County – Foreclosures as a Percentage of Total Sales

In movies, 2007 was the year of the threequel.  Sensibly enough, Beyonce Knowles was the year’s most desirable woman (I’ve been saying that since 2006, at least).  Al Gore won the Nobel Peace Prize, while the arctic ice cap melted at an alarming rate.

In Sacramento real estate, I’ll remember 2007 as the year when those of us who entered the business early in the decade learned the mechanics of selling short sales and foreclosures. 2007 was the year of the foreclosure in Sacramento County. 

This chart shows the number of foreclosures sold month by month through November of 2007 in blue.  The short sales are shown in pink.

 

image

Short Sale “Time Lag”?

About a month ago, a reader responded to my post about the dismally low closing rate for short sales by remarking that my analysis failed to account for the fact that short sales take longer than foreclosures to sell.

The chart above does not show short sales lagging behind foreclosures by the 1-3 months it takes to sell them.  It shows a steady increase in the number of REOs sold.  REOs broke the 10% barrier in April, and short sales have yet to rise above 6%.  The longest short sale I’ve done took four months — sometimes we can close them in 30-60 days.  If short sales were lagging four months behind, not just failing to close, there should be at least 18% of them closing every month by now.

Another problem with this argument is this.  Yes, short sales take longer, but the short sale step also happens before the bank owns the property.  So these sales take longer, but they also start earlier, so the longer sale should be a wash, and clearly the numbers above show that it isn’t.

Sacramento County Real Estate Market Update

The numbers are in for November.  As we get into what’s usually a slow time of year, unit volume is continuing to rise slowly from September and October, with 809 units selling as against October’s 803 and September’s rather bleak 709 units.  Buyers are beginning to take advantage of the bargains offered by short sales and REOs (bank foreclosures) in inventory, which collectively account for just over 50% of active listings (REOs make up 24%, while short sales comprise 26.5% of inventory).

The average home sold for $323,772 in November, down 15.2% from last November’s average of $381,666.  Average sold price per square foot is off 16.6% from a year ago, at 188.35% versus last year’s $225.97.  The median sale price in November was $293,000, down 15.1% from last November’s median of $345,000.  Unit volume is off 25.7% compared to last year, but as we mentioned earlier, is strong compared to recent months.

There are 11.21 months of unsold inventory at present in Sacramento County, down from last month’s figure of 11.61 months.

You Can Write Up a Short Sale (But Can you BUY One)?

The one and only Sacramento Real Estate Gal, Purva Brown, recently called my attention to some really important information for buyers about short sales — their abysmal closing rate.

Many readers of the blog will no doubt already know that a short sale is a sale where the seller has insufficient funds to pay off the loan(s) on the property, and has asked the lender to allow the sale to continue but approve a reduced pay-off instead of going through foreclosure.  Like homes that are already owned by the bank (REOs), short sales are often discounted compared to other homes.

Unlike REO’s — however — there’s a problem.  It’s harder to tell exactly where the problem is than it is to tell you the numbers.  In Sacramento County, for example, as of late November, 2007 short sales accounted for 2,890 of the 11,053 active listings — 26.1%.  At the same time, 16.8% of all listings marked pending sale (in escrow but not yet closed) were short sales.  The pending sales data, moreover, may tend to underreport short sales, since many listing agents will continue to list the home as active until the lender has approved the sale — or even beyond this point.  (Indeed, this practice is common enough that it’s become the subject of an MLS rule prohibiting the practice).

OK, so how many of these short sale transactions are closing?  In October, the number was only 3.8% of sales — so far in November, that number has only risen to only 5.3%.

5.3% of sales, versus 16.8% of pending sales.  In other words, two out of every three short sales transactions (or more) fail to close escrow.

Why the low numbers?

  • First of all, understand that the lender doesn’t have to approve the transaction.  They can always foreclose.
  • Sometimes buyers find out in the process that short sales are not for them.  When it takes a month or two or longer to get a short sale buyer, many’s the buyer (we’ve worked with some) who’ve simply lost patience or couldn’t wait because of their situation.
  • I’ve seen cases where short sales were listed where the buyer was not even behind in their payments.  As a buyer, have your agent ask about the status of the seller.  If they’re not behind in payments, and if there’s not an adequate hardship, the chances of the lender approving the transaction trail off to something pretty close to zero.  Chances are that a large percentage of short sales shouldn’t even be listed.

Can you avoid the short sales and still get a bargain property?  Absolutely!  If you focus on the REOs — bank owned foreclosures — you’ll find homes that are typically priced below the short sales and are much easier to own.  When you look at REOs, the number of homes that close compared to the number that are for sale is actually higher, not lower.  For example, it’s not uncommon to see 12% REOs in inventory, but 25% in the sold statistics (about twice as many).

Home Shopping this Winter?

Traditionally, home shopping falls flat during the holidays. We slow down during Halloween and then Thanksgiving comes around and we hit a dead spot. This year however, I think business is going to continue, albeit at a slower pace.

If you’re considering buying a home this winter, count yourself among the lucky ones. Why?

1. Inventory is high – The number of foreclosures make for scary news for sellers because they have to compete with bank-owned homes and you, lucky buyer, have lots of homes to look at to find the perfect one! You can find a complete list of foreclosures in Sacramento county here.

2. There are no recreational sellers out there – During the big real estate boom, a lot of sellers wanted a certain amount for their home before they would sell their home. Today, if a home is on the market, chances are they want to sell and will do whatever it takes to negotiate a sale with you.

3. There are huge discounts in price – There was a time when homes had trouble appraising and hence getting a loan for the home was hard. Today, if you find a great deal, the appraisal might just come in 10% over the price you’re in escrow for. Congratulations – you just “made” 10% of the sales price by just buying the home!

So head out there and let the shopping begin. Remember, you don’t have to restrict yourself to just retail gifts this winter. Housing is selling at wholesale prices!

Sacramento County Foreclosures in Active Inventory

We’ve just updated the listing database that feed the specialized areas of our web site for foreclosures, new homes, and condos.

For some time now we’ve made available the number of active foreclosures by area in Sacramento County, but one thing I didn’t like about that list is that it only gives you raw numbers of foreclosures available, so naturally this is going to tend to show more foreclosures for areas where there are just more homes. 

To give you a better idea of what the actual percentages are, I’ve put together the following table, which shows the percentages of bank-owned foreclosures in active inventory for different areas in Sacramento County.  In other words, barring any possible data import errors, this is a rough guide to the number of unsold foreclosures as a percentage of all unsold homes for these areas in Sacramento County.

Percent Foreclosures Zip Code Area Name
31.3% 95832 Sacramento Franklin Freeport Vicinity
25.0% 95830 Sacramento Florin & Vicinity
23.8% 95660 North Highlands& Vicinity
23.8% 95823 Sacramento Franklin Freeport Vicinity
22.1% 95815 Sacramento Arden-Arcade Creek Vicinity
22.0% 95817 East Sacramento & Vicinity
21.8% 95828 Sacramento Florin & Vicinity
21.2% 95838 North Sacramento Natomas Del Paso Heights
21.1% 95690 Walnut Grove
20.8% 95842 Sacramento Foothill Farms
20.3% 95824 Sacramento Elder Creek Fruitridge
20.1% 95757 Elk Grove
20.0% 95639 Hood
18.9% 95827 Sacramento Rosemont College Greens Mayhew
18.7% 95820 Sacramento Elder Creek Fruitridge
18.3% 95626 Elverta
18.0% 95843 Sacramento Antelope
17.7% 95758 Elk Grove
17.5% 95673 Rio Linda
16.3% 95621 Citrus Heights
16.3% 95632 Galt
16.2% 95822 Sacramento South Land Park Greenhaven
15.8% 95670 Ranch Cordova Gold River
15.8% 95833 North Sacramento Natomas Del Paso Heights
15.5% 95835 North Sacramento Natomas Del Paso Heights
15.5% 95834 North Sacramento Natomas Del Paso Heights
15.4% 95841 Sacramento Arden Arcade Creek Vicinity
15.1% 95829 Sacramento Florin & Vicinity
14.9% 95624 Elk Grove
13.5% 95826 Sacramento Rosemont College Greens Mayhew
13.5% 95610 Citrus Heights
13.3% 95655 Mather
11.0% 95821 Sacramento Arden Arcade Creek Vicinity
10.9% 95662 Orangevale
9.3% 95825 Sacramento Arden Arcade Creek Vicinity
9.1% 95693 Wilton
8.8% 95628 Fair Oaks
8.3% 95742 Rancho Cordova
7.8% 95608 Carmichael
6.5% 95864 Sacramento Arden Arcade Creek Vicinity
6.2% 95683 Rancho Murieta
5.6% 95831 Sacramento So Land Park Greenhaven
4.4% 95630 Folsom & Vicinity
4.4% 95816 Sacramento Downtown Midtown
3.1% 95818 Sacramento Land Park Curtis Park
2.0% 95814 Sacramento Downtown Midtown
1.6% 95819 East Sacramento & Vicinity

Antelope Foreclosures Account for Nearly Half of Sales

Purva recently wrote some excellent advice for home sellers in Natomas, and nearby Antelope home sellers.  Based on October’s real estate statistics, I would suggest that nearby Antelope sellers also need to seriously consider how competitive their home is compared to the many foreclosures that are on the market.

In October, bank owned foreclosures (also called REOs for “real estate owned”) accounted for fully 47.5% of sales in Antelope (95843).   In October of 2006, none of the forty-six homes that sold were REOs.  In October of 2007, forty units sold and nineteen of them were REOs (hence 47.5%).  As in other areas, foreclosures outsold non-foreclosed properties by almost two to one.  Even though they accounted for just under half of sales, REOs constitute just over one quarter (25.7%) of the inventory.

Moreover, Antelope is no exception to the general rule we’ve that the more foreclosures there are in an area, the more prices tend to plummet.  The median sale price in Antelope dropped 20.6% in October from the previous year, from $350,750 last year to $278,350 this year.  The average sale price dropped 23.6% during this time, from $360,437 last October to $275,350 this October.  Average sold price per square foot dropped off somewhat less, since this year’s average home was somewhat smaller.   The decline in price per square foot was 18.8%, from $206.44 last year to $167.69 last year.

Currently Antelope has 12.03 months of inventory.

But Aren’t Foreclosed Properties Sold “As-Is?”  Why Are They So Popular?

That one’s easy.  Looking at what’s currently on the market in Antelope, here’s how the sold prices per square feet break down:

REO’s are listed on average for $163.19 per square foot.

Non-REOs are listed on average for $183.49 per square foot.

On a 1650 square foot home (which is about average), the difference in price works out, rounding off a bit, to $269,000 versus $303,000.  $34,000.  Ten per cent.

Buyers aren’t stupid.  $34,000 buys a lot of paint and carpet.

Sacramento Foreclosure Auction Coming

A colleague of mine recently published an article critical of foreclosure auctions, saying that the tendency of buyers is to overpay at them, and banks know this.  I don’t have any data on that to report one way or another, but whether you love them or hate them, Hudson and Marshall are holding another Sacramento Foreclosure Auction on Sunday, November 18th at 1:00 PM at the Radisson Hotel at 500 Leisure Lane in Sacramento.

You can also bid on properties online before the auction.  (Legal disclaimer:  I’m not advising you to do that or saying you’re going to get a “good deal” or anything of the kind  — right now I’m wearing my blogger hat, and I’m not your agent.)

On the other hand, if you’d like to secure an agent to help you identify which of these properties are good ones, preview them, and assist you with the bidding process so 1) you don’t overpay and 2) you have your own agent rather than the bank’s agent to help you with the inspections and paperwork, give me a call at (530) 672-9160 and I’d be happy to help you with it as a buyer’s agent.

Even if you don’t hire us to work on it, I’m thinking I might go to the auction and report back.  Maybe I can get Purva to go as well, but she may have family coming to town.

Foreclosure auction party?

Some people will take any excuse to throw  a party.

Let’s hope there will be dip.  I like dip.

Sacramento Real Estate Market, October 2007

October2007Market

Trick or treat.

As I prepare my report on Sacramento County’s real estate market for October, 2007, I recall  my happy youth watching The Flintstones.  You remember Fred and the gang.  From the town of bedrock, he’s a page right out of history.

One great cartoon gag from the the Flintstones — though surely it has roots all the way back to the Manichean cartoons of the third century — were the Fred Flintstone as devil / Fred Flintstone as angel that would sometimes perch on Fred’s shoulders, whispering instructions.

Sometimes Gazoo would whisper the instructions.

Bloggers, Find Your Voice (From Among Those You Hear in Your Head)

In my case it’s the eternal angelic optimist, Purva Brown, on one shoulder versus the pitchfork-armed bubblers on the other.

Bubbler pokes me with pitchfork:  In terms of unit volume, October was the second worst month in recorded MLS memory.   803 units sold in Sacramento County in October.

Purva flaps angel wings:   C’mon, John, that MLS data only goes back to October, 2004, so all you have to compare it to are good times.  Plus, October’s volume was an increase of  11.7% over September!  Look on the bright side, will you.

OK, you two.  Behave.  Fight it out between yourselves.  Let my shoulders be your last battleground.

The Rest of the Numbers

The median price of a home in Sacramento has fallen to $300,000 in October, down 14.3% from last October’s median of $349,900, and 24.9% from their peak of $399,499 of November, 2005.  Average sold price per square foot was approximately $189.32 in October, down 18.2% from last October’s $231.23, and down 25.5% from the peak of $254.10 (September, 2005).  (Purva:  That’s not fair, John — you keep making the houses lose 1/4 of the value by picking high peak values from different months.  What are you, some kind of bubble blogger now? ).  The average home sold for $327,719 in Sacramento County in October, down 14.9% from last year’s average of $385,233.

Recently we reported that about a quarter of the homes selling in Sacramento County were foreclosures (REOs).  The numbers have now risen to slightly more than one third.  More precisely, of the 803 units that sold in October, 285 (35.5%) were REOs.  Now you bubblers might think you could get an even 50% if you throw in the short sales, but you can’t, because only 31 short sales sold during this period, so the overall total ends up being about 39.4%.

Inventory is 11.61 months for Sacramento County overall.

Sacramento Area Foreclosure Search Page

For some time now, we’ve had a Sacramento Foreclosures section where you could browse for Bank Owned Properties or Short Sales by county in El Dorado, Placer, and Sacramento County.

We’ve now added a Foreclosure Search Form to make it a little easier to:

  • Select only in the areas you’re interested in, across all three counties.
  • Narrow your selections by price range.

We’ve kept it really simple, but hopefully this basic functionality makes things a bit easier.  Please give it a try and let me know if you run into any problems!

Sacramento Real Estate Listings Updated

I’ve updated our site home lists, including the sections for:

Most of these sections are pretty much “browse only” as of now, but I plan to have a search tool in place for the foreclosures soon — probably some time this week.

A client once told me that it’d be nice to have such a thing for the new homes section as well, so I may tackle that this week as well.

Enjoy.

Listing Pages Improvements

Those of you who do real estate searches from the either our main search page or many of our other search pages have access to listings that are updated six times per week.

I’m not sure why it’s six and not seven.  Presumably it’s to give FTP a Sabbath.  The point is, it’s practically daily, so it’s about as up to date as you can get without calling a Realtor up and asking him.

In addition to the search pages, there are also a lot of pages where you can browse listings, such as our foreclosure pages, the condos pages, and the new homes pages.  These pages are driven by a separate database that we maintain, that we update once per week or so.  We’ve recently improved the import mechanism on these pages to fix a few issues, so we expect these pages to more closely match our MLS (Metrolist) as time goes along.

We just did an import as well, so we’re pretty current as of now.  Enjoy!

Sacramento Real Estate Market Update

The real estate market for Sacramento for September, 2007 was the slowest we’ve seen since the MLS data begins in August, with 730 units (down 41.3% from last September’s volume of 1244 units).  By itself, this is fairly depressing, but fortunately we have somewhat better news in that 1314 units are pending sale, so it’s possible the unit volume will pick up some for October.

In terms of price, this year’s average home sold in Sacramento County for $342,640, 12.4% less than last September’s average of $391,165.  Sold price per square foot declined more, 14.2%, from $235.08 on average last year to $201.79 on average this year.  The median price fell 12.1%, from $353,750 last year to $311,000 this year.

The total number of expired listings was down slightly this September, but because of the sharp drop in unit volume, the expired to sold ratio stood at 153.6% in September, as opposed to 96.2% a year earlier.

Bank owned properties, making up just over 25% of sales in August, accounted for 26.2% of sales in September (i.e., 191 of the 730 units sold).

There are currently 11.4 months of unsold inventory in Sacramento County.

More Sacramento Area Foreclosure Resources

We’ve improved our Sacramento Foreclosures portion of the site this morning with two enhancements.  First, if you scroll past the foreclosure listings offer, you’ll be rewarded with a set of foreclosure “Frequently Asked Questions”.  Actually, to be perfectly frank, I think the best questions here are the ones that aren’t frequently asked — and that may keep some people from ignoring the real opportunity that buying a foreclosure represents.  We’ve tried to answer those as well.

The second improvement is that we’ve now added Placer County and El Dorado County to the areas where you can browse short sales and bank owned foreclosures.  Those links are all available from the main foreclosure page, but for your convenience, here they are again:

Bank Owned Properties:

El Dorado County

Placer County

Sacramento County

Short Sales:

El Dorado County

Placer County

Sacramento County

Placer County Real Estate Market

Like most greater Sacramento markets, Placer County has had its share of the reversal of fortunes of 2005-2007 (or make that 2005 to 2000-when?), but August’s numbers are less dramatic than others we’ve seen. The average home sold for $518,108 in August, or 96.4% of the average list price of $537,549. This year’s average home was 7.1% bigger than last year’s, so while the average sale price dropped only 0.6% from last year’s average of $521,393, the sold price per square foot dropped 7.2%, from $249.47 last year to $231.50 this year. Likewise the median price fell 8.4% from year to year, from $453,000 last year to $415,000 this year. This compares favorably to a 12.2% drop for Sacramento County from August to August, and 14.8% for El Dorado County during the same period.

Last year, of 338 homes sold, none of them were REOs (bank owned foreclosures). This year, of 275 sold homes, 40 (12.0%) were REOs. This is a huge jump in absolute terms, of course, but it is approximately similar to El Dorado County’s 11.6% REO sale rate, and much lower than Sacramento County, in which fully a quarter (25.3%) of August’s sales were bank owned.

Approximately 339 homes have sold per month over the past year, on average. There are 3242 active listings in Placer County currently, putting the unsold inventory figure at 9.7%.