Archive for May, 2008
Temple City Foreclosure and Short Sale Properties
May 21st, 2008 categories: Seller Financing
I would consider Temple City fairly immune to the general downward pressure facing the overall real estate market. The demographics and good public school system provide a strong level of price support for real estate, so it doesn’t surprise me that there are a relatively small number of properties in foreclosure.
Out of 71 active listings in Temple City right now, 6 are advertised as short sales. That’s just a little over 8%. In some areas of L.A. County, the numbers look something more like 25-30% (like the Antelope Valley).
So, you’re a buyer interested in taking advantage of the price pressure and FHA loan incentives . . . should you go after these short sales? Wouldn’t they be a great way to get a cheap property?
Maybe, maybe not.
Once in a while, someone gets a really good deal on a short sale, but generally, the banks will not approve anything less than 92-95% of appraised value, and they won’t credit you for repairs, or pay for termite or home warranty. And you need to be able to put your loan together in less than 30 days.
But still, because many buyers and their agents don’t like to deal with the short sale process, it might be worth going for it. After all, potentially getting a property at 5% below market isn’t bad, especially in an area like Temple City. You just need to be patient and have an agent that understands the process well.
And in regards to the new FHA guidelines intended to help boost the mortgage and real estate industry, you need to read an insightful and informative post by Pasadena real estate agent, Irina Netchaev: Distressed Market and FNMA Announcement. The new loan programs are great, but you need to make sure you understand the whole picture. Things are shifting fast.
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REO Holds Short Sale Hostage – Feeling Foreclosure First Hand
May 20th, 2008 categories: Real Estate News
We all hear about how the rash of foreclosures has put downward pressure on the value of homes, but it doesn’t
always hit me so directly. I’m not talking about my personal home situation, but my personal business. The following series of events in one condominium complex provides a perfect microcosmic way for understanding what’s happening at large.
There’s this condo community in Hermosa Beach where I happen to have a couple of listings (I tend to get listings all over the place even though I’m based out of Pasadena).
The first listing was a short sale. It was upside down to the tune of $100,000 by the time you figure in delinquencies. I listed it at what I thought was a fair price, $450,000 and got 3 offers at or above asking price. I begged the seller to complete the short sale package so I could submit it to the first lien holder, Litton Loan (I like working with Litton . . . they’re one of the most progressive and organized loan servicing companies out there).
So, by the time the seller finished getting me all the paperwork (that I had been asking for for weeks) and Litton finished their due diligence, two months had gone by. By then, not one of the original offers was still on the table. Two months seems to be an unbearably long time for buyers to wait these days.
But that’s OK, I sort of expect it to happen that way. It’s easier to get a buyer when you can advertise that a short sale has been approved anyway. And that’s what did happen. Three days after I had the approval letter for a $440,000 purchase price from Litton in hand, I had an offer from a buyer that opened escrow and put in a nice deposit right away.
About the same time, another seller (not a short sale) from the complex asked me to take their listing, as they knew I already had a long list of potential buyers interested in those condos.
Because it was a much nicer unit and had a much better view, we felt that we were well justified in listing at $469,000. And I had a lot of interest right away.
Then, a day later, a bank-owned (REO) property hit the market at $449,900, and it’s on the 3rd floor with one of the best views of the entire complex . . . right out towards the sunsets over the beach.
Now, of course it’s good for banks to price property well, and I applaud them for actually being smart for a change. It’s just that in this situation, it really fouled things up for me and my clients, so I’m not feeling so happy about this REO. Why couldn’t they do what they normally do and overprice it and let it sit on the market for a few months?
Once that REO hit the market, 2 things happened:
1) The buyer for my short sale pulled out of escrow. Why should she pay $440,000 for a unit that needed some work and had an astonishing view of a cinder block wall? No, she’s just gonna wait and see. Perhaps she thinks she’s going to make an offer on that REO instead, and good luck to her if she does. That REO is priced in a way that it will probably generate multiple offers and sell above asking price fairly quickly.
2) I had to call my other sellers and tell them that a price reduction was in order, even though I personally like their unit a lot better. They have a view of the pool and plantar areas and several upgrades to the kitchen and bathrooms. That REO basically forced us to drop the listing price down to $450,000, just to avoid getting stuck hanging out to dry. The chance of them selling for $460,000 – $470,000 (which is what I expected originally) is now very slim.
So that’s my most recent personal story of how foreclosures are affecting the market at large as more and more properties are being taken back by the banks.
So, what can we learn from this?
- First of all, time is of the essence. If you need to do a short sale, get your agent all the paperwork before she actually needs it. Delays in short sale approval can spell death for a successful short sale.
- Price your property well out of the starting gate. You want to get momentum going right away. You never know when the REO next door will hit the market forcing you to drop your price even further.
- And lastly, stop eating cinnamon bears . . . they get stuck in your teeth.
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Find a home using your own home search, or email me to be updated of short sales and REOs in your area.
Related Reading:
- Short Sales: The Buck Stops With the Lenders, by Jay Thompson
- Just a Question (short sales, REOs, help for distressed homeowners) by Teresa Boardman
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How Getting a Professional Note Appraisal Can Save You $Thousands$
May 19th, 2008 categories: Selling Your Note
Not long ago an attorney was representing an estate that held several real estate notes worth a total of about $8,000,000. Needless to say, the estate taxes were very high, so to reduce them, he hired me to do a Professional Note Appraisal to determine the actual market value of each of the notes.
This attorney knew that a note is almost never worth it’s face value. There is almost always a discount when the note is purchased, and this attorney wanted tax savings for his client based on the true market value of the note (just like an appraisal is done to determine the market value of any real estate).
The gentleman who had died had invested heavily in real estate (mostly commercial) and his exit strategy was to sell and carry back a note and first deed of trust using the installment sale. He successfully converted his real property assets into paper assets, which is what a lot of investors eventually do.
It’s just easier to collect note payments than it is to manage property.
Some of the notes ended up being worth substantially less than their remaining balance, some represented only a small discount, but working together, this attorney and I were able to save the estate about $250,000 in estate taxes!
The IRS has some funky guidelines about note valuation, but the Professional Note Appraisals gave the attorney a starting position from which to successfully negotiate. He feels that this issue is below the radar of most professionals and needs to be brought to the surface for the benefit of estates, like this one, that held a lot of real estate notes.
- I’d Like a Professional Note Appraisal
- I want to carry paper, please help me create a valuable note
- If I Carry Paper, How Much Will I Get Each Month?
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Related Reading:
- 15 Things You Should Tell Your Clients About Notes
- How Does the Market Determine the Discount I Take on My Note?
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