Archive for November, 2009
Real Estate “deals” …are there any left?
November 21st, 2009 categories: Home buying, Real Estate, Sacramento
It’s been three years into this market and the inventory is starting to look like Wal-Mart’s shelves after black Friday. Have we seen the bottom yet, is a constant refrain in my conversations with clients. Congress extended the tax incentive and expanded it to include principle owners, and seller’s are seeing multiple offers on choice homes. Does that mean all the deals are gone? Glad you asked.
Some economists think we’re bumping along looking for a place to land and others fear we’re in for another down hill ride. One thing is certain; it’s a good time to buy a home. The trick is knowing what a deal looks like and writing an aggressive offer. Real estate has certain break points that are obvious to those of us who look at houses all day…not so much for the novice. Each tier offers a certain level of ”deals” to be had and I’ll attempt to define the differences so you can recognize the trends.
For obvious reasons price determines the location but within each area there are grades of desirability. The homes that are typically the lowest priced are bank-owned (REO). They can be damaged and stripped of appliances or have half-completed projects and are usually priced at the bottom of the neighborhood price scale. The banks usually respond quickly but don’t do much in the way of repairs. They can be good deals in the lower priced neighborhoods but when it comes to the better zip codes you’ll find the competition stiff.
Coming in at a close second are the fixers, which by definition need work to some degree. The nice part about buying a fixer is that there are loans (FHA 203) specifically designed to include the repairs and offers the potential owner their choice regarding those repairs. So if the house needs new carpet, the buyer gets to choose the color and style. Again location, location, location since these homes are much sought after by contractors who have lots of time to work on them.
Next is the much-dreaded short sale. Depending on the skill of the listing agent, these homes can be a great deal but you have to have the patience of a saint. Buyers need to be clear about the waiting period for short sales. Each bank has a different process and some manufacture delays by the methods they demand for submission of offers. Currently I have a short sale that requires submitting the entire package via snail mail, not very efficient given today’s technology. These properties are deliberately priced low to attract offers quickly to get the process going. Of course, the bank will send out their appraisers to determine value but if priced right you will find they will accept a solid offer to avoid foreclosing.
The last tier is the forced sale due to some misfortune and the fair market sale, which represent about 25% of the current market. Varying value structures but all are based on the assumption that within a given radius each home would be of equal value given the same degree of interior upgrades, lot size and age of bldg. The bottom line is that every sale that takes place in that neighborhood affects the next sale good or bad, so the deal you buy today might not be the last one found in your neighborhood.
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