drug prescription

Friday, November 16, 2018

Real Estate Market Creating Alternative Buying Options

The real estate market is changing quickly. Our market is experiencing rapid depreciation, foreclosures, Real Estate Owned (REO) properties, lack of available loans and the tightening of loan qualification requirements. In order to adapt and sell a home in this environment, sellers must take a serious approach to get their home to sell. The home must be in the best condition and be priced significantly below the competition; so that it stands out among the large inventory of homes it is competing with. It must look like a deal to the small pool of potential buyers that are looking for a great home and a great deal. Sellers now have to compete with short sales, REOs and auctions to sell their home.

I began hearing a lot about short sales at the beginning of this year. Sellers that were experiencing hardships were given the option of a short sale from their lenders. In order to qualify for a short sale a seller must submit a package to their lender that includes the following: a letter explaining their hardship, current pay check stubs, bank statements, tax returns and an itemized list of all expenses and income. The seller will be required to list the home with a real estate agent. The real estate agent will submit to the lender a market analysis that will let the lender know the value of their home in this current market and how it should be strategically priced to get it to sell in this market. Once an offer has been made on the home and has been accepted by the seller, it is submitted to the bank. The offer at this point in time can only be accepted contingent on approval from the bank. The bank receives the contract and assigns it to a negotiator who typically orders a BPO (Broker Price Opinion), where a third-party licensed real estate agent prepares an opinion of value to the lender. In my experience and the experience of most agents I know that are dealing with short sales, this is very long and frustrating process. There is typically little or no communication with the negotiator or anyone that is a decision maker. The banks have been taking up to six months to make a decision. This is extremely frustrating for everyone in the transaction. It is unusual for a buyer to continue to stay interested in a home for this long. Waiting this long to find out if you have a deal on a home is normally not an option to a buyer in need of a place to live. The long, drawn-out process and the lack of communication leaves all parties to the transaction frustrated and upset. In a large number of the short sales, the buyer gives up and finds another home before the bank makes a decision. The buyers and sellers end up upset with the listing and buyer’s agent.

This no-win situation is making short sales not attractive to real estate agents and buyers alike. Many agents are not taking short-sale listings and buyer agents are not showing short-sale homes. Banks are inundated with these short sales and did not have the manpower or systems in place to process this huge serge in requests for short sales. As time passes they seem to be making some progress. But the frustration over the last six months has left short sales stigmatized. Be cautious of the companies claiming to be short-sale experts. There has never been this kind of volume of short sales and it is extremely important that you check out the experience of any short-sale expert by asking for documentation on how many short sales they have closed in the last six months and in the last five years. It is commonly believed that a short sale will be less damaging on your credit report than a foreclosure; however it will negatively affect your credit.

An REO is when a property becomes the asset of the lending institution through foreclosure. When a back acquires a property after a trustee sale it will put it on the real estate market for sale. This process is more streamlined. Banks are pricing these homes aggressively in order to get them sold and off of their books. These homes are excellent values and are great investments for a buyer. They typically will close in the standard 30- to 60-day time frame. There is no waiting for approval from a negotiator, an actual decision maker or direct contact to a decision maker. There are things to be aware of when purchasing a bank-owned property. Many of these homes have been vacant for long periods of time. It is not uncommon that the appliances and ac units have been stolen, the yard is overgrown with weeds, the pool is green, etc. Buyers should be aware that the banks sell these properties in “as is” condition and many banks do not allow an inspection period after a contract has been accepted. If this is the case, an inspection should be done prior to writing a contract on a property. Carefully read and understand all of the addendums to the contract that the bank requires, particularly when it comes to earnest money. These addendums typically take out important parts of the standard real estate purchase contract and it is important to know what you are agreeing to.

We have all seen the popularity of real estate auctions. Television ads were touting starting bids as low as $1,000. Auctions are designed to quickly move large quantities of the many homes on the market. Most of the homes being auctioned are bank owned. It makes sense for the banks to get these homes moving because of the huge inventory they are dealing with. Be cautious of the same addendums and conditions as REO homes. The auction environment creates buyer competition; it creates excitement and motivates buyers. Competitive bidding can bring the price up to or above market prices. I attended an auction two weeks ago and homes were selling at about the same price as ones that were on the MLS, (Multiple Listing Service). The advantage to a buyer buying on the regular market verses an auction is in most cases they are not bidding against others for the home and can usually get a better deal. In many of the auctions, the seller reserves the right to accept or reject the highest bid if it is below what is acceptable to them.

There are many ways to purchase a home today. Do your homework and find which option is best for your circumstance. Deals can be found the old fashioned way, through short sales, bank owned and auctions. Know the advantages and challenges with each option before you enter into a contract. Contact your real estate professional to help you build wealth during this great investment opportunity in the real estate market.


Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!