By This Intero Insider – Video Series brings you Dominic Nicoli, one of our top real estate agents at Intero Real Estate Services from the Los Altos office. He speaks candidly with Intero COO Tom Tognoli and shares his insight and projections on today’s real estate market from luxury real estate to foreclosures – where we have been, where we are now, and where we are headed.
Posts Tagged ‘Short Sales’
Short Sales Pressure Home Prices
Short Sales Pressure Home Prices by Diana Olick, CNBC Real Estate Reporter, published on April 7, 2011 on CNBC Realty Check blog stated home prices fell 6.7 percent in February year over year, according to a new report from CoreLogic. That numbers includes distressed sales, that is, sales of foreclosed properties or short sales, where the bank agrees to let the homeowner sell for less than the value of the mortgage. If you take those sales out, however, home prices were basically flat.
Distressed sales, though, still make up more than a third of all home sales, according to the National Association of Realtors, and that number is likely to rise at least in the near future. The banks have slowed the process of foreclosure, and that has reduced the number of bank owned properties hitting the market lately, but it’s a whole different story with short sales.
Robert Cruz, Vice President and Managing Officer of Intero Silver Creek was featured in the article and shares his insight on today’s short sales.
Cruz says, “In the first quarter of this year Intero Real Estate Service’s short sale closings were up at least 60 percent, thanks to the banks and servicers being far more aggressive in pursuing them; not only are they pursuing them, but they are paying for them”
Short sales used to be a long, tedious process with a very low success rate. “Short sales used to be a waste of time,” Cruz remembers. “Now it’s totally changed.”
Read more on this Realty Check blog at CNBC.com
Realty Check takes you from the housing boom to bust and beyond. Led by Diana Olick, the goal of this blog is to bring the real estate market, the rescue plans, the politics and the pontification home to you, with clear concise explanations of the wildly complicated issues in all facets of real estate today and tomorrow.
Diana Olick is an Emmy Award winning journalist, currently serving as CNBC’s real estate correspondent. She also contributes real estate expertise to The Today Show and NBC Nightly News with Brian Williams.
HAFA (The Home Affordable Foreclosure Alternative) is coming to town!
By As I reported in a recent post, up until now, short sales have had a high rate of failure, leading to frustration by buyers, distressed sellers, real estate agents and escrow officers. HAFA (Home Affordable Foreclosure Alternative) is a new federal program which becomes effective April 10, 2010. The intent of the new guideline is to streamline the process and create incentives for short sale transactions for lenders and borrowers through 12/31/12. Whether you are a homeowner, home buyer or home seller, this program may impact on you!
Yes, even if you are a current homeowner that is not experiencing financial distress you may be affected. 
Here’s how; as can be seen here, homes that have been foreclosed on and are now bank owned receive a sale price, on average, some 20% below that of a successful short sale. What homes sell for in your neighborhood directly impacts the value of your home. The fact that short sale sellers typically stay in their home until escrow closes limits the negative affect of foreclosed homes that become vacant.
As a homebuyer you are impacted because of the high failure rate and length of time short sales have been experiencing. In the first time buyer price range short sale listings represent the highest percentage of homes for sale, however, most buyers learn quickly to limit their search to bank owned or traditional market listings, thus ignoring half or more of the available homes for sale. The expected outcome of the new guidelines, which become effective April 5, 2010, is to align the short sale process with more traditional sales.
And of course, all this will benefit the seller experiencing financial hardship. Hopefully, the failure rate will go down and the process will become more predictable.
So, lenders have until April 5th to implement the HAFA guidelines and if it provides the intended benefit, it’s a win-win for all.
For complete details on how HAFA affects you, contact your real estate professional.
Hollister Housing Expo Expects a Crowd
By Tax returns, pay stubs, bank statements, social security, DNA, hair sample, finger prints, spit swab seems to be only a few things a lender is requiring to resolve a mortgage problem these days, but help is on the way! The City of Hollister Redevelopment Agency is putting on the two day 2010 City/County Housing Expo at the Veterans Memorial Hall at 649 San Benito Street, Hollister to help struggling homeowners figure out if they qualify for a loan modification or the results of a Notice of Default.
The free bilingual (English and Spanish) public event held on Thursday, February 25 from 9:00 am – 5:00 pm will have a presentation from Legal Aid (Real Estate Attorneys) and Certified Public Accountants (C.P.A.’s) on the Foreclosure Process, Renter’s Rights, Loan Modification, Short Sales, and Tax Consequences. On Friday from 3:00-7:00 pm different organizations will discuss the home buying assistant programs and incentives through California Housing Finance Agency, Chase, Bank of America, and many more. The more prepared homeowners are with questions and paperwork, the more likely they will get real results with a real person in few minutes time.
Are Bank Owned and Short Sales Always a Good Deal?
All home buyers have one thing in common: Everyone wants a great deal. The buying public seems to think that “great deal” equals foreclosure, short sale or bank-owned property. The truth is that these properties may appear to be bargains, but in many cases you could be buying someone else’s problems. So the real issue is whether the foreclosure, bank owned or short-sale property you’re considering is a bargain or problem. If you’re looking for a bargain property, here are some key issues to consider:
1. What is your time line for purchasing?
You may find the perfect short-sale property, and the seller may accept your offer. The challenge is that you don’t have a deal until the bank approves the short sale. At many large lenders, a single short sale processor may have hundreds of files to handle at one time. I’ve experience delays of up six to get an offer approved. The wait can be extremely frustrating and it can also be costly.
For example, months from now the offer made today you may be too high or to low. Also, interest rates are more likely to go up rather than down during the coming year. And, just because the seller has accepted your price, it doesn’t mean the bank will. You will have a better shot at buying a short sale where the bank has preapproved the sales price. It still may take a long time to close, but not as long as it would if the price was not preapproved.
2. Are you prepared to be in a multiple-offer situation?
You’re not the only one looking for a “bargain.” Many buyers are searching for distressed properties and the approval process takes so long, multiple offers are common. The sellers agent or lender will not tell you about the details of other offers.
If another offer comes in at a higher price and at better terms, the bank is obligated to take the best offer. If the property is a short sale, the seller’s signature on the document merely opens the negotiation – it does not finalize it. Furthermore, the seller/lender may continue to market the property even after they have signed a contract with you.
3. Ask the agent if the seller participated in the “Cash for Keys” program
The best candidates for good bargains are those properties where the sellers are still occupying them. Many banks have a program called “Cash for Keys.” This program pays the owners of foreclosure and short-sale properties money to keep the owner from trashing the property when they move out. It’s not uncommon for disgruntled owners or tenants to remove or damage appliances, plumbing and electrical systems. Cash for Keys is designed to minimize these behaviors.
4. Beware of tenant occupied and vacant properties
It’s never a good practice to purchase a property without doing a physical inspection. Also, be sure you have stipulated the right to make a final inspection prior to closing. This is especially important with distress sales. Also, if the property is tenant occupied be sure the contract states the property must be delivered to you vacant. Trust me, you don’t want to be responsible for evicting a tenant. Also, the longer a house stays vacant, the more likely it is that problems will develop. Not only vandalism, but rats and mice are more likely to move into vacant properties. Rodents can chew through the wiring and generally wreak havoc with the home’s electrical systems.
5. Is the deal more important than your lifestyle?
A property can be a great deal in terms of the price, but is it worth it if it’s in a poorly rated school district or if you end up with an extended the commute? A “bargain price” won’t make up for a poor floor plan, airplane, train or traffic noise or the occasionally whiff of the sewage treatment plant? When you purchase, it’s important that you take all of these issues into consideration rather than focusing exclusively on the price. A property with any of these types of problems will be harder to sell in the future.
As you can see, it’s important to consider the price in conjunction with the quality and the convenience of your lifestyle once you move in.
Of course there are good distressed property deals out there. Nevertheless, don’t limit your search. Keep in mind that, depending on the neighborhood and price range, anywhere for 10 to 50 percent of the sales may be distress sales. This means that 50 to 90 percent of the available homes are likely occupied by owners that are maintaining their homes and in better neighborhoods. In the long run, they may be a much better bargain.
A true bargain is when you find a home in the neighborhood and price ranges that fits your lifestyle. A house you will be proud to call home.
Moving at the Speed of Opportunity
You’ve probably heard the old saying “You Snooze, You Lose!” I’m told that the line came from the character known as George Owens on the 80’s sit com, “Mr. Belvedere.”
I think the words spoken by “George Owens” say a lot about where some “homebuyers” are relative to this market. Hopefully that’s not you.
Some people are sitting on the sidelines…taking a wait and see attitude, waiting for the market to “change,” hoping that some of the perceived risk will be reduced by more stable credit and mortgage markets, and wishing that just one more piece of positive news would filter out of the media to convince them to become active and take action.
Well, guess what? It just isn’t going to happen that way. Not if you want to capture the market at the bottom, at least. Let me explain why, and how to avoid “staying sidelined,” so you are in the right position to capture current opportunities.
Imagine for a moment that you are attempting to merge onto the freeway, where traffic is moving at 65 miles per hour - now picture yourself coming to a stop.
Being behind somebody that stops on an on ramp waiting for the “right opportunity” can be scary, yet I imagine it’s happened to all of us at one point or another.
So, when you’re at a standstill, how hard it is to find just the right opening between the rapidly moving cars. You know how hard it is to get your car to go from zero to 65 miles an hour in a very short distance and merge into flowing traffic. It’s not easy.
Now, picture yourself in this same situation – only this time, you continue moving down the on-ramp, and, once you find the right opening to merge, you join effortlessly into the moving traffic.
Simply put – it’s hard to find an opening when you are standing still. You know this – but did you know that this principle is not just a question of physics – it’s a question of money and opportunity? And did you know that it applies to many would be home-buyers?
Movement creates opportunity. It invites new things to happen. Movement means you are ready to take action – that you are responding and adapting to the changing marketplace.
As the market continues to evolve we are past the time to watch, to wonder and to wait. Now is the time to pay attention! Watch what’s happening, and look for your opportunity. Believe me the growing positive statistics, like those at our Market Activity website, www.bayareamarketmetrics.com reveal that there are plenty of buyers ready to jump at the right opportunity. Remember, if you are sitting on the sidelines, all you can do is watch.
But what about those that “just got lucky”, right? Well here’s how people get “lucky”, they (1) they get into motion, (2) they get their financing lined up, (3) they find a great agent who welcomes their business and they start looking for the right home (4) They make an offer that fits the circumstances, (5) and THEN they “get lucky”. In other words, they are people willing to move at the “speed of opportunity”.
Remember, just like you can’t easily merge onto a highway from a dead stop - neither can you find the best home buying opportunity unless you are moving at the “speed of opportunity.”
If you want to move at the “speed of opportunity”, a good place to start is understanding the current level of market activity. Our Bay Area Market Metrics Report can be viewed at www.bayareamarketmetrics.com.
Intero Insider: Closing The Door on 2009
By The Holiday Season is approaching its end. Hopefully, you’ve been able to relax a bit and spend time with family, friends and the people whom you love most. The end of this season signals the rapidly-approaching end to yet another year. A year that most of us are more than ready to put behind us. We’re all looking forward to the promises of the new year. A fresh start. New possibilities. To 2010.
But let’s take a moment to reflect on the year that was 2009, and how it shaped us and our industry.
2009 was a year of change. A change in the way people shop for homes. A change in the way real estate professionals do business. A change in the way we look at things.
Certainly, the economy and its woes played a major role. While there are glimmers of light and signs of improvement on the horizon, rising unemployment (that will likely worsen a bit more before it gets better) and more stringent lending standards continued their stranglehold on the real estate industry.
Mortgage rates found themselves at all-time lows in 2009, but with underwriting restrictions and tightening standards, including tougher rules from places FHA, typically thought more “understanding”, very few people were able to qualify. With the Federal Government’s loan modification program, short sales and a flood of foreclosures with which to deal, banks are not likely to loosen these standards anytime soon.
Of course, the news wasn’t all bad.
With those foreclosures and short sales came some incredible opportunities for those looking to buy a home. For those with open minds and who were willing to exercise a little bit of patience, deals, the likes of which hadn’t been seen in decades, were ripe for the picking.
For those who were really lucky, those deals could be combined with what was (and will likely continue to be) one of the biggest stories in real estate: the Homebuyer Tax Credit. Recently expanded to include a far broader pool of buyers, the HBTC, in 2009, gave first-time homebuyers a credit of up to $8000 when they purchased a new home. For many, this credit was just the boost necessary to get them toward their share of the American Dream.
While 2009 saw nowhere near the panic and angst that riddled Wall Street and the entire real estate industry in 2008, it was a year of sobering news. A year of goodbyes to the old way of doing business. It was a year for real estate professionals to reevaluate their priorities. To rethink how they did things. It was a year of separating the wheat from the chaff, as many Realtors left the profession altogether. Those who dug in their heels, who opened their minds to new practices, who opted to help, rather than hinder, will rise to the top. They will reap the fruits of their labor.
As you’re making your resolutions for the New Year, think about where we’ve been. About how far we’ve come. Think about how you’ll do things differently. Think about the possibilities before you.
Yes, 2009 was a hard year. But remember our theme for 2009 – “Adversity is your asset. Things turn out BEST for those who make the BEST of how things turn out.”…AND WE DID! So rather than looking back at 2009 as just a “tough year” let’s make it a year in which we have learned. A year that strengthened our resolve, and our collective character. 2010 is OUR time, now let’s go out and TAKE IT!
Top 10 Silicon Valley Real Estate Trends for 2009
By As 2009 draws to a close – you’ll soon be reading lots of top 10 lists for the movers, shakers, and trends of the year and the decade! In the spirit of being just a little ahead of the crowd, here’s our list of the top Silicon Valley Real Estate trends of 2009:
1. Low Interest Rates – with More Strings – Interest rates have been low this year, with periodic dips into historic record ”low” territory. These great rates, though, come with seemingly ever-changing requirements and conditions. Selecting a great financing source who can get you great rates AND help you navigate through the process has never been more important.
2. We’ve Got to Keep It Together For Longer – With the changing lending guidelines, it’s been taking longer for properties to close escrow and having a signed purchase contract did not automatically mean a closed escrow in 2009. Having a black belt negotiator on your real estate team has been critical this year.
3. “Turn Key” is Hotter than Ever – A few years ago – buyers could purchase a property & count on some quick appreciation to pay for a remodel in just a little time. Now – buyers can’t count on home appreciation to finance a remodel in the near term & are looking for great condition, move-in ready homes to buy (as if location and condition ever go out of style in the world of real estate!). On the other hand – for buyers seeking to purchase a property in a high-demand area like Palo Alto or Cupertino – it may pay to look for properties needing some work. If you can see the potential in a fixer – you may have fewer competing bids from other potential buyers.
4. Buying a Silicon Valley Foreclosure is not as Easy As It Sounds - Some of the busiest agents in any real estate office are the ones listing “Real Estate Owned” or REO properties for the banks. Buying one of these properties means navigating a maze of bank-specific requirements for making the offer, competing against multiple offers (some properties are getting 20, 30 or even 50 offers), and positioning your offer against “all cash” investors. Finding a deal & making sure it stays a “good deal” through the process is not for the faint-of-heart!
5. No Shortage of Short Sales – over the course of 2009 – we continued to see properties listed for less than what is owed to the lender(s) – resulting in a short sale requiring lender(s) approval to go through. We’re starting to see short sale listings where the lender has approved a short listing price – allowing the whole process to go smoother and quicker.
6. The Year of the First-Time Buyer – with more affordable home prices, the First Time Home Buyer Tax Credit, and sweet interest rates – many of the homes sold in 2009 went to first time home buyers. In the final months of the year – we are starting to see more and more “move up” buyers rousing the mid and higher-end price points. Welcome! Please bring friends! This is a trend we want to see continue & grow in 2010!
7. Deal Hunting in Palo Alto – Where’s the deal on a single family home in Palo Alto for less than $300,000? The media in 2009 did a fantastic job of painting the picture of real estate in free fall, and we went through a period in the spring where every day brought Internet inquiries looking for the extraordinary deal in Palo Alto. According to the MLS – the least expensive Palo Alto single family home sold so far in 2009 went for $703,000 for a 67 year old, 703 square foot cottage with foundation issues.
8. Your Home May Have a Bigger Electronic Footprint than You Do - Social media sites like Facebook and Twitter are 2009 Trendsetters above and beyond the world of buying and selling dirt. In real estate, though, the savvy home seller now ensures that their Real Estate agent is marketing their property through multiple Internet channels. Wouldn’t you want 30 million visitors at your open house – especially the ones who can’t leave foot prints on your new carpet?
9. Welcome to California! – We are working with an increasing number of clients who are relocating to Silicon Valley for a new job. It looks like both our job market and our real estate market are picking up! Welcome!
10. Less to Pick From, More Competition – And finally, in many areas of Silicon Valley – we are seeing fewer homes on the market. In fact, for Silicon Valley overall – more homes are “pending sale” than are actively for sale. For buyers – this means that there are fewer homes to consider and more competition to get your offer accepted. For sellers – it means that there are fewer competing properties. This sets the stage for an even brighter 2010!
We wish you the best holiday season & look forward to serving you and your referrals in 2010!
Short Sale vs. REO: Buyer “Thunderdome” Part 2
By As I wrote in my last post, for today’s buyer, the Short Sale and REO transactions are the market heavyweights.
Let’s recap:
Score card so far:
REO – 2 Rounds Short Sale – 1 Round
Round 1 – Pricing (REO comes out swings and lands a quick over-hand right – perhaps) Round One goes to: The REO
Round 2 – Timeframe (Smelling blood, the REO goes for the knockout with a devastating left uppercut to the body!) Round Two goes to: The REO
Round 3 – Disclosures (The Short sale has its Balboa moment…queue the horns) Round Three goes to: The Short Sale
Round 4 – Financing, Contracts & Condition (Short Sale is getting its second wind and is peppering REO with jabs)
One of the saving graces of the downturn in the housing market has been the re-emergence of the FHA loan. This loan has breathed hope into the lives of many lower end and first-time homebuyers. The only downside is that with the FHA loan, not only does the buyer have to qualify, but the physical condition of the PROPERTY itself, must also. In many cases REOs have sat vacant for a long period of time before being assigned to a Realtor and actually being placed on the market. It is during this time that vagrancy and vandalism (like broken windows) often occurs. Stoves, refrigerators, dishwashers, cabinets, toilets, etc. go “missing” or simply vanish. This rather curious phenomenon results in FHA denying financing for the purchase and the buyer cannot perform due to the fault of the property.
With a Short Sale, more often than not, the seller still lives in the home and keeps the home in fairly functional condition. After all, they are still living there. If a problem arises, the owner can fix or negotiate repairs to be completed before the close of escrow. Most REO seller’s will not entertain any repairs as a condition of closing escrow.
Many buyers of REO’s, after acceptance of their offer, are surprised when they realize they still need to sign the banks “addendum” – which for some banks can be 25 pages long. Have you ever read some of these documents? The language in these “addenda” are often vague, contradictory and potentially misleading. Legal debates are swirling around the idea that certain terms strip a multitude of buyer’s rights sometimes in direct contradiction to consumer protection laws. A high level of discomfort comes with the realization that the “addendum” supersedes the standard contract that was originally submitted and, if you don’t sign it, the deal will awarded to a competitive offer in place of yours. OOOOF, a straight left to the jaw!
As for the short sale, you just following the boring standard CAR or PRDS contracts where everything is written simple and plain and easy to understand.
Round goes to: The Short Sale
Round 5 – The Transaction (It’s a toe-to-toe slugfest!)
The Short Sale is a sale that requires specialized skills. Most agents who attempt to represent a seller in this process do not have the experience, diligence, attention to detail, market knowledge, communication skills, etc. to make this a viable opportunity. This makes the outcome for either party (buyer or seller) delayed, difficult to predict, or often times not fruitful.
Another disadvantage is that some sellers “check out” and will not, despite living for months without paying a mortgage, do what it takes financially to bridge a small gap to get the deal done at the end.
Lack of experience on the Selling agent’s side can result in poor management of the Buyer’s expectations. The length of time it takes to close the sale, the aspect of bringing additional funds to the deal beyond the original agreement, and other factors “sour” unprepared buyers on what could be decent transactions.
As for REO, many REO Listing agents do not communicate at all with selling agents during the offer/negotiation process. This is costly to the institutions because it can frustrate qualified buyers who may be willing to improve their bid but can’t seem to get the seller’s attention. This is also an ADVANTAGE for more skilled agents with good reputations who can find their way to the Listing agent and possibly earn a higher level of consideration for their client.
Round goes to: Draw
Final Score Card: WINNER – The Short Sale
Sometimes the price might be very tempting but take a look at the Short Sale. If the agent representing you in the purchase is a skilled negotiator and properly qualifies the listing agent’s capabilities at offer presentation, you might - just might -end up with a better deal in the long run.
SHORT SALE vs. REO: Buyer “Thunderdome” Part 1
For today’s buyer, the Short Sale and REO – real estate owned property – transactions are the market heavyweights.
Let’s go a few rounds weighing the pros and cons to see how they compare!
Round 1 – Pricing (REO comes out swings and lands a quick over-hand right – perhaps)
The biggest and most powerful draw the REO property has on buyers is typically lower pricing when compared to other homes on the market. In San Jose lower prices have enticed so many buyers that, for the first time since 2005, there are more pending sales than active listings. However, there is no Tyson-like knockout because with lower prices comes competitive bidding which drives the price up to where the deal is, in many cases, not so hot. Case in point, we recently listed an REO on E. Duane Avenue in Sunnyvale and within 48 hours had 18 offers!
Round One goes to: The REO
Round 2 – Timeframe (Smelling blood, the REO goes for the knockout with a devastating left uppercut to the body!)
A huge complaint about the Short Sale is the uncertainty of outcome and the time frame – they take too long! There are Pending Short Sales right now that have been waiting for lender approval for over 9 months! The majority of REO offers can be ratified within 7 days and closed in 30 days. This gives the REO a huge advantage. Short Sale’s knees are a little wobbly at this point but somehow manage to stay upright. Why? Thankfully many major lenders have finally recognized the value of the short sale and are beginning to streamline the approval process. In the case of Wachovia Bank in Santa Clara County they are pioneering a program where the short sale approvals happen at the local level. They have staff that actually discuss and assess the situation with the homeowner. Their approval turnaround time – from offer submission to final approval - can be as timely as 5 to 10 days. In general, private parties are typically more nimble in their ability to respond and make decisions related to the transaction – far less “bureaucracy” in this process. Short Sale survives REO’s early barrage and is saved by the bell!
Round Two goes to: The REO
Round 3 – Disclosures (The Short sale has its Balboa moment…queue the horns)
As an REO listing agent myself, it amazes me that buyers and/or their agents sometimes don’t get it – There are LIMITED SELLER disclosures in a REO transaction. The seller is an institution – they have never lived at the property. They have never seen the property, much less know its history. Apart from the Natural Hazard Disclosures and a few mandatory disclosures, you have no idea what has happened to or around the home. This is where the Short Sale has a HUGE advantage. The seller most likely occupied the property and has a legal obligation to disclose everything they know to a potential buyer. Out of nowhere, Short Sale regains his legs and starts landing body punches to REO!
Round goes to: The Short Sale
This match is just heating up! Come back for Part 2 and see who will win.
The Intero Insider
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