Banks Not Giving Houses Away

Contrary to the media's belief that inventory levels of bank owned properties are so high that the banks will take anything we have found a bit that banks are holding their ground on many of their properties.

Bank owned properties (also known as REO's and Foreclosures) are currently being priced about 10% below the rest of the traditional resale inventory. This price point has enabled them to get showings, but many consumers feel that since it is bank owned they can offer whatever they want. Although we do empower our customers to write competitive offers for discounts there does appear to be a threshold that the banks will take.

On properties offers from Long Beach to Riverside we have found that the banks:

1. Will still discount off of their current list price (sometimes another 3-5%)
2. If it is a new listing the bank is usually less likely to give up big ground on price
3. Banks will counter offer! They aren't desperate enough to take anything
4. They have been willing to provide termite clearances in some situations
5. They like thorough offers with pre-approvals, FICO scores, and proof of funds like a traditional seller

Keep your eye out for the foreclosure, but act quickly. The well priced foreclosures in prime areas are often receiving multiple offers.

It would be great to hear what situations others have come across in their experience. We look forward to the comments!

Banks Look to Unload Inventory - You Save Money!

As the 4th quarter is well upon us Banks are now looking at the properties they have under on their books as opportunities to start 2008 fresh. Banks clearing their books means savings for you!


Now, this is not referring to "short sales" as banks are still facing some challenges making quick decisions on those, this is referring to bank owned property. Bank owned property may often be referred to as foreclosure or REO. As the bank now owns homes, they need to clear these properties off of their books so they can maintain their business of lending money!

Real life example:

• A 1 bedroom condo in the Eastside area of Long Beach was listed at $264,900 for quite some time (over 100 days). Now that the 4th quarter is here, the bank dropped the price to $224,900, where it quickly received an offer. That's over a 10% break!

More examples like these will be prevalent over the next 45 days as banks drop prices to attempt to close prior to years end. Remember, that you will need to close before the end of the year to get some of the best deals and the properties are sold "as-is" so the bank won't be fixing anything, but you will be saving on that purchase price! Use the Long Beach MLS or contact your local realtor so you can get the deal on a foreclosure that you have been waiting for.

The Truth about Nonjudicial Foreclosures

With all the bad news in the media about the housing market and foreclosures, it might be helpful to know that there is a difference between a judicial foreclosure and a nonjudicial foreclosure.

In a nonjudicial foreclosure, know as a “trustee’s sale,” the trustee exercises the power of sale given by the deed of trusst. Nonjudicial foreclosure is cheaper and faster then judicial foreclsure because it does not have to be looked over by the court system. In addition no appraisal or judicial determination of fair value is required and the debtor has no postsale right of redemption. The creditor may not seek a deficiency judgment.

Further, if there is no irregularity in a nonjudicial foreclosure sale and the purchaser is a bona fide purchaser for value (defined as: one who pays a valuable consideration, has no notice of outstanding rights of others, and acts in good faith concerning the purchase) a large difference between the value of the property and the sales price is not grounds to set aside the sale.

If you choose a nonjudicial foreclosure and the lender chooses to bid, the lender does so in the capacity of a purchaser. The only distinction between the lender and any other bidder is that the lender is not required to pay cash, but is entitled to make a credit bid up to the amount of the outstanding indebtedness. The purpose of this entitlement is to avoid the inefficiency of requiring the lender to tender cash, which would only be immediately returned to it.

If you want more information check out ww.abanet.org/rppt/cmtes/rp/i4/ waldman-Uniform_Nonjudicial_Foreclosure_Act.pdf

The Reality of Foreclosures in Long Beach

As many people search the web for "Foreclosures" or Short Sales to find that beach home for $200,000 or respond to the ad for "Buy a home for $1,000" it is important to realize the reality of the market.

1. If the Naples Island Home or Belmont Shore Home is available for $200,000 instead of $2,000,000, the general public (including realtors) won't get access to the deal. Investors who have relationships with banks often buy notes from the bank, but rarely could they even get a home for 10 cents on the dollar.
2. You can buy a Foreclosure property using a real estate broker! Yes, they are listed on the MLS and it takes a little digging to find them, but ask your real estate broker for what is available. The banks like prepared offers so make sure to include your FICO scores, pre-approval, and proof of funds.
3. Closing Costs - With a well prepared offer, you can get the bank to help you with your closing costs if it is a Foreclosure that is on the MLS. They may not give you all of your costs, but they certainly may help, especially as they are selling the property "as-is" they might help to get you in the door!
4. Buying at the Court house - Yes you can purchase a foreclosure at the court house steps when it goes to auction, but remember these are cash purchases! You don't get an inspection period so be prepared and remember to contact your Title Officer ahead of time so you can find out if there are any other liens on the property.

Looking for the deal can be a challenge, but having a professional real estate broker, title officer, and lender can sure make it a much more enjoyable experience. Make sure you learn as much as you can so you can make your purchase one that is filled with success!

Short Sale Purchases come at a Price

The deals on properties are out there, and now that short sales are becoming a consistent part of the Long Beach real estate market, we thought it would be helpful to provide some insight on what to expect when purchasing a short sale or a quick sale*.

Purchasing a short sale or a quick sale can present some challenges. Since a short sale is not a foreclosure there can be some challenges that are a bit different than your traditional Long Beach home or condo purchase.

1. Time Frame - Understand that even with the best Long Beach realtors invovled, completing a short sale will take substantially longer than a traditional escrow period. Time periods to complete a short sale can often take 90+ days.
2. Understanding Bank Approval - The bank that holds the first and second trust deeds on the property (and they can be different banks) must "approve" of the sale. They must take into consideration the purchase price and terms and the penalties (amounts owed by seller) and determine if accepting the offer on hand is better than going to foreclosure. This period can take 3 or more weeks.
3. Repairs and Credits - Many banks are allowing very few (if any) credits for buyers to purchase properties. This is the case with short sales, but not the case in foreclosures at this time. Be aware that if you are purchasing a short sale you may get a break on the price, but may have to pay most (or all) of your own closing costs. Also remember that most of the time these are "as-is" sales meaning the seller will not make any repairs to the property.
4. Escrow Updates - Your Long Beach realtor may often not have any information to update you on the status of your offer. Some banks allow the listing agent to check-in regarding the status of the approval, while others do not. It has been our experience, that GMAC, does not let realtors call for updates, while loss mitigation departments at WAMU do allow more frequent checking of the status.

If you want to purchase a short sale it can certainly be an opportunity to pick up a great property at a great price. Realize that you may need to submit a few offers out there on different properties so you can obtain one and just be prepared to pay some closing costs.

*Quick Sale is a term being used by Countrywide that means the same as a short sale

3 Tips to Get the Property You want for the Price You want!

As some buyers are in the wait and see mode, we thought it would be helpful to give a couple of tips to get the deal that you want on the property you want. As interest rates are at historically low levels this is a rare occurence where there are proeprties to choose from and good rates to borrow money.

So...if you see the property you want but are hesitant because you feel the prices might drop here are 3 tips to get the price that is right for you.

1. Write the offer for the price you want! - That's right if you feel there is going to be a drop, write below the asking price so that you feel comfortable with what you are offering. Keep in mind you won't be picking up Long Beach condos or homes for 50 cents on the dollar but you may be able to get 7-10% off of the list price depending on how competitively priced it is.
2. Be Prepared - Ensure that you include your FICO scores, proof of funds, copy of check, and pre-approval with your offer. Whether you are offering on a REO (foreclosure), short sale) or a traditional seller this will help you get a strong discount.
3. Understand the Market - Review the listings provided by your local Long Beach realtor or use the FREE Long Beach MLS to see what is out there so you can recognize a good deal from a great deal! If a property comes up that is rarely available in an area (maybe like a condo in Alamitos Beach with parking) and it is priced under what the other ones usually go for, don't wait! Go and get the deal you want by putting out an offer. By reviewing the listings on the MLS system you will know what is a good deal and will not have to wait for someone to tell you it is a good deal.

Try these tips so you can get the property you want in the area you want! Have fun shopping as it is a rare time to have such great choices available.

Mortgage Crisis? - Real Numbers on Delinquencies

The LA Times this past weekend actually prepared a balanced article allowing people to come to their own conclusions. In their article "And now for good mortgage statistics" by Kenneth R. Harney they cover the aspects of foreclosures and the amount of mortgages that that are delinquent. Here are some of the highlights:

• "Mortgage crisis" is very particular to local markets. A state like Ohio has 5.2% of all home loans that are 3 months past due while other states are dramatically lower.
• The nationwide average for prime-credit borrowers being delinquent on fixed-rate loans is over 2% while in California it is barely over 1%.
• The Sub prime effect though does have bigger implications. 12.6% of sub prime borrowers in California are now late on their payments. This can be a small number compared with West Virginia (26% late) or Mississippi (almost 27%) late.
• So for the record number of Foreclosures? Kenneth Harney states "In 34 states, the rate of new foreclosures actually decreased."
• California did see an uptick in Foreclosure filings although those were attributed to investors walking away from their properties.

Kenneth does a great job of pointing out that the foreclosures (REO's) will be concentrated in specific areas at a local level. For those wishing they can get the Home in Belmont Shore or Naples for 20 cents on the dollar it doesn't look likely.

4 Tips on How to Purchase a Short Sale

Short Sales or Quick Sales are a part of the Long Beach, Ca Real Estate market. A short sale occurs when the property is trying to be sold for less than the trust deed that the bank has on the property.

Purchasing a short sale is different than purchasing an REO (Foreclosure). Here are 4 tips on how to have a successful purchase of a short sale:

1. Be Patient! - The bank has to approve the short sale. Unlike an REO where the bank already owns the property, in a short sale the bank has to decide if they are comfortable losing a certain sum of money. The bank must determine if it would be cheaper to go to foreclosure than accept the offer. For this reason, it can take many weeks (sometimes 6 weeks or more) just to get an approval of the short sale. The total process of purchase can take 3 months.
2. Deposit Amount - You will need to have a deposit that is at least 1% of the purchase price of the property. The bank wants to see that you can complete the purchase.
3. Complete Package - Have as much documentation as possible. In other words, include FICO scores, bank statements, and a pre-approval letter to show you are prepared.
4. Closing Costs - You can still get closing costs from the bank, but you will be limited at 3%. Be prepared that the bank may come back and knock that amount down as they are reviewing your offer.

As you are working with your Long Beach realtor, realize that they may be hesitant to submit an offer on a short sale because often the realtor commission gets cut. Be persistent and be open that you may need to look for other properties in case your short sale does not get approved.

Avoid Foreclosure - Government to Help Home Owners

President Bush announced earlier this week that the government would step in and help some home owners to refinance their loans. They want to do this through FHA or the Federal Housing Authority. So how many people are affected by the potential adjusting loans? The government estimates that over 2 million home owners are near or facing foreclosure. So how does this help home owners in Long Beach California? Well first of all let's look at who, what, and how many are likely to get help.

1. The government estimates that about 80,000 will be affected by this new change. That is a very small amount in comparison to what is outstanding in the market currently.
2. They are going to help home owners refinance. Now they are helping those who currently can't get refinanced. This will mean your loan amount must be conforming or under $417,000 so home owners in long beach california may not get much help out of this program.
3. The government will not be bailing lenders out or home owners out with cash or any type of subsidy at the moment.
4. The biggest part of this plan is that President Bush is trying to get the IRS to not tax home owners on the debt relief. Currently if you are working to avoid foreclosure through a short sale or in foreclosure the lender can and probably will issue you a 1099 for the amount that they lost on the sale of the property. This means you will owe taxes on that amount. In some cases that number can be astronomical. This would allow people to work more closely with the lenders and with less fear.

If you want to avoid foreclosure today make sure that you call your lender and ask for a short sale packet or that you ask to speak to the loss mitigation department.

Top 4 Reasons to Ask for A Short Sale

When things get tough, as they are now, in the long beach real estate market some home owners find themselves getting behind in payments. Often through no fault of their own home owners have lost jobs, health reasons, helping family, and rising rates make it difficult to pay the mortgage on their piece of long beach real estate. So what is a short sale and why should you ask your bank for one if you get behind? Well let's get into this.

1. The bank doesn't want to foreclose - Truly banks like to lend money. They have no desire to actually be property owners.
2. It is bad for business - It costs the bank a tremendous amount of time and effort to foreclose on a piece of property and long beach real estate is no different. The average cost of a foreclosure is over $42,356!
3. The number one reason for foreclosure is the bank can't speak with the home owner - That's right lack of communication is the reason behind the majority of foreclosures. So speaking with the bank and asking them to work with you is highly in your benefit.
4. It is better for your credit - Getting a short sale where the bank works with you to sell a property is better for your credit than a foreclosure. The bank has more options on how to report it to the credit agencies.

Remember a short sale is when you are selling a property for less than it is owed. In future posts we will talk about how this can affect you. For now if you are behind on payments, can't refinance, and just need out consider a short sale instead of letting the property foreclosure.

How many California Foreclosures will there be?

The news has spread there will be foreclosures in the state of California. First of all foreclosures happen in any market. There have been many news reports that California foreclosures are up 200%. Well what they fail to mention in that amazing headline is the fact that they have been extremely low in the last several years as a result of the market that existed here. So just how many California foreclosures will there be? Well that is the millionaire dollar question. We will try to answer it as best we can.

First what we believe won't happen:

• Foreclosures will not be 50% of the overall market - Unemployment is still very low and the government seems to be doing an adequate job to assist the lending institutions.
• Homes will not sell for 50 cents on the dollar - Let's be clear about this. If you were thinking that you were going to pick up the million dollar ocean front home for 50 cents on the dollar please know that just isn't going to happen. The economy is still going forward and certain areas are still selling within days and that includes the ocean front properties.

What probably will happen

• Foreclosures and/or short sales will make up at least 5% of the market - now that is still a large number of homes.
• 10% off of what the bank owns will be common - let's be clear we don't mean that the market will fall 10%. What we do mean is some people were able to finance their homes above the actual value of the property and the banks will be taking less than they financed for. In some cases the value will be far greater than 10%.

So just how many California foreclosures will there be? Well there will be a few. If you are serious about buying you can find a deal besides a foreclosure. If you still would like to sell you can still do that as well it just means you have to make sure to understand what is happening in your neighborhood.