Tag Archives: investors

Short Sales Revisited

Posted on December 17, 2009 | 1 comment

In past posts I’ve been adamantly against short sales due to all the hiccups involved.  It is still true that a buyer needs patience, emotional disconnect, and a reality check, however, this year and the years to come might be much different.

Definition – Short Sale:  When a home’s value is less than the money owed on the note/mortgage; This produces a scenario where the lender (one holding the note) is given the opportunity to approve or reject an offer to “forgive” the difference between the offer amount (and real estate fees) and the current amount owed on the loan.

To reiterate:

1) Patience – I closed a few short sales this year for buyers and the average wait to hear back from the bank on an approval was 2 months.  I currently have an offer out there for a client on a short sale and we’ve waited about 4 months with no approval from the bank as of yet.  The other agent keeps saying, “soon, soon… hopefully soon.”

2) Emotional Disconnect – This is a tough one… How does one make an offer on a home to live in and not become somewhat emotionally attached?  It can be such an emotional roller coaster!  Here’s the real picture – one can make an offer and finally hear back from the bank 2 months later, only to find out that the sale is not approved.  Or, what is more common, there is no approval or call back, just the information that the home has gone to foreclosure.

3) Reality check – Much of the time short sales are listed in better condition and less expensive than REO/Bank Owned properties.  Why is that?  That’s what I ask my clients.  Here is the answer – the agent is never sure what the bank will accept until an offer is received and submitted to the bank.  So, in fact, the listing price is not completely accurate.  And it stands to reason that an agent might just list it for lower in an attempt to garner offers.

Here’s the other side of the coin.  I just took a short sale listing.  The seller’s were very cooperative in filling out our short sale package.  My staff and I were diligent to contact the bank.  We did out own Broker Price Opinion (BPO) and due diligence.  We priced it fairly and receive multiple offers.  We picked the best one and submitted it to the bank with all of the information they requested (we knew this ahead of time).  The offer was accepted and approved by the bank within ONE WEEK! I add the emphasis because my jaw also dropped with I heard this news.  I can’t really take too much credit either, but I do know that the banks appreciate a complete package and agents that have their act together.

Bottom line, my faith is renewed for short sales.  Also this coming year I believe that along with government incentive, laws being pasted, and banks getting more adept at dealing with short sales, this segment of the market will be huge.

My company is primed and geared to entertain many short sales in the year to come.  Let me know if you have questions, or think you are a candidate for short selling your home.

Enjoy,

Keith Klassen

Real Estate Broker

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Posted in Home Buying, Home Selling, Short Sale

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Short Sale Tips in Sacramento Real Estate

Posted on June 18, 2009 | Leave a comment

http://www.sacbee.com/realestatenews/story/1933693.html?mi_rss=Real%2520Estate

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Posted in Home Selling, Investing, Investment, Local Real Estate News, Mortgage, Loan & Finance, Real Estate, Short Sale, Valuable Information

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The Best Time to Buy/Invest in Sacramento Real Estate

Posted on June 12, 2009 | 1 comment

1) Right now Sacramento consumer confidence is on the rise.

2) The interest rate is extremely low (about 5%, maybe lower).  And everyone predicts that it will not stay this low, and in fact may skyrocket (according to Obama, as we continue to borrow from other countries).  As the interest rates go up, even if the prices go down, this will take many potential buyers out of the market.

3) One report shows that the housing affordability index is the best it has been in 40 years.

Call me or write if you want to see the numbers OR discuss your scenario.

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Posted in Home Buying, Investing, Investment, Local Real Estate News, Mortgage, Loan & Finance, Real Estate, Valuable Information

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Property Tax Reassessment in Sacramento

Posted on June 5, 2009 | Leave a comment

Many that bought homes several years ago in the peak of the market should expect some real estate tax refund or a credit to be applied toward your next fiscal tax year.

Download the “Decline in Value Reassessments” form at:

http://www.assessor.saccounty.net/coswcms/groups/public/@wcm/@pub/@asr/@inter/documents/webcontent/sac_018985.pdf
You can also check out the new 2009-2010 assessed values for you properties with the County of Sacramento

http://www.assessor.saccounty.net/SacramentoCountyParcelsReducedPerProp8DeclineinMarketValue/default.htm
You may need some assistance in determining the value of your property. Give me a call and I can help.

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Common Investor Questions – Sacramento Real Estate

Posted on May 29, 2009 | Leave a comment

I get many questions from interested investors, so I thought I’d start posting them, as I’m sure others have the same questions.

Question/Inquiry from potential investor [May 27, 2009]

I heard that it is possible to achieve ~ $600 per month positive cash flow.  I would like to develop in my mind a profile of these types of properties so that I have a better idea of what I am looking for.

Here this is how I responded:

1) Cash flow will always depend on your finance situation.  For instance, the more money one is able to put down, the more cash flow (up to 100% cash flow).  My first question for you is, how much are you able to put down?  Or, what is your comfort level?  Or what is your budget?  Are you obtaining a loan?  Or would this be a cash transaction.

2) One way many investors are generating big rewards and high cash flows is to buy under valued properties that need value added.  This demands cash reserves to do put toward renovations.  Also, many times these types of properties do not qualify for a loan due to the poor condition of a property.

3) Also, $600 cash flow might be on the high side of expectations.  I have closed a few deals with investors that have received that kind of cash flow by putting 20% down and at times buying their rate down.  One recent scenario was a duplex that sold for $105K; 20% down; $10-12K in renovation; bought the rate down to about 5.25% – his total housing payment (including taxes and insurance) is about $700/mo. and he’s getting $1600 in rents.  This is a dream scenario, but as you can see it takes some reserves to pull it off.

4) A very common situation is a SFR in the $80-120K range that needs $2500 in repair, and would cash flow $300-$400/month.

What questions do you have?

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Home Loan Market Loosing Up? Sacramento and Beyond

Posted on April 24, 2009 | Leave a comment

Mortgage rates and house prices are down – which sounds great for buyers and refinancers. But a series of mortgage industry underwriting and appraisal changes taking effect this month is throwing hurdles in the way of borrowers and loan officers.

Read on… this article is from the SF Chronicle on 4/19/09

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Posted in Mortgage, Loan & Finance

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What to Expect When Buying a Bank Owned Property in Sacramento

Posted on March 12, 2009 | 6 comments

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While there are always better and worse case scenarios, I’m speaking from my experience. You can expect when buying a bank owned property:

1) A low price tag! Everyone loves this aspect of bank owned properties. Most banks are pricing their inventory at the low end of the market. I know one bank that specifically prices their homes 10% below the market. They want their inventory sold and off of the books as fast as possible. Their loss, your gain!

2) An As-Is sale. This is what most people don’t like… Banks will most always sell their properties as-is – I have not seen one that is not listed this way. This means that the bank will make no representations or warranties on the property, as they usually don’t know much about it, more than the address and the appraised value. Ninety percent of the time a bank will do no work or make no repairs on a property. Of the 10% of the time,

a. There may be a health or safety issue with the property that would cause potential future liability.

b. They may do a pest inspection and at times clear the Section 1 work (dry rot, termite damage, infestation, etc. that is present).

c. There may be some cosmetic work that is done before the home is listed or after it has not sold in several months, such as, re-painting or re-carpeting the house.

3) A one-sided transaction. In a buyer’s market, where the buyer should have all the negotiating strength, bank owned transactions do not behave as such.

a. It usually starts with a lack of responsiveness from the listing agent (not always). The agent, most of the time, is just a go-between and has little control or influence on the bank’s actions.

b. Many times because the property is priced so low, there may be multiple offers. Many times the final purchase price will be more than the asking price. Are you seeing how these transaction do not behave differently in this market? Most of the time a buyer is asking, “How much do you think the seller will come down on their price?”

c. If you get your offer accepted, expect the bank to send you an addendum, which is another contract that is written by their attorneys to safe guard their own interests.

i. Much of the time inspection time frames are shortened (say from the traditional 17 days to 7-10 days)

ii. There is always a Per Diem charge (any where between $50-$300) if the buyer does not close escrow on time as a fault of the buyer.

iii. Many times there is a “silent” contingency removal clause. This states that contingencies (loan, appraisal, inspection, etc.) will be removed automatically once they pass stated time frames in the contract. This is oppose to the normal signed contingency removal. Once contingencies are removed, whether formally or silently, the buyers deposit money is in jeopardy if the buyer backs out of the deal without good cause.

4) Some frustration. I have stories to tell…

While many things are out of my control, I’ve managed to successfully navigate bank owned properties on behalf of my clients. Give me a call to discuss your options.

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Want to Buy a Foreclosure Property in Sacramento?

Posted on March 11, 2009 | Leave a comment

foreclosuresignIt seems as though many buyers that I’ve worked with lately have a misunderstanding or just a lack of understanding of foreclosure properties. This makes sense, as there is a lot of confusion surrounding the process.

Pre-foreclosure, otherwise known as a short sale …

Once a borrower misses 2 payments in a row the lender issues a notice of default (NOD) and the foreclosure process begins. The borrower has roughly 3 ½ months (maybe longer) before their home is foreclosed upon, unless the default amount is brought back to good standing.

Typically a home owner, that falls on hard times and cannot make their mortgage payment any longer will sell the home, if only to get out and break even. During time as these where homes values were inflated and now in decline, many owe more on their loan than their home is worth. A short sale is an option… that few find come to fruition.

A short sale is the scenario described above, where the loan(s) on a property exceed the amount of the home’s value. If the short sale is to close, the home owner will have to

1) Procure an offer during the 3 ½ month default period

2) The seller has to show hardship – e.g., loss of employment, divorce, medical condition, etc.

3) [The hardest piece of the puzzle] The lender will have to forgive the difference between the loan amount (plus real estate expenses) and the offering amount. This piece is why most short sales do not close. Prior to listing a short sale, most agents do not know if the lender will entertain a short sale, let along be willing to take a huge loss on the property.

4) [The second most difficult piece of the puzzle] The buyer will have to be very, very, very patient while they see other, potentially better deals pop up all around them. Lenders usually take a long time to respond. I’ve heard claims of short sales closing in 30 days – since I believe in miracles, I believe it. But from my own experience and the other agents I’ve surveyed the process is usually in the realistic range of 2 – 4 months. AND, many times a potential buyer waits around 2 month or longer, only to be denied by the bank, or to see the house go into foreclosure.  I love the marketing remarks on one short sale listing that read,”If you do not like disappointment and let-down, or are at all  impatient, then this home is not for you.”

I’ve had many potential clients call and say, “I’m looking to buy a foreclosure.” I think what they are really saying is, “I want a good deal and I heard on the news [or from a friend] that there are some great foreclosure buys out there!” And they are right, sort of. There are great buys in Sacramento, but they are more likely than not Bank Owned properties, rather than a true foreclosure.

Foreclosure

This may just be semantics, but a true foreclosure is sold at auction at the county courthouse. There is a minimum price set and the auction begins. The potential buyer has to attend the auction and has to have cash in hand (a cashiers check will do) to pay the full payment immediately following the sale. As you can see, buying a foreclosure at the courthouse auction is not for the faint of heart.

Bank Owned

If no one meets the minimum bid then the property reverts back to the bank. Sometimes you will see the initials R.E.O., which mean Real Estate Owned, another term for Bank Owned. These are the properties that are most prevalent in the Sacramento area and most of the time the best deal.

Still want to buy a foreclosure? Let me show you a less painful way of buying…

Give me a call to discuss your next move, whether it will be your first home or 50th.

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