I get questions frequently from first time investors that are interested in purchasing REO’s (foreclosed properties) in Livermore or surrounding cities. The general perception is that they will be the best deal. That may or may not be true. Certain factors need to be considered when making this type of purchase.
Inventory. This is the most critical piece of the equation currently. There are very few homes on the market in Livermore in general. 58 total as of today, 8 of those being attached homes. And buyers are plentiful. There is fierce competition for homes in most price ranges. The idea of lowball offers is one of the past. Banks are certainly aware of the turn in the market. While nationwide some cities are still feeling the pinch, the Bay Area of California is not overburdened with excess inventory, foreclosures or otherwise.
Price. REOs are no different from traditional sales in one regard. The list price may be under value, at market value or actually overpriced for the condition and location. As with any other property purchase, it’s important to have your agent run a comparative market analysis to assess the list price.
Condition. Some REO’s have been vacant for a very long time, and that may have had adverse effects on the property’s condition. There are some banks that will prepare the home for sale, and do a very good job, but it’s not a given.
Investor Friendly? Some properties are part of special programs to get homeowners back into neighborhoods. In these cases, offers will be accepted by owner occupants first. If no suitable offers are accepted within a given timeframe, then offers are accepted by non-owner occupants.
As Is Condition. Banks expect properties to be accepted in their as-is condition. Your impression of value may change greatly if and when you learn about property defects and deferred maintenance items and their associated costs.
Disclosures. Banks are exempt from many seller-required disclosures. They have never lived in the property, nor have knowledge of previous alterations or repair items. Buyer beware has significant importance for this reason.
Anticipate Inspection Costs. This is a critical part of a successful investment purchase. The only way you will know the true cost of owning this house will be to do thorough investigation of the house. Whole house inspection, roof inspection, pest inspection, chimney, pool, HVAC – there is no one to tell you what works and does not, so it’s best to know upfront.
Timing – When you make an offer to the bank, you may not hear back as quickly as you would from a regular seller. They can be slow to respond, just due to sheer volume. That said, they will more than likely ask you to perform quicker than a typical escrow on some of the time sensitive due dates. (such as inspection contingencies).
Contract – In addition to a regular purchase contract, you will receive a separate REO advisory to alert you to many of the differences between an REO purchase and a regular sale. You should read and understand these thoroughly. In addition, you will receive a counter offer from the bank (even if it’s not about price), showing their terms and conditions which are apt to be very different from a standard purchase contract. Again, it is important that you read and understand them.
Bank’s Motivation. The bank cares about two things – what they will net, and how fast the transaction can close. They have a non performing asset, so the quicker they close, the better. They may also offer incentives if you use their lender.
No Two are the Same. Banks have their own internal processes, thousands of employees and a plethora of agents who list their foreclosed homes. The nuances of the transaction can be very different from one bank to the next, and many of their processes are subject to change. With banks as sellers, every time is a new experience.
Distressed sales are certainly still a component of the Livermore market, and many homebuyers want to start their search with this segment. While they were the bulk of the activity a few years ago, their percentage of the overall market has certainly decreased. Buyers expect that they are a better value, so continue to ask about them specifically.
The graph below illustrates the percentage of total sold properties these distressed properties comprise. As you’ll see, it’s noticeable, but regular sales far surpass distressed in number of total units sold.
Here is the detail for the above chart.
| Foreclosures and Short Sales in Livermore 2012 | ||||||
| Jan | Feb | Mar | Apr | May | Jun | |
| REO | 19 | 20 | 15 | 16 | 13 | 9 |
| Short Sales | 32 | 22 | 26 | 23 | 43 | 15 |
| Total | 83 | 77 | 100 | 102 | 125 | 88 |
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(all data current as of
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Listing information deemed reliable but not guaranteed. Read full disclaimer.
Those living in most areas of the East Bay are aware that the market has turned. Move up buyers are those who can benefit greatly from this market – it’s much easier to sell in a low inventory/multiple offer market. But purchasing a replacement home offers a few more challenges. So what are your options? (more…)
Now before I imply that all the buyers I meet want to buy lots of house, let me explain. The Tri-Valley real estate market is fast-moving, and many buyers are feeling the pressure of little to choose from, lease renewals and fierce competition. Many buyers get frustrated when they’ve been beaten out in multiple-offer situations, by others with more all cash, higher prices and bigger down-payments.
Other times, the question arises when a buyer in contract on a short sale gets tired of waiting and wants to have a back-up plan in place.
With low inventory levels and high demand, this question gets asked repeatedly. So can you offer on more than one house? Well, it depends. Remember, a real estate purchase agreement is a binding contract, and must be made in good faith. Your signature on that document indicates that you have the financial wherewithal to make this purchase. It is accompanied by your earnest money deposit, also known as a ‘good faith deposit’ letting all parties know that you are ready, willing and able. (more…)
Negotiation has always been a component of real estate. But it’s not mandatory. One party can try and the other can say no. So much of that has to do with how the market is, and whether it’s a buyer’s market, a seller’s market or a balanced one. Negotiating is very common in a balanced market.
WHAT KIND OF MARKET IS IT?
Buyer’s Market – price tends to be first and foremost. The longer a property has been listed, the more likely a below-asking offer will be submitted – especially if it is the only offer. Once two parties come to agreement, there is usually another round of negotiation regarding repairs. When listed properties are plentiful, the buyer has other choices and may play hardball where offers are concerned.
Seller’s Market – appreciating prices and/or low inventory put sellers in the driver’s seat. They push back on price, and know the buyers don’t have a lot of other properties to choose from. They may also be competing with other buyers for the home. If the seller encounters a buyer with strong financing though, it’s less likely they’ll take too many chances where repairs are concerned. (more…)
Real Estate Owned properties (REO’s) can be tremendous values. But they are not without risk. Prior to writing an offer on a bank-0wned property, make sure you balance out the risks and rewards.
Contract Elements: Banks often have very specific instructions that must be followed for an offer to even be considered. They may prefer a specific title and escrow company. They often request that you are pre-approved with their loan officer. And it’s likely that you will receive verbal acceptance far in advance of their written acceptance.
Counter Offers: You will receive one, even if the bank accepts your price. These documents then supersede your initial offer. Understand that these are written by attorneys for the bank and can be very lengthy. You’d be well advised to have this reviewed by your own attorney.
Disclosures: The bank agents and principals in the transaction have never lived in the property and won’t provide disclosures about the properties condition. Many of the documents you received will simply state ‘exempt’. (more…)
Buying a house is a lot like getting married. If you’re buying it for your residence that is. An investor buyer would have a very different mindset – more like speed dating.
First comes Playing the Field. This is where you check out various cities, tour open homes or new home developments. But it feels a little empty, and shallow.
Double dating, that’s the ticket. You pair up with a real estate agent and a lender – It’s safer that way. You go out a lot and you have fun. It seems you are narrowing your focus to a select group now. Things are taking a serious turn. (more…)
In this example, let’s consider a detached 3 bedroom, 2 bath, 1500 sq. ft. home, with a lot size less than 10,000. The average monthly rent for homes of this size (based on the past 120 days) is $2265. Depending upon the neighborhood, that same home size might rent for $2500 or more.
The average price to purchase a house of that size is $363,000. Using the example of 20% down, what does that look like in terms of a monthly morgtage?
363000
72600 20% down payment
290400 conventional loan amount
$1743.69 monthly mortgage amount (includes principal, interest and taxes) based on 3.875%*. So, less than your rent would be. (*Based on 30 year fixed rate as of 2/9/12, .05% insurance and 1.25% for taxes) (more…)
Buying a home in today’s market can be a bit scary – at least at the surface. Almost everyone knows someone who has been left in a precarious position due to a housing purchase. Maybe even you or your parents!
Do you know what group is buying property? Investors! So what do they know, that the rest of us don’t?
Investors who purchase real estate typically look at it as a buy and hold investment, an important part of their portfolio. They look at it historically. The craziness of the early 2000s prompted people to buy high and sell quickly – and at that time it was for a tidy profit.
But traditionally, people bought real estate for other reasons:
Now, please understand, I don’t mean this to be an unrealistic approach to buying a home.
You probably started out your home search with a very specific list of what you wanted, how much you were willing to pay, and where you wanted to live. Your budget it the largest factor in determining if all of those factors line up.
So far I haven’t met anyone who didn’t want the perfect house, in the best location and please, pretty please can it be in our budget? Those with endless financial power may win on all accounts. But for most people, there is a price limit and ‘perfect’ usually comes at too high a price. (more…)
Karen Crowson
Alain Pinel Realtors
Phone: 925.784.6208
Cell: 925.784.6208
Fax: 925.245.1897
Email: karen@karencrowsonhomes.com
License #: California DRE#01732313
©2013 Bay East. ©2013 CCAR. ©2013 EBRD. All rights reserved. Information deemed reliable but not guaranteed. This information is provided from three separate sources: Bay East, CCAR and EBRD. The listings presented here may or may not be listed by the Broker/Agent operating this website. Information last updated on 1/3/13 4:09 PM PST.This IDX solution is (c) Diverse Solutions 2013.
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