Buyers are paying more for quality homes. I have often shared that the problem with the “Zillows” of the world is that they cannot quantify the very things that buyers will pay more for. Exceptional locations, views, privacy, upgrades, cleanliness, rare floor plans – all of these are features that buyers may pay a premium for. In the last 3 years it has been very difficult to get premiums; either because the buyer was scared to pay it or the appraiser wouldn’t bring the value in.

We will likely not have any obvious appreciation for a few years. The overwhelming reason for this lack of appreciation is that agents are pricing short sales below market value without any knowledge or care for what bank may accept. Make no mistake, most agents’ price short sales aggressively, with 30% of the homes in our county having no equity. It is everyone’s responsibility to price property with integrity.

The second foreclosure wave has not hit, and most “in the know” agree that it won’t. Clearly, there are plenty of foreclosures that will come to market in the next 3-4 years, just not the gluttony of homes that we all heard about. Just ask the 100′s of asset managers that have been laid off in the last 2 years. This most recent issue with banks FREEZING FORECLOSURES is highly suspect in my opinion.

Vistit My website at www.tandconline.com

The first time home buyer credit which expired at the end of April has some fine print that the IRS is now bringing up. The 2008 first time home buyer credit was considered a loan that would be repaid over a 15 year period. The IRS is stating that many would be recipients have incorrectly filled out their tax return.

Interest rates are still at an all time low with 30 year mortgages hovering around 4.5%. The median sales price in August was $164,500. With a typical 5% down payment, the payment for principle and interest would be approx $786. Throw in taxes and insurance and you’re left with a clean 3 bedroom 2 bath home with a 2 car garage in a good neighborhood for just under $1,000. That’s cheaper than rent!

Sales volume was down compared to last year. Sales in August peaked at 168 sales compared to 185 in August of 2009. Pending sales volume was up however, with 252 new pending sales in August compared to 223 pending sales in August in 2009. The real estate market for the summer of 2010 is on track to be a lot like the summer of 2009.

I have buyers calling me every day asking about a short sale or bank foreclosure that is in limbo (the period between the court house steps and going on the market as bank owned). What starts out as exciting often turns frustrating.

Recently, we have seen banks counter offer short sale offers at even higher prices than “normal sales prices” Why is this happening? I looked into it closer and I discovered something to consider.

Several years ago the banks had a lot to catch up with. There was no efficient way to bring such an overwhelming number of foreclosures to the market. With the added short sale pandemic, the banks found themselves in an even more difficult situation. Many banks would accept short sale offers prior to identifying a clear market value. Banks did their best to determine market value with limited support from appraisers and Realtors. Fast forward to today and things are different.

Banks have established a strong BPO network (broker price opinions). These opinions are essentially mini appraisals conducted by local real estate agents. For approximately $50 a real estate agent will estimate the value of a home. The banks typically order 2-3 BPO’s per property, in order to determine value before considering a short sale offer. If the average of the BPO’s is higher than the offer price, than the offer is typically countered at a higher price.  Since BPO’s are often ordered 1-2 months after a short sale offer is submitted, a buyer may find themselves 3-4 months in an escrow “thinking they have a good deal” before discovering they don’t have a deal at all.

Consider this…banks now have a good process for liquidating homes through foreclosure. The bank has hundreds of willing agents who are willing to estimate a home’s value, list a property on the market, pay for advertising, install signs, provide access for buyers and brokers, coordinate repairs, turn utilities on in their own name, receive offers, collect buyer qualifications, upload offers to the banks database, open escrows, coordinate inspections, and finalize closings. All this work can be done on Contingency! In fact, many agents, “not my office” will line up and fight for the chance to work for the bank. “Again, not my office”

Several years ago, banks did not have the network in place to accomplish all of this work considering the amount of foreclosures they needed to liquidate. For this reason, I feel in the past banks where more willing to work short sales than they are now.

I do not blame the banks for this decision. There has been no good way to regulate how agents perform short sales. Many homes come to the market as short sales at far below average market values. The banks know it, and until now had no real good way to handle the problem.  In the future, I expect banks to place much heavier scrutiny on short sales and the prices they are selling for. If homes are priced to low, more often than not, they will not get accepted as short sales.

Over the past 2 years I have had a lot of success helping sellers sell their homes through a short sale. It is important to have a complete financial picture prepared and a good offer on the table before submitting a short sale package to a lender for review. Good agents know the difference, and in today’s market it will be more important than ever if you want the bank to accept a short sale.

By Josh Barker

530-222-3800

THE MARKET HAS NEARLY DOUBLED IN PRICE SINCE 1998! We often forget that even with a bubble that no one could have seen and predicted, the average prices in Shasta County are still almost double what they were at the end of 1998. The irony though is that with the public having more access to information than ever, there seems to be more confusion than ever. In 2009 we had 5.176 million sales nationally (higher than the average of the boom years of 2000-2005. I do think it is safe to say though that the days of expecting double digit appreciation every year are over. Personally, I wouldn’t be surprised if at least the next 5 years are relatively flat. Because we have over 35% of the homes in our market with negative equity, the market we are in is the market we will have for awhile.

SHORT SALES WILL DOMINATE;  I have written plenty in the last 2 years about short sales, and have changed my thinking from not wanting to have anything to do with them to going through extensive training to handle them. I have met with lawyers, CPA’s and representatives from the top lenders just to help the public understand how they work and what their options are. 3 years ago we had hardly any short sales on the market, today they represent a large portion of the homes for sale and homes in escrow. This won’t change for a long time. Why? Because never before have we had such a large percentage of homes upside down and the ONLY method available to these homeowners (other than foreclosure) is usually a short sale. There is no bankruptcy, loan modification or magic answer to people that in many cases, simply bought their home at the wrong time. Because of the complicated way these loans were sold and securitized, almost never does a successful loan modification change the loan balance. Until this changes, (highly unlikely for now), the problem of being upside down will continue for many Shasta County homeowners for years to come. If the new “HAFA” incentives to short sale show promise, watch for all kinds of additional incentives to homeowners and lenders to go this route, the only route so far for an unhealthy and unprecedented housing problem.

The reason the lenders are encouraging these short sales is because it costs them much less to dispose of an asset on a short sale than going through foreclosure. The problem we are having right now is with a select few agents. These select few, don’t really care about market values and there are no rules to prevent them from pricing a home anywhere they want (By the way, most of these homes go to foreclosure because banks know better!) I suggested last year it is up to all of us to police this issue.

SHADOW INVENTORY IS NOT COMING ON THE MARKET; The nations most knowledgeable foreclosure experts have been saying for over a year that the lenders have neither the balance sheets nor the political will to bring the over one million properties in default to the market. We will likely see these properties come on the market over a LONG period of time. There are simply too many reasons why it won’t happen all at once, or even over the next year and a half. What that means is that the percentage of our inventory that is foreclosure (a modest 20-30%), will likely stay that way for the next 2-4 years.                                           

Continued on other side

THE APPRAISAL PROCESS HAS CHANGED COMPLETELY; in 2009 the Government imposed new regulations on appraisers designed to eliminate some of the “funny business” that occurred during the boom with inflated appraisals. As many agents and appraisers will tell you, it has had the effect of driving many good ethical appraisers out of the business and often created a situation where the agents involved can have no communication with the appraiser. On the surface this may sound good, however, it is now quite common for appraisers to come from far out of the area to appraise and usually they have no information (other than photos online, if any) about the comparables they are using. They use short sales (that in many cases sell for lower than market value because of a lack of competitive bidding or a lack of buyers willing to go through the aggravation) as “comparable” to regular sales when in many cases they are not. This one area is clearly keeping home prices from enjoying even modest appreciation, especially in the under $200,000 price point where demand is high.

BUYERS ARE MORE IN CONTROL OF THE HOME BUYING EXPERIENCE; like never before, buyers have access to listings and information. When I started in Real Estate in 1999, the agent was almost entirely in charge of which homes a buyer saw, today the opposite is true. Unfortunately, our role is now just as often explaining to a buyer why a home they think is for sale really isn’t. For buyers, a good agent helps you separate fact from fiction. For sellers, understand that your photos online and your agent’s reputation may be the difference between a showing and no showings.

THE MOVE UP BUYER IS SLOWLY COMING BACK; I don’t know about other markets, but in Shasta County the first time buyer, and move up buyer has been the fuel that drives the Real Estate engine. From 1999-2009 I sold more homes in Shasta County than any other agent by doing multiple transactions; First, by helping first time home buyers purchase there first home. Second, by helping the existing homeowner sell and buy up. Lastly, by helping investors buy, sell and exchange properties.  Prices have fallen so much over the last 3 years, we are seeing sellers in the $200,000-$250,000 range move up to $300,000 – $350,000 and get a LOT more house. Slowly I am talking to more people in the $350,000 range that will move up to $500,000 plus. In many cases theses homes couldn’t be built for the price they are offered at, and the buyer knows it. One last thought, don’t count out the investors! We have seen plenty of great investment opportunities coming back to the market ranging from 8-15 percent cash on cash returns.

THE NUMBER OF REALTORS IS DROPPING RAPIDLY; in 2005 there were over 2.1 million licensed agents in the United States, today it is about half of that. In 2009 over 50% of the agents in the United States sold 2 homes or less. What this means, more than ever, is know your agents experience and track record. It could mean the difference between getting your offer accepted or rejected, selling your home or not selling.

Lets all make today, a great day!

Josh Barker                                                                                                                                                                           

The information provided has been gathered through extensive research, and collaboration with some of the nations most knowledgeable Real Estate Agents. All though intended to be accurate, this document contains opinions of Josh Barker and others, and should be verified.

1. Rules of supply and demand  (you already feel this but may not know it!)
   1. anything over 7 months supply usually a buyers market
   2. anything between 5-7 months supply usually stable market
   3. anything under 5 months supply usually a seller market

1. Foreclose (reo) market
   1. over 500 bank owned properties listed and sold over last 12 months
   2. average sales price $225,000.00
   3. average list to sales price 98%

1. Short sales (pre-foreclosure listings)
   1. 90 short sales listed and sold over last 12 months
   2. Average sales price $200,000
   3. Average list to sales price 97%

1. Lending
   1. crazy loans are history until they forget what happened!
   2. Majority of purchases are FHA 3.5% down.
   3. Most buyers are asking for seller closing cost up to 6%
   4. Guidelines have changed takes longer, time periods etc.

1. Appraisals
   1. no more direct communication with lender or agents
   2. bid process when ordering an appraisal
   3. most do not factor (well) the condition
   4. must include short sales and reo sales
   5. many appraisals note future market decline.

1. How did we get here?

Forecast for the next 1-4 years

1. Next 12 months expect further price decline. (Could be 5-8% on average)

1. 1. Short sales (the wild west) buyers perceive these to be the market
   2. Reo properties still coming to market at similar pace
   3. False sense of pricing with marketing gimmicks etc.
   4. Strange rumors of sales prices on reo and short sales
   5. Very few move up buyers (see move up chart)

1. Shortage of listing inventory in 2010
   1. reo will still dominate the market (may be 50% of total sales)
   2. Short sales still shooting up the comps all over the west!
   3. Fewer equity sellers.
   4. A few Builders will add new inventory (small scale) build a few / sell a few
   5. Current 500 (50% distressed) homes in escrow out of 2,000 total listings will look more like 700 (60% + distressed) homes in escrow out of possible 1,500 total listings
   6. Same number of sales each month as 2009 for the year 2010 with fewer active listings.
   7. You will hear things like “low inventory” “hard to find good homes” etc.
   8. Supply of homes could be as low as 5 month supply.
   9. Price may begin to stabilize on the lower end ($100-300k) first.
   10. There will be little change in interest rates in 2010

1. Continued shortage of listing inventory in 2011
   1. With reo and short sales still plaguing the market there will be little confidence to break ground on new large scale subdivisions. (for good reason)
   2. several new and smaller subdivisions will appear, and can be successful if within 5%-10% of existing home sale prices (at that time) and if under $300,000.00
   3. Several “hot locations” may see a small bump in sales prices
   4. Fewer short sales and reo by the end of 2011
   5. Slight bump in interest rates (more stimulus money reaching the publics hands)

1. Things beginning to feel better in 2012
   1. even fewer short sales and reo
   2. begin to see higher percentage of move up transactions and transplant buyers
   3. builders will begin to build with more confidence
   4. may see a slight bump in sales price in lower end $100k-350k

1. Real housing shortage 2013
   1. A few strong Builders take back control of market. (we need this) reason to move
   2. Even more move up transaction and relocation buyers
   3. Upper end of market stabilizing. (after compression already takes place)
   4. Lower end of market receiving single digit appreciation.
   5. Supply, Affordability, and interest rates control market again!

Kind of sounds like a Real Estate cycle,,, doesn’t it?

Foreclosures

According to RealtyTrac, 1 out of every 240 homes for sale in Redding is in foreclosure.

Banks are more likely to work with a seller on a short sale than EVER before, and we know how to get them approved! (Refer us!)

Interest rates

Rates are still hovering around 5.25%.  How long will it last? We have been discussing some trends that have been discovered and know where to find the best rates!

Inventory

It has been Dropping! In a normal market, which does not last long (usually 2-3 years), the inventory of homes is around 5-7 months. Anything  under a 5 months supply, usually means a sellers market.  Anything over a 7 month supply is usually a buyers market. 

Currently we are right at a 7 month supply of homes and it is dropping!

Investment

There are some real bargains out there. The smart investors know where to find them and we can help. These deep discounts will not last forever. 10%+ returns are not uncommon   anymore,  and we know where to find them. If you have not seen Josh’s Ideal Investment   Opportunity worksheet call for a copy today!

BREAKING NEWS…On Wednesday, Feb. 17, 2009, details were released on the President’s Homeowner Affordability and Stability Plan. The $275 Billion plan is geared towards helping struggling homeowners with keeping their homes and reducing foreclosures, mainly through Government backed refinaces and loan modifications. I will be participating in a conference call this Friday, Feb. 20th, where I should obtain the latest information on the plan. I will update this article with the most current information soon. Are you or someone you know behind on their mortgage payments? A sad fact is more than 50% of homeowners who lose their home to foreclosure NEVER seek serious professional counseling to find out what their alternatives are. The first thing a homeowner who is having difficulty in affording their mortgage payment should do is talk with your lender about a loan modification. All lenders have different criteria, however, if you qualify and really want to stay in your home, this may be the best solution for you. If a loan modification is not an option for you, a short sale of your home is possibly the next best solution. A “short sale” is a process in which the lender approves the sale of a home for less than what is still owed on the home’s mortgage. Each company has their own set of processes through which they decide whether or not to accept a short sale, and while there are many similarities, each has its own requirements for final approval. A short sale can be a win-win-win situation for the seller, buyer, and lender. The seller gets out of the mortgage liability without having to go through foreclosure or possibly facing bankruptcy, the buyer usually pays below market price, and the lender doesn’t have to go through the expensive and time-consuming process of foreclosure. Are you a candidate for a short sale? With today’s economic climate, many people are having a rough time meeting their financial obligations, one of which is making their home mortgage payment. If you are in this situation now, or about to be thrust into this situation, it is important to talk with a Certified Distressed Property Expert immediately. After a confidential discussion with you, the CDPE will be able to advise you if you are a potential candidate for a short sale, or if there is a better alternative for your situation. Time is of the essence! There are specific time lines to be followed to prevent your lender from foreclosing on your home. It is very important that you contact us as soon as possible to evalutate your situation. As mentioned above, over 50% of home owners who lose their home to foreclosure NEVER seek the confidential consultation of a professional, whether it be a CDPE, Attorney, CPA, or other professional who can help and guide them in their situation. Many of these foreclosed homes could have been dealt with differently and saved the homeowner the stress of a foreclosure and the impact it will have on their credit and public record for a long time. Don’t hesitate…make the call today! The Process The first step is to call and set up an appointment to discuss your situation. I will explain your options and, if necessary, refer you to other professionals. If you decide that a short sale is the best option for you, we will set up a listing appointment in your home. At the listing appointment, in addition to signing the listing agreement, the listing agent will provide you with additional information about the short sale process, including a list of items you will need to provide us so we can begin putting a “Short Sale Package” together to submit to your lender. The items a lender requires may vary slightly, but usually include the following: Authorization to Release Information: This form is signed by the borrower and co-borrowers on the home mortgage loan and submitted to the lender, and any other lien holder, so agents of RE/MAX Town & Country can submit and negotiate the short sale offer on the seller’s/borrower’s behalf. Residential Purchase Agreement: This is the purchase offer that has been accepted by the sellers. Buyer Pre-approval Letter: A letter from the buyer’s lender stating they are approved for a loan. For a cash buyer, proof of funds are required, such as a bank acount statement showing sufficient monies deposited to purchase the home. Estimated Settlement Statement: This statement is completed by the Escrow Officer and lists the purchase amount, seller/buyer costs, and the net amount the lender(s) will receive at the close of escrow. Residential Listing Agreement: This is the listing agreement between the seller and RE/MAX Town & Country. Hardship Letter: This letter should be a single page handwritten letter from the seller, explaining to the lender what has occurred in their life to place them in such a financial hardship that they no longer can afford to make their mortgage payments. Financial Statement: This is a detailed accounting of the borrower’s and co-borrower’s assets and liabilities. Recent Pay Records: Most lenders will require the past 2 months of the borrower’s and co-borrower’s pay records from all sources of income. Recent Bank Statements: Most lenders will require the past 2 monthly statements of the borrower’s and co-borrower’s bank/credit union accounts, and other accounts where assets are held. Tax Returns: The borrower’s and co-borrower’s past 2 years of income tax returns, federal and state, along with W-2s and 1099s. Comparable Market Analysis: Some lenders may require a CMA or BPO (Broker’s Price Opinion), which is a report that lists market value of the short sale property by comparing sales prices of similar properties that have sold recently. Once the listing of your home is completed, it will be placed on the local Shasta Board of Realtors Multiple Listing Service and marketed for sale in the manner the listing agent described at the listing appointment. Now is the time for you to begin to gather the required financial documentation listed above! Upon acceptance of an offer, I will schedule a meeting with you at my office, where I will receive your financial documentation and hardship letter. We will go over the short sale process and I will answer any questions you may have. Generally, I will have the Short Sale Package submitted to the lender(s) within 2 business days of the purchase agreement acceptance date. I will follow up with a telephone call to confirm receipt. On occassion, it takes several days for a Short Sale Package to be logged into the lender’s record system. At this point I will be in contact with the lender(s) on a weekly basis to check the progress of the short sale review. The lender will assign a negotiator and order a BPO (Broker’s Price Opinion) or appraisal to be completed by an outside company. Once the negotiator has reviewed the short sale package, it is usually reviewed by the lenders upper management and then presented to the lenders investor board or committee for final approval. The entire review process can take anywhere from 3 weeks to 3 months or more. Once an approval letter is received by all lenders escrow will be opened (if not already opened) and the Buyer’s investigation period will begin. The rest of the escrow will proceed as any other home sale, with a closing date being scheduled and both seller and buyer doing their part to close on time. Any extension of the escrow period must be approved by the lender(s) and reflected on the lender’s approval letter. Personal Message: As a Realtor and Certified Distressed Property Expert for RE/MAX Town & Country, one of the most reputable Real Estate companies in the Redding area, I guarantee you the highest level of honest, ethical, and professional representation. My specialized training and experience in negotiating short sales gives me a distinct advantage over other Real Estate Agents in listing, marketing, selling, and obtaining a short sale approval from your lender. Call me today for a free and confidential coversation, where we will talk about your situation so you can determine if a short sale of your home is your best option. Remember, time is of the essence. Do not delay…make the call now