Larry Hansen

1 Million Foreclosures Delayed Until 2012.

2011-07-25T02:49:00Z

1 Million Foreclosures Delayed Until 2012.

An estimated 1 million foreclosure-related notices for defaults, auctions, and home repossessions that should be filed by lenders this year will be pushed back until next year, according to the latest report by RealtyTrac.

While the delays could give home owners more time to catch up on their payments and try to avoid foreclosure, housing experts warn this means the looming shadow inventory of distressed properties likely will continue to plague the real estate market even longer. "The best-case scenario is we don't get back to normal levels of foreclosure activity until 2015, which means the housing market recovery gets delayed by at least a year," says Rick Sharga, a senior vice president at RealtyTrac.

Foreclosure Notices Drop, Threat Still Looms Overall, the number of homes repossessed by lenders in the first half of this year dropped 30 percent compared to the same period in 2010. But foreclosure processing delays — with lenders taking longer to take action against delinquent borrowers — is stalling the housing recovery, experts note.

About 1.2 million homes received a foreclosure-related notice in the first six months of this year — in other words, one in every 111 U.S. households, RealtyTrac reports.

Nevada continues to face the most foreclosures; one in every 21 households in that state received a foreclosure notice in the first half of the year.

The foreclosure process continues to lengthen too. From April and June, homes took 318 days on average to go from the first stage of foreclosure to ultimately where it was repossessed by the lender — that’s up from 298 days in the first three months of the year. (In New York, the foreclosure process took the longest at an average of 966 days or 2.6 years; Texas boasted the shortest at 92 days.)

Source: “Delays in Bank Processing Push Likely U.S. Foreclosures Until 2012, Stalling Recovery,” Associated Press (July 14, 2011)

Big mortgages are back

2011-07-22T14:16:00Z

Big mortgages are back
As reported in the WSJ. Low interest rates are driving high-end home buyers to supersized mortgages at a pace unseen since the housing boom. But the deals may have a limited shelf life.

Read the full story

Tax Tips for vacation properties

2011-07-07T19:39:00Z

If you are thinking about renting out your vacation home for extra income (or conversely, using your rental property for personal use), here are some tax tips to keep in mind.

First and foremost, be aware that the number of days you (or family members and certain others) use your vacation home will be treated by the IRS as "personal use" which can adversely affect tax benefits. The IRS uses a fourteen-day-or-ten-percent test, meaning if you stay in the home more than 14 days or 10% of the total days it's rented in a calendar year (whichever is greater), the deductiblity of related expenses will be limited to the amount of rental income. This could result in a huge loss of tax benefits if for example, your total expenses greatly exceed total rental income in a particular year (net loss). You would be unable to offset this net loss against other qualified income. So.... make sure you don't lose what might be a significant tax benefit by simply losing track of the number of "personal use" days.

If you plan to use your vacation home often, there is a "less-than-fifteen" day exception you may want to keep in mind (and verify with your tax advisor). If you rent out your vacation home for less than 15 days during the taxable year, the income may be yours, tax-free and you don't have to report it on your return. Just be aware that any expenses related to the rental are nondeductible. If you itemize, you can still deduct qualified mortgage interest and real estate taxes on your vacation home.

Other tax rules, such as passive activity and capital gains reporting, can also impact the decision to rent out your vacation home. Be sure to check with your tax advisor to review your options under the tax rules.

If you are considering a vacation home, or investment income property here in the La Quinta CA area... be sure to give me a call or email. There are some very good deals right now, particularly in the "off season" summer months.

Larry Hansen, CPA, Broker / Owner

Calif Desert Realty

www.CalifDesertRealty.com

Bankruptcy agreement reached with club members at PGA West and La Quinta Resort & Club

2011-06-23T20:41:00Z

Michael Kelly, executive director of PGA West, said in a statement today that a membership settlement has been filed in the U.S. Bankruptcy Court of the Southern District of New York between La Quinta Resort & Club and PGA West. The agreement was reached with the board of governors of the La Quinta Resort’s 797-member Citrus Club and the 1,475-member PGA West Club. The settlement, which is subject to final approval by the bankruptcy court, includes a guarantee that the golf courses, social experience and facilities will be maintained as a world-class property, includes a cap on dues hikes, restrictions on assessments and a stipulation that the four golf courses will remain private.

Click here for the full story as reported at MyDesert.com

Do a reality check before retiring

2011-04-21T17:58:00Z

Are you thinking about retirement? If so, it is important that you review your finances and develop a retirement strategy.....and perform a reality check on your retirement resources and expectations. Here are some helpful tips:

Create a retirement budget.
- Take a look at your current expenses and add or subtract items that you expect to be different when you retire. Don't forget to include things like health insurance premiums and other fringe benefits currently provided by your employer and factor in how these costs might change.
- Estimate your retirement income. Keep in mind your life expectancy given the age you decide to retire and and the financial resources that will be needed. If you have an investment portfolio, be conservative on what your anticipated income might be. This is not the time for agressive investing. For some people, this may be the time to cash out on home equity, invest the the proceeds and pay monthly rent. However, again, be conservative in estimating the income generated from investing the proceeds.
- Evaluate your investments. As mentioned above, now may be the time to start moving into more conservative investments. If you do not have equity in your home that you can cash out, it may still make sense to consider downsizing your home to reduce your housing costs and free up money for other types of investments.
- Pay down your debt. Don't take on new debt. Get a handle on your current debt to prepare yourself for a reduction in income when you retire.
- Decide where you are going to live. If you are going to relocate, don't forget to adjust your budget for the cost-of-living differences between the two communities. Also, don't forget to factor in moving expenses. And, if you are considering moving to a warmer climate such as the La Quinta, CA or Palm Springs, CA communities, give me a call and we can discuss the current housing market, prices, communities, lifestyle preferences, etc.
- Revise your budget. Typically, it may take a number of revisions both to estimated expenses and estimated income before you reach a comfortable budget that you feel will provide yourself with a comfortable retirement. If the numbers don't work out, you may need to continue working a few years longer than expected. If so, best to know that early on to stay motivated in your job and career.
Make wise "exit" choices. For example, if you qualify for pension benefits, you will be faced with a number of binding decisions when you leave your company. You may be eligible for COBRA coverage (extended health insurance) which could help bridge the gap between retirement and Medicare eligibility at age 65.

If you are considering a move to the Palm Springs, CA or more specifically, the La Quinta CA, The Citrus, Rancho La Quinta, La Quinta Resort and Spa, The Tradition, or PGA West communities, give me a call to see if I might be of service in your real estate needs.

Larry Hansen, CPA, Broker / Owner

Calif Desert Realty

www.CalifDesertRealty.com

760-668-2486

La Quinta housing market finally picking up.... then again, maybe not...

2010-08-10T00:08:00Z

A month ago, it looked like the housing market was finally picking up in La Quinta, CA and that we were at or near the bottom. However.... that was last month. This month, all signs are pointing toward NOT being at the bottom yet and the La Quinta housing market is NOT picking up. Next month is anyone's guess.

Such is the housing market in these times... up one day, down then next. Who would have thought we would see the kind of volatility in the housing market we have become accustomed to in the stock market! We see the papers, websites and TV news reports. And just like the weather, every day the forecasts change. Prices stabilizing, prices rising, prices falling, foreclosures will double, mortgage rates will rise, unemployment will worsen, the recession is over, great time to buy…

Rob Gutman, a real estate agent at Keller Williams Realty in Ridgefield, CT recently authored an excellent summary of the housing market uncertainty, and had this advice for people considering selling their house: "Don't try to time the market. Buy or sell when your life calls for it."

I recently had a conference call with a home seller / client, and their wealth management adviser. We all concluded during the call that their best course of action is to lower their price to compete with bank owned and short sales, cash out, and re-invest. Being a former CPA, I also like to crunch numbers, and it was fairly easy to show them what their annual carrying costs were. And in addition to the actual costs, what their "lost opportunity cost" of having the money tied up in a non-performing asset was actually costing them. This may not be the best advice for everyone, but for this couple, where they inherited the home and were not using it as a second vacation home (it was just sitting idle) this was sound advice. Cash out, cut your losses, reinvest, and move on.

Other clients are not in this situation.... they need all the equity they can squeeze out of a sale. However, the harsh reality right now is that home sellers are in competition with bank owned and short sales, and rather than the odd anomaly now and then, these transactions are what's driving the market right now. And appraisals for those seeking financing. I don't see the market getting any better for quite some time, and if fact... may get ever worse given where unemployment is at. Not to mention the "shadow inventory" of bank owned homes that some believe will be coming on the market, and a new wave of adjustable rate mortgages ready to reset. The buyers I am working with are looking for the best deals they can find, including immaculate condition, designer furnished, quality upgrades and great views, at prices similar to bank owned or short sales. And we are finding them! That seems to be mainly what is selling right now, in this market anyway. The longer buyers take to look, the better it seems to get for them, as prices are still dropping. However.... when they find the right home, then need to be ready to submit an offer because chances are it won't last long, assuming it is priced to sell and priced to compete with bank owned and short sales. That seems to be where the market is right now.

FHA Mortgage 101 (The "basics" you need to know)

2010-08-09T23:16:00Z

As more and more borrowers are considering an FHA Mortgage, it is imperative that they know what is necessary to be approved for an FHA loan. It is also important to remember that as today’s market is in constant change, HUD is also constantly making changes to the guidelines and requirements. FHA Mortgage 101 authored by Rosemary Rugnetta, will tell you what you need to know to obtain an FHA loan. Read full article.....

Thoughts on the La Quinta CA housing market....

2010-08-08T22:58:00Z

I ran across an excellent post on the housing market written by Joe Manausa, MBA who was kind enough to let me re-post. Although he was describing his thoughts regarding the Tallahassee housing market, he could very well have been describing the La Quinta CA and surrounding area housing market as well.

Click HERE to read his well written article, or copy and paste the following link in your browser address: http://www.manausa.com/thoughts-on-real-estate-supply-and-demand/

Larry Hansen, Broker / Owner

Calif Desert Realty

www.CalifDesertRealty.com

The La Quinta, CA real estate market - The longer buyers keep looking, the better it seems to get for them....

2010-08-08T17:50:00Z

I have been blogging lately about mixed signals, mis-information (whether intentional or not) particularly from national franchise brokerages trying to paint a rosy picture inside a muddy landscape, and buyers and sellers being VERY CONFUSED about the state of housing market. Is it getting better, or getting worse? Or staying the same?

Buyers and sellers are not the only ones confused.... many real estate agents, including myself, are equally confused. Just when you convince a client to lower their listing price, a similar home down the street sells for a higher price (which of course makes you feel like an IDIOT, having just done an exhausting study of "comps"). Then a week later, a similar home sells for a much lower price than where you were advising your client to list at. Then a bank owned on the same street, sells at a HIGHER price than similar comps and a "non-banked owned, non-short sale" sells at a much LOWER price than similar comps. The market is crazy! (And it's making me crazy!!!)

However.... THANKFULLY, when you sort through all the dust and noise, there does seem to be certain "patterns" consistent with practical advice (and common sense). Those homes that are the lowest priced relative to similar homes, in the best condition, good location, great views, etc., for the most part are selling faster than homes not as competitively priced, or not as well kept up or staged effectively etc. Yes, there are always exceptions, but that still appears to be the overall trend.

Bottom line, it still boils down to the age old "time vs. money". If sellers have the luxury of time to price a bit high and wait for an offer, they may get it. If they don't have that luxury, then it is better to price aggressively and get the home sold. I recently had a conference call with a seller's wealth management adviser, the seller and myself, where we went through the "carrying costs" including the lost opportunity cost of having money tied up in a non-performing asset. We concluded that even though they were not "financially desperate" to sell, it was clearly to their advantage to sell quickly, take the money and re-invest. (We also "jointly" concluded that the market was not going to get any better for quite some time....a major factor in the decision process.)

For home buyers looking for great deals right now, my experience the last 6 months or so, is that the longer they keep looking, the better it seems to get for them...... leading me to believe that the market is NOT improving, and in fact pricing is still dropping in many cases as sellers finally decide to throw in the towel, and lower their price to get their home sold.

However.... once a buyer does find that "perfect" home they have been looking for, at a very good price, they had best buy it now because chances are high that it is truly "priced to sell" and won't last long on the market.....

What the new consumer protection bureau will do for home buyers in La Quinta CA

2010-08-07T16:04:00Z

Re-posted from C.A.R. Market Matters Weekly

Los Angeles Times

What the new consumer protection bureau will do for home buyers

Part of the financial reform bill signed into law by President Obama includes the creation of a Consumer Financial Protection Bureau, which will write new rules and monitor problems and abuses in areas such as residential real estate settlements, credit scores, "truth in lending," and equal credit opportunity.

KEEP THIS IN MIND

• Before the Bureau can begin implementing new laws to assist consumers, the president must nominate a director for the Bureau and the Senate must confirm the nominee. While this may take time, mortgage industry leaders say some of the core changes promised by the legislation either already are in effect or should be soon.

• Treasury Secretary Timothy F. Geithner has until Sept. 19 to designate a transfer date when key legal and regulator authorities shift from agencies such as the Federal Trade Commission and the Dept. of Housing and Urban Development (HUD), to the new consumer bureau. Once that takes place, the Bureau will begin implementing the new laws.

• One of the earliest and most widely anticipated changes expected to take effect impact home appraisals. By law, the agency must create new interim rules on appraisal accuracy and independence to replace the Home Valuation Code of Conduct (HVCC) rules imposed by Fannie Mae and Freddie Mac in 2009. Many in the real estate industry, as well as home buyers and sellers, report HVCC standards led to low home valuations that, in some instances, derailed home sales transactions.

• A national hotline system also will be developed that will allow aggrieved mortgage borrowers and others to issue complaints and alert the Bureau to unfair and deceptive practices.

• Rules requiring mortgage loan officers to verify mortgage applicants possess the ability to repay the loans they’re seeking also is high on the list.

To read the full story, please click here:

http://www.latimes.com/business/realestate/la-fi-0801-harney-20100801,0,821975.story

In Other News…

San Francisco Chronicle

Funds low for first-time home buyers’ tax break The Franchise Tax Board is continuing to take applications for the state first-time home buyer tax credit more than a month after it looked as though the credit had run out.
To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/08/02/BU891ENQVA.DTL

The New York Times

Fannie Mae offers borrowers hardship relief

Struggling borrowers may find more flexibility from lenders starting this month. Fannie Mae, which sets lending standard for most mortgages, will begin easing its policies for those facing what it calls "unique hardships."

To read the full story, please click here:

http://www.nytimes.com/2010/08/01/realestate/01mort.html?_r=1&ref=realestate

CNN Money

Home ownership falls to lowest level in 11 years The number of Americans who own homes fell in the second quarter of the year to the lowest level since 1999, said a government survey.

To read the full story, please click here: http://money.cnn.com/2010/07/27/real_estate/home_owners/index.htm

San Francisco Chronicle

Pending home sales sink 2.6 percent in June

The number of buyers who signed contracts to purchase homes dropped in June, as the weak economy and tight lending standards kept consumers away from the housing market.

To read the full story, please click here:

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/08/03/financial/f070158D76.DTL&tsp=1

Press Enterprise

Agents for buyers rate higher Real estate agents rate higher with home buyers and lower with sellers this year compared with last, according to a national consumer satisfaction study released last week by a leading marketing information company.
To read the full story, please click here: http://www.pe.com/business/realestate/stories/PE_Biz_D_realagents29.3bcaf82.html

San Francisco Chronicle

Feds put up $1 billion more for mortgage relief Congress has just come up with an extra $1 billion to help people who can’t pay their mortgage because of unemployment or a medical problem.
To read the full story, please click here: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/07/29/BUP21EL5T4.DTL&type=business

CNN Money

Foreclosures climb in 75 percent of metro areas Foreclosure filings climbed in 75 percent of the nation’s metro areas during the first half of 2010, according to a report issued last week.
To read the full story, please click here: http://money.cnn.com/2010/07/29/real_estate/new_face_of_foreclosure/index.htm

Home owners, are you feeling "house rich and cash poor? A Residential Sale / Leaseback may be the answer....

2010-08-04T19:08:00Z

If you are feeling “house rich and cash poor” lately, you are not alone. As the current housing and economic crisis continues to worsen and expand, many homeowners previously unaffected are beginning to feel its effects. Household income is dropping as more and more jobs are affected, savings are being tapped into and investments portfolios are losing value in the volatile stock market. What was once a comfortable mortgage payment is now becoming a struggle. A potential solution for many of these homeowners may be a residential sale-leaseback where they cash out the equity in their home, typically by selling to a family member or investor, then turn around and lease the home back for a fixed period of time.

Click here to read more....

Larry Hansen, Broker / Owner

Calif Desert Realty

www.CalifDesertRealty.com

La Quinta home buyers have a LOT of options in this market!

2010-08-04T18:13:00Z

Home buyers looking for great deals in beautiful La Quinta, CA and surrounding communities, have a LOT of choices and options. So many in fact, that it is difficult to sort through them.

It used to be that when I did my initial "home search" viewing list for a buyer client, I would start by limiting my search to just those homes that were at a low "price per sq. ft." looking for really great deals (and finding them!). However.... this approach is no longer effective in "narrowing the search" to just those really good deals, as a starting point. This is because most sellers have finally thrown in the towel and priced thier homes to compete with other similar homes. Consequently, the list of "really good buys" is MUCH larger than it used to be and can become overwhelming. Buyers need more help than ever to sort through the huge inventory and find the good deals that meet thier criteria and lifestyle.

(A side note about "price per sq. ft.". While this metric is still important to look at when doing "comps" to get a feel for the market and pricing, it can also be misleading in many cases due to comparing "apples to oranges". In many cases, a higher price per sq. ft. is completely justified in the extent and quality of upgrades, overall condition and location, a beautiful pool and spa overlooking an awsome view, and so on. And in some cases, a lower price per sq. ft. may be due to the home being a "fixer upper", no pool, no spa and no view, or located next to a busy, noisy street. Nevertheless, this is still a good metric to look at and it is the agent's job to find out why the home is priced higher or lower than the average price per sq. ft. market pricing)

Now that the inventory of "really good deals" has grown, it is necessary to do a lot more research online. And then go "preview" the home before wasting the buyer's time, as in many, many cases, the pictures you see on line do not tell the "whole story" and will show the good stuff, but not the bad stuff. Look for homes that are located in gated or golf communities that will meet your criteria and lifestyle first, then zero in on those homes that are newer, or highly upgraded, designer "turn-key" furnished, great views and so on. Don't settle on the first one you "like". Take your time and find that home that really speaks to you. The one where you walk in and say, "WOW! I love this home! And I love the price!". You have time on your side, so make sure you take advantage of it and find that perfect home (at a really good price). It is out there waiting for you and a good real estate agent familiar with the market area, can help you find it!

You don't need to be a golfer to buy a home in a La Quinta area golf community

2010-08-01T23:17:00Z

You may be surprised to know that many home buyers in La Quinta, CA golf communities don't golf. It's true. They are buying in these communities largely for the beauty and greenery these golf course communities provide, and the feeling of living in a relaxing tropical environment. They are also thinking ahead about the resale value when the time comes to sell their home. Although they may not golf, they may still be interested in joining a club as a social member and making use of fitness centers, arobics classes, tennis and club social activities. Most golf clubs and golf communites have a wide range of amenities to offer non-golfers.

If you are considering a home purchase in the beautiful La Quinta CA area, I would be happy to assist. I can help you determine which of the many gatetd and golf communities are best suited for your desired lifestyle. There are many good deals to be had right now, so call today!

La Quinta Real Estate - Home prices rise despite fewer sales

2010-07-31T15:36:00Z

Re-posted from C.A.R. Market Matters Weekly

Sacramento Bee

Home prices rise despite fewer sales

Following the expiration of the federal home buyers tax credit, sales of existing, single-family homes in California declined 4.2 percent during the month of June compared with the prior year, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) June sales and price report. Meanwhile, the median price of existing homes in California rose 13.6 percent on a year-to-year basis to $311,950. The median price is the point at which half of the homes on the market sell for more and half for less.

KEEP THIS IN MIND

• Although the median home price in California rose in June on a year-to-year basis, in month-to-month comparisons the median price declined 3.8 percent, according to C.A.R.’s report. Despite the slight decline in month-to-month home sales, California’s housing market continues to recover at a quicker pace than the national housing market. Nationwide, home sales declined 5 percent in June and the median price rose only 1 percent, according to a report from the NATIONAL ASSOCIATION OF REALTORS® (NAR).

• C.A.R. expects home sales to be lower in the second half of the year because of the absence of the federal home buyers tax credit, but sales should remain above the long-run average and be significantly higher than the trough in 2007.

• According to C.A.R. President Steve Goddard, "It’s important to keep in mind that home prices are substantially below their peaks and interest rates remain at historic lows, making this a very affordable time for many first-time buyers to purchase a home of their own."

• Home prices continued to post modest gains in June, due in large part to the lean inventory of homes for sale in many regions of the state. C.A.R.’s Unsold Inventory Index slightly rose to 4.8 months in June compared with 4.6 months in May and 4.2 months in June 2009. However, inventory remains well below the long-run average of a 7.1-month supply. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

To read the full story, please click here:

http://www.sacbee.com/2010/07/23/2909637/home-prices-rise-despite-fewer.html

July 29, 2010 Page 1 of 4

In Other News…

Los Angeles Times

Credit rescoring can help you qualify for a mortgage Rapid rescorings by independent, legitimate firms use procedures approved by the three major credit bureaus and can help correct errors or omissions that are dragging down your scores.
To read the full story, please click here:

http://www.latimes.com/business/realestate/la-fi-harney-20100725,0,7390703.story

Los Angeles Times

Sellers should ensure that condo projects are on approved list for FHA mortgages Condominium owners who are trying to sell in today’s agonizingly slow housing market should make sure that their community is on the Federal Housing Administration’s approved list. Ditto for someone who is thinking about refinancing a condo.
To read the full story, please click here:

http://www.latimes.com/business/realestate/la-fi-lew-20100725,0,7727492.story

Wall Street Journal

Mortgage delinquencies fall in June, still near record high Some 9.39 percent of all loans were 30 days or more past due, down from 9.54 percent in May, according to LPS Applied Analytics, which tracks loan data. An additional 3.69 percent of mortgages were in some stage of foreclosure, down from 3.72 percent in May and the record high of 3.81 percent in March.
To read the full story, please click here: http://blogs.wsj.com/developments/2010/07/26/mortgage-delinquencies-fall-in-june-still-near-record-highs/

Los Angeles Times

Home prices tick up 4.6 percent in May

Home prices in 20 major U.S. cities gained in May, according to data released Tuesday, boosted by the effects of federal tax credits that have now expired.

To read the full story, please click here:

http://www.latimes.com/business/la-fi-home-prices-20100728,0,7277846.story

July 29, 2010 Page 2 of 4

San Diego Union-Tribune

Consumer confidence falls to lowest since February Americans’ confidence in the economy eroded further in July amid worries about a still-stagnant job market. The report raised concerns about the overall economy and the back-to-school season.
To read the full story, please click here: http://www.signonsandiego.com/news/2010/jul/27/consumer-confidence-falls-to-lowest-since-february/

Wall Street Journal

The threat of "sidelined" home sellers How many homeowners have been sitting on the sidelines during the housing downturn, waiting for massive price plunges to pass? The prospect of home-price stabilization is raising that question in some of the nation’s housing markets, say real-estate agents, who report an uptick in listings from "sidelined" sellers testing the waters.
To read the full story, please click here: http://blogs.wsj.com/developments/2010/07/27/the-threat-of-sidelined-home-sellers/

Bloomberg

Americans tap $8.3 billion in home equity, least in a decade Americans in the second quarter tapped the smallest amount of home equity in a decade, showing households are focused on repairing tattered finances.
To read the full story, please click here: http://www.bloomberg.com/news/2010-07-28/americans-use-of-8-3-billion-in-home-equity-last-quarter-least-in-decade.html

Wall Street Journal

Doubling down on housing The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.
To read the full story, please click here:

http://online.wsj.com/article/SB10001424052748704421304575383490870014662.html?mod=WSJ_hpp_sections_personalfinance

July 29, 2010 Page 3 of 4 July 29, 2010 Page 4 of 4

What you should know about the market
• Federal foreclosure-prevention programs have been expanded to encourage delinquent borrowers to avoid foreclosure by streamlining the short-sale process. In the new program, participating lenders now are required to advise eligible sellers of the minimum amount they will accept for the short sale prior to the house being listed for sale. If the seller secures an offer for the agreed price and meets the lender’s terms of the short sale, the lender must approve the proposed sale within 10 days.
• Another component of the new streamlined process requires the property to be listed with a licensed real estate professional who works in the community where the property is located. However, homeowners should be aware that because short sales require the bank to accept an amount less than the amount due on the mortgage, lenders may not approve a short sale, even if the price is comparable to recent sales in the neighborhood.

Is buying a short sale or bank owned REO home a good idea?

2010-07-29T17:25:00Z

To say this is a "Buyers Market" is an understatement. Buyers are clearly in the driver's seat.... looking for really great deals and getting really great deals. Many of the really great deals however, are short sales, or bank owned and buyers are often asking me what I think about these. My "short answer" is that (here in this La Quinta CA market area) these properties are usually short sales or bank owned for a reason. Meaning there is often "a reason" they did not sell prior to going into short sale or becoming bank owned. While in some cases, they reason they didn't sell may have been due to having been overpriced, that is probably the exception rather than the rule. Most of the time, there is something about them that has made it difficult to sell. For example, they may be located next to a busy (noisy) street, or lack any a desirable view, or the owners have allowed the condition to deteriorate. Or, if a custom home, they may have been "over customized" with a difficult floor plan to make work for the average buyer.

So, should you go look at them? Yes and no. Depending on how much time my buyers have to look, my advice is to let me go take a look first and see if there are any major flaws. I also like to compare the listing price to other non-short sale, or non-bank owned homes. While bank owned are usually priced below market, this is not always the case with short sales. In some cases they are priced similar to non-short sales, simply due to the sellers having bought at the peak of the market and having outstanding mortgages much higher than current market value. And then there is the opposite situation where a listing agent will price a short sale listing at a very low "teaser price" just to generate an offer and get the paperwork started with the bank (knowing the bank will not approve the offer, but at least get started on approving the seller for a short sale). There is a lot of gamesmanship to be aware of when considering short sale properties. If you do make an offer, be prepared to wait many weeks or months before finding out if your offer was accepted, and then many weeks or months after that for the bank approval process.

Bank owned homes, on the other hand, are usually priced for a quick sale. It is not uncommon for the listing agent to only accept offers for a week or so, then submit them to the bank. If one is acceptable to the bank, they may enter into escrow the very next day. Any buyers considering bank owned homes will need to be ready to move quickly on an offer, and be prepared for a quick closing. In multiple offer situations, it may be worthwhile to submit an offer slightly above the listing price in order to get it accepted. I have had clients submit offers at or slightly below listing price on $500,000 + only to be "out bid" by $5,000 or $10,000. (On a home that is already listed well below market). So if you find a bank owned home you really like, have your agent check the comps to see how it is priced relative to market and if low, be aggressive on your bid.

Finally, make sure your real estate agent does a search for other homes that meet your criteria that are NOT short sales or bank owned. In this market, in order to compete, there are many really nice homes, designer furnished, with pool and spa, great views, etc. that are priced very close to the short sales and bank owned properties they are competing with. My advice is to check these out first, before looking at short sales or bank owned. You may be pleasantly surprised. And, you are dealing (negotiating) directly with the final decision maker (the home owner), with no need for bank revive or approval.