This has not been making the newspaper headlines yet but the sale of single family homes has taken off the first couple of months of 2010 up 50% from the same period last year. Perhaps more disheartening to first time Marin buyers is just 18% of those homes sold for $500,000 or less (compared to 22% for the same period last year).
The focus here is single family homes because they are currently hot. This is not permanent as condo prices tend to leap-frog homes when the price differential is great. That is to say when condo prices approach house prices people tend to say lets buy the house, it is just a little bit more and does not have an association fee. The jump to single family home purchases cause prices to go up creating a price difference large enough that condos look like the better deal. As condo sales increase prices go up and thus the leap-frog of prices. This is true of neighborhoods too, when Greenbrae is just a little more expensive than San Rafael that is where the buyers go. Once the price difference is great San Rafael looks more attractive.
For the first two months of 2010 there were 199 single family homes sold and 18% were $500,000 or less. For the same period in 2009, 22% of the 133 homes were $500,000 or less. All the information for this post comes from the Marin County BARIES MLS, which does not include “off market” sales.
For more information contact:
Warren Carreiro
DRE# 01031805
warren@RealtyOfMarin.com
Most banks don’t want to hold an inventory of foreclosed homes (REO’s) so they are priced to sell quickly which usually equates to a good deal.
Looking at the year-to-date sales of Marin County single family homes $500,000 or less (which is the low end for Marin County real estate) the numbers show that REO’s have sold for less than a traditional sale. One thing these numbers don’t take into account is the condition of the property. Most REO’s need paint, carpet, and minor repairs. There are no disclosures to speak of on REO’s so it really is buyer beware because you don’t know the history of problems.
Of the 105 REO’s sales year-to-date ($500,000 or less) the average price was $382,000 with an average of 1387 square feet.
Of the 119 sales that were NOT REO’s the average price was $411,000 with 1239 square feet.
Does this mean every REO is a good deal? No, but be sure to look at them if you can stomach not having disclosures (which usually means you should get more inspections) on your new home.
When looking for a new home put Short Sales at the bottom of your list. The reason most Short Sales fall out of escrow is the buyers get tired of waiting for the bank to accept their offer. In most cases it takes months for the Short Sale bank to respond to your offer and then you might find out they want to counter with a higher price. Or perhaps you have waited several months for the bank to respond they at the last minute a new buyer comes in with a higher offer than yours. At the very least I hope you keep looking for another “perfect” home while waiting for the bank to respond, and no, it is not legal to write offers on several Short Sales and take the first one that is approved (unless you disclose your intent on all offers).
Maybe everything goes along perfect, the bank accepts your offer and then you find out the sellers have changed their mind. Rather than go through with the Short Sale they will let the bank foreclose and live in the house for several more months without paying their mortgage.
Speaking of waiting, did you realize that you don’t lock your loan rate until the bank accepts your offer? This means you may write your offer when rates are in the 4% range and by the time the bank accepts your offer rates may have gone up close to 6%.
Don’t think you are getting a better price on a Short Sale either. Many times the bank will list the home for a lower price as an REO (foreclosed home) than a Short Sale offer they refused.
This is a great opportunity, because of very low prices, for first time buyers to finally get into the housing market. Those that have saved a down payment (sometimes as low as 3% with FHA financing) and have documentable income can buy a home that just a few years ago may have cost twice as much.
The problem is many of these homes have multiple offers, ten or more is not uncommon in Marin county. It is not unusual that the majority of those making offers are cash investors that have no plan on living in the home. Nothing wrong with that, after all the United States is a capitalistic society which is not a dirty word.
The sellers, big banks many of whom received bailout money favor cash offers as do most sellers. There should be some regulation that would put intended owner occupied buyers on the same footing as cash investors. If the buyers have a down payment and proof of income and fully qualify for the purchase REO banks should not be allowed to accept a lower cash offer from a non owner occupied investor. These qualified buyers are the type that build communities, have an interest in local events and tend to keep up the homes and therefore the neighborhoods. This just seems like a no-brainer to me especially if the REO bank is using OUR bailout money.
According to an article published in the Los Angeles Times, a Short Sale can hit your credit rating up to 130 points according to researchers at VantageScore. While this is a big hit there are several advantages to a Short Sale over letting your home foreclose. Typically owners that sell their home short have missed several months of mortgage payments and that is usually what affects your credit. The actual formulas for calculating credit scores are kept secret but typically you can get a new home loan in less than three years after a short sale.
If the bank forecloses on your home your credit rating can take a hit of up to 150 points and the record of foreclosure can stay on your credit report for seven years.
For those that choose Bankruptcy look for a credit drop of well over 300 points and ten years on your credit report.
To read the full story click on this link.
Buying a foreclosure is for the pros with a big checkbook. In Marin a “real” foreclosure is literally sold on the steps of the courthouse on Fifth Avenue in San Rafael. The buyers have several denominations of Cashers Checks that add up to the maximum they will pay. They bid against each other and the bank that holds the loan on the house and is foreclosing on it. The bank has the upper hand because they don’t have to write a check unless the bidding goes over the loan amount.
You will be bidding on a house you likely have not seen on the inside. No bank will lend you money until you buy the home. This is a cash transaction that does not come with title insurance.
When you hear someone say they bought a foreclosure that usually means they purchased a home that has already been foreclosed on by the lender. They are known as REO’s, which stands for Real Estate Owned (by the bank). When buying an REO the paperwork sucks. Banks expect buyers to start their inspection and financing timelines without so much as a signed offer acceptance from the bank. In many cases the acceptance of the offer is conveyed to the buyer verbally. As you know, in real estate verbal does not cut it, the law requires everything in writing. But as long as you are getting a good deal are you really going to fight with the bank that selling the house?
Homes are also sold in pre-foreclosure status which may mean the seller had a notice of default (they are late in mortgage payments) or it is a short sale. In a short sale the seller gets the bank to agree to sell the home for less than the amount owed.
Warren Carreiro
The Marin County real estate market is hot again. We are seeing multiple offers on many homes and condos. It looks like the deep price reductions along with first time home buyer tax credits and historically low interest rates have buyers bidding in droves.
One measure of how “hot” a real estate market is what percentage of homes on the market are in escrow. A common formula is:
Buyer’s Market: less than 25% of home in escrow
Neutral Market: 25 to 40% of homes in escrow
Seller’s Market: more than 40% of homes in escrow
The hot price range in Marin is anything $600,000 or less. That is where we have 52% of available listings in escrow. The next price jump from $600,000 to $800,000 is also doing well at 33%
As we move up the price range the picture changes. From $800,000 to one million the figure is 22%, a buyer’s market. Homes at one to one and one half million are 17% and over 1.5 million just 9% are in escrow.
Those numbers include condominiums and homes combined. When we lump all price ranges together Marin has 28% in escrow which is higher than we have seen for well over a year. I don’t know how this will play out with the “talked about” last wave of foreclosures but Marin has not been hit nearly as hard as other counties anyway.
My view is if you are looking for a high end home the prices are dropping but if you are in the lower price range waiting to buy will just cost you more money.
Warren Carreiro
