Marin Real Estate Pulse

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.

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

It is not uncommon for a client to ask me about purchasing foreclosure homes.  We hear the misleading ads on the radio, “I just bought a home for $199 a month”.  While that number is totally unrealistic in Marin, foreclosures can be a bargain.  In some parts of the country banks and other owners have foreclosure auctions, other than the occasional homeowner (usually with an unrealistic reserve) I have not seen this in Marin. Although our foreclosure rate is significantly up from prior years it still is very low and most foreclosed properties are taken back by the bank.

In Marin, properties in foreclosure are sold at the court-house steps.  Buyers with cashiers checks (for the full amount) bid against each other and the bank.  The bank does not need a cashiers check because it is their loan that would be paid off.  Okay, get this straight, you need cash to buy the home, often you have never seen the inside of the house, and you many not be sure the title is completely clean.  Once you win the auction you can get title, go to a bank and then (after you bought the home) try to get a loan.  You also get to evict the occupants and finally see the inside of the home you just purchased.  The experienced buyers have lots of cash and make a bundle on most of them but do loose their shirts on about one in ten.  This is a rich person’s game as most of us don’t have the extra cash laying around and can’t afford our one purchase to be the dog that is a money looser.

So the court-house auction does not work for most of us but the next best thing is post foreclosure, bank owned property (REO – real estate owned by the bank). Once a bank takes a home back they want to sell it quickly because they are in the business of lending money, not owing excess homes.  These REO homes are priced (usually) realistically, as the banks wants to dump them within a month or two. Caution here; just because a home is an REO does not mean it is a good deal and the banks will negotiate.

If you are interested in looking for these homes ask your agent (or me if you don’t have one) as it is easy to do a search in the Marin MLS.