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Foreclosure, Bank-repos, short-sales, VA and FHA owned
properties and other distressed properties!
A Realtors®
perception. By Darren Bryce, Broker Associate -Realtor®
Please read on for important information and considerations:
Every day we are hearing about the rise in
foreclosures and distressed properties of all types for sale in Colorado
Springs, as well as the rest of the nation. What is this all about?
What contributes to the rise in foreclosures? Are these properties
something the public should pursue and attempt to purchase?
I am going to first address the owner occupant, not the investor. Is a
foreclosure right for you?
I have worked in the real estate industry for
over 15 years and have experienced many fluctuations in market conditions.
The fluctuations are typically driven by several factors including:
Availability of employment. As the tech
industries and aviation industries change, so does the local employment
opportunities. Typically, as the available employment market decreases
so does the need for housing and thus the prices decline and the availability
of
distressed properties increase.
Availability of financing options. This
is one area that the entire country faces. 2007 has seen a dramatic
decline in sub-prime financing options and thus the overall market has
suffered significantly. This, believe it or not, should have a
positive impact on the # of foreclosures in the future (less foreclosures)
due to the fact that clients have to have a good credit standing and
verifiable income. In the short term, less buyers will be able to purchase.
100%, no income verification loans are going away. These were risky to
start with. So sale numbers are down with available inventory on the
rise. This, obviously, decreases the prices due to decreased demand
and increased inventory. Many government agencies are stepping up to
help ease the tension. The FHA, as an example, is considering raising
the maximum purchase price allowed as well as considering a 100% loan
(we've heard that before). The FHA has just started a refinance program that is designed
to help conventional loan customers with adjustable rate mortgages that just went
up, to refinance into an FHA loan. Many stipulations are in place, so
it is doubtful that the refinance program will have a dramatic effect on the
total # of foreclosures. Rates rose early in the year but have
stabilized and even decreased recently. It is now a stable market,
financially speaking, and is a good time to get reasonable rates. I worked as a real
estate loan officer for 6 years and my experience will help you obtain the
financing that is right for you. Many of the available loan programs
don't work on properties in poor condition, so finding the right property
for the loan program that you qualify for is very important.
Pricing of homes in the market were you
want to buy. Colorado, as with many areas across the nation, suffers from a shortage of reasonably priced homes
due to scarcity and location. This impacts the market dramatically and
is very difficult for the "normal" purchaser (median family
income) to find a home that fits in their budget. If you have
ready, willing and able buyers who drive up the price in a specific market
due to location (resort locations etc.) you might not be able to
buy at all because of the inflated values. Colorado Springs has a mix
of these desirable locations, but, there are still affordable areas and
neighborhoods. Otherwise, you may have to settle for a smaller home,
possibly in a poor quality neighborhood.
The general population's perception of the
national economic condition. Buyer's have a hesitation to buy if they
believe the whole country is falling apart. The war in Iraq, political
division, election years etc. all place a perception of the unknown in the
buying public's mind. It becomes an environment of "let's wait and see
what is going to happen". This decreases demand and softens the
market. This can actually stimulate buying in the longer term since
market prices decrease. Again, the ups and downs of market trends.
The actual cost of living. As the
cost of living increases, buyers available budget for housing decreases. And
what is not spoken of much is that wages don't ever keep up. One of
the strongest recent
impacts affecting Americans is the high price of gas and everything that is related to it.
It costs more to transport everything. The interesting fact of gas prices
is that so many people live a long way from work etc. The increase in
gas prices affected a couple I was working with to the tune of $350 more per
month. This caused the couple to reconsider buying and they just
rented instead.
The media. A very sensitive issue to
most professionals. The media has an impact on the fluctuations of market
prices in the short term-- dramatically. Just one negative story
regarding interest rates has a huge impact on the buying publics opinion
about buying real estate. The public typically thinks that the media
have the "inside scoop" and that waiting to see what will happen is the
right thing to do. I have actually experienced many customers calling and asking me
questions about news stories that were totally sensationalized. The truth
is, the facts were just not presented properly. The media has always
had way too much impact on local economic conditions- in the short term. The publics perception of the issue is what drives
demand, not so much as what is actually happening.
These are just a few of the items that would
affect market conditions to a level that creates more distressed properties for
sale. In Colorado Springs, we have had all of these conditions. So
we are now in a buyers market. The number of homes has risen and the
demand has decreased. Foreclosures are everywhere and in every price
range. Short-sales are happening every month. But, the normal house
sales that are occurring are encouraging for sellers also. The point
for sellers is---have the house priced reasonably and have it in excellent
condition and offer incentives that motivate the buying public. Remember
that as a buyer you want a reasonable deal but not a steal. If you steal
the property then chances are you get to inherit the problem that caused the
property not to sell at market price in the first place. Don't get me
wrong, occasionally, the unbelievable deal does happen. Remember though,
why? If the seller, even if it is a bank, can get market price- they
would. I just spoke with a source at a title company that calculated the
time it would take to sell our current inventory in Colorado Springs without any new listings coming
on the market. He stated 8.5 months. Not too bad a number actually.
Houses are selling and for very reasonable prices.
So how do I buy a distressed
property? And how do I determine if it is priced well?
This is really where my services come into play.
First of all understand, I need to know what fits YOU. I am not interested
in having you purchase a home just because it is a good deal. Remember,
you are going to live in it, not me. We need to get down to business to
find out your NEEDS and then your WANTS. Here is a list of the typical
steps I take my owner occupants through to determine what type of property fits
them:
Loan qualification. Let's get down to
numbers. Do you qualify for an FHA, VA or conventional loan? Do
we need seller paid closing costs? Do you have a down payment? Let's
work with a lender that really knows what they are talking about and that
have a reputation for closing the deal promised with honesty and integrity.
I can and will help with this and make sure I know the details so that I can
prepare a contract that works for you and that takes all of your financial
needs into consideration.
Property selection. Can you buy a repo?
Are you the type that has the patience to go through the grueling experience
of submitting an offer under a short-sale? Do you have ready cash to
fix up a property? Do you need to move immediately? Distressed
properties can be the best deal on the market, but why? Usually
because they are in poor shape. Bad carpet, paint, landscaping.
Remember that the yards haven't been watered. Also, the banks want them GONE
now and price them reasonably-Sometimes. But, and here comes the but- Some
properties are on a bid process and can be very frustrating to wait and see
if you get it. If the owner is a bank, they usually won't fix anything
and they don't disclose anything to you the buyer. It is the old
"buyer beware" story. You can have an inspection and back out as long
as we do it in the time frame stipulated in the contract.
Searching and viewing. I set you up on
an automated search system that sends you listings with property addresses
and details. Then we go out an take a look. We find a property
that meets your needs and wants - wow!
Offer preparation and presentation. I
will write an offer that benefits you. We will run comparable sales
first to make sure that the property is worth what we are offering in the
current market. I will make sure YOU UNDERSTAND what is in the
contract and the implications to you.
Inspections. We will have a property
inspection and consider all of the work that the inspector
notes. If things aren't right, we will move on. This is for your
protection.
Working with the lender. I will work
closely with your lender to make sure that there are no surprises for you at
closing. I review your closing statement, go to closing and work with
the loan officer on appraisal issues etc.
Post closing. Would you want to know if
putting a extra garage on your new house would be a wise decision regarding
the potential value? Call me anytime for a current market analysis of
your property and find out if you can get the money back out of the work
today. Some improvements get a more positive ROI then others. I
can help with those decisions. Ready to move up? Contact me for a discounted commission I
provide to previous clients.
To summarize the details into a short paragraph
is difficult but I can say it is important to find the house that fits you best.
It may be a bank repo, VA or HUD, or a normal sale that is "ready to go".
I can't state it strongly enough that speaking with me and letting me work you
through the process of evaluating your needs and wants and then selecting the
property that fits you best is what is important. Remember this house will
turn into a home. And if you are just going through the process to make
money then you are really an investor, right? There is a balance between
the proper fit and the long-term proper investment. Remember that buying a
home is also an investment in your future financial condition. I will help
make sure that both your peace of mind and your comfort and needs are fulfilled
the best way possible.
INVESTORS- READ ON----
Everyone is an investor, if they realize it or
not. Real estate has always been the most solid place to shelter your
money and get the most consistent return on investment. But I would like
to speak now to the non-owner occupant or true investor. As I write this
article it is late in 2007 and market conditions are very soft and rental
returns very low. I continue to work with investors, but, with more
caution then before. I always consider the education level of the investor
I am working with before going too far into the process. The education I'm
referring to is "actual experience" not textbook education. I have
witnessed many investors that have taken some "get rich" seminar and feel that
they are well equipped to wheel and deal their way to riches. Let's get
down to the truth. There are some very sound investment strategies out
there and, when properly applied, get the investor a fair ROI. It is not
TYPICAL to make HUGE returns in the short term on real estate. I have a
tremendous computer program that helps analyze all of the data available and
prepare a wonderful looking report that helps the investor determine if the
investment makes sense. I still find, though, that good old common sense
is very important. Here are some mistakes I see investors make:
Buying a property that has functional
obsolescence. You can't, easily, change a floor plan that just isn't
in demand today. Small kitchens, small living areas etc. just don't
appeal to the majority of the market.
Underestimating the true cost of renovations-
You have to make sure and include market time losses, cost of sale,
unexpected repairs etc. There are several good, solid approaches to
reducing the risk.
Buying in a declining neighborhood.
Careful attention has to be given to market trends that look at what is
happening in the specific neighborhood. In the case of Colorado
Springs, that might mean breaking it down to the surrounding 200 houses.
Characteristics of our neighborhoods can change in just a couple of blocks.
Believing that just because it is a
distressed property, it must be a good deal. The banks have "as is"
market evaluations done on the property before listing it. They want
to obtain as much $$$$ as they can just like everyone else. You really
need to evaluate each property for its condition, cost to revitalize it, and
all the other costs of sale, and see how it stacks up against the other
"regular" sales in the neighborhood. I have seen customers buy
property that just doesn't make them any where near the ROI they expected.
Not paying yourself for time spent on repairs
and renovations to the home. "Sweat equity". I have seen many
the investor look like they have made a good profit on the sale without
looking at the amount of work they put into it. Paying yourself
$10/hour just makes no sense at all. The work is just way too
difficult.
Believing they are "interior designers" and
finishing out a house that has an appeal to less than 1% of the market.
This one I see all the time. A couple buys an investment home and
overspends on chair railing, fancy fans, crazy colors. Buyers find the
house just too committed on decorating and go on to the next house.
Keep it simple. You end up spending more and make less and can
increase market time.
These are just a few ideas and suggestions.
I can help you balance these factors and help you make a solid investment
decision. Remember the financing issues that face the investor today.
100% investment loans are pretty much a thing of the past (or just too
expensive) so you really need to get your ducks lined up in a row before
starting the process.
Some of the government owned properties aren't
even available to the investor during the initial bid period. Find out how
this works through an experienced, knowledgeable, agent--such as Darren.
Darren currently works for Morning Star Real
Estate in Colorado Springs, CO and is a Colorado licensed broker. Darren
has worked with many clients helping them realize their dream of homeownership.
Call Darren Bryce today to find out how he can work with you to realize the
American dream.
Foreclosure, Bank-repos, short-sales, VA and FHA owned
properties and other distressed properties!
