Chances are you are going to be looking at a great many short sale properties, or not looking at much at all. Because it is all but unavoidable these days here are some things you should know.

If you are willing to wait and work with the listing agents you can get a really great deal on a short sale. The first step is submitting an offer they can work with. This involves having your agent contact the listing agent to make sure you make an offer that is what they are looking for. Most agent will only submit 1 offer to the bank and keep the rest as back ups in case the first falls through. More than they are looking for a winning bid t this point they are looking for a buyer who isn’t going to walk away.

Your agent should be contacting the listing agent regularly to see if there are any updates or anything that you should be doing while you wait for bank approval.

When the bank approves the short sale the listing agent will usually counter your offer with the conditions the bank is requesting on price and terms. If you agree to this you will enter escrow.

THIS is where things can get very messy. Many agents got the short sale by tip toeing around the seller. When it comes to getting paperwork signed and moving out your agent needs to be sure they are addressing these issues. You want to know when the homeowner will be moving, do they have a place to go and a firm move out date? It can be hard to pin the sellers down as it is often only now hitting them that they really are losing their home.

Be sure to purchase a home warranty in case something goes wrong and the seller does not leave quietly so you are not stuck with a trashed property. But more importantly, if the sellers have a firm move out date, even if it is beyond the original closing date, you may be able to extend the escrow period so that you are not closing with them in the house. Evicting the sellers can be a nightmare.

All this may sound very intimidating but short selling is far from over. The most important thing for a buyer is to make sure your agent is cooperative but still aggressive and can handle the sale. My motto is that an agent who isn’t working for you is working against you.

Sept Closed Sales by City

by Erin Goodrich

Wrong! I feel that people making prudent investment decisions and working to accomplish their life goals is the backbone of this industry. I don’t think this tax credit is helping home buyers in Orange County. Here’s why.

Because the credit is only available to first time home buyers, and first time home buyers are typically in the market for lower priced properties this only really affects one sector of the market. These buyers are the most sensitive to price fluctuations to either be able to take advantage of home purchasing, or watch that dream slip out of reach. When I work with first time home buyers I always stress that when making an offer it is amazing how many other potential buyers you may be forcing out of the sale by every $1,000 or $2,000 dollar increase in offer price.

Since the incentive was put into effect prices have increased disproportionately to the credit. We have seen at least a solid $20,000 price increase on homes under $400,000. This is making it more difficult for people to purchase again because of an artificial price inflation. Not to mention that this difference in price is being financed, which means it will cost considerably more in interest over the life of the loan.

This credit has also created another difficult situation in Orange County. As prices rise on smaller homes, they have been falling on larger homes. For those looking to downsize they are seeing that they have to be willing to spend $20,000-$50,000 more on a smaller house and will have to take an additional loss of $50,000 or more on the sale of their current home. A disequilibrium is appearing. Rather than smoothing market demand, the credit is throwing it into turmoil.

If you are thinking of buying a home now, by all means take advantage of the credit, because it is being offered, but it seems to me that it is time to ride out whatever pain there really is in the market. Trying to continue pushing it back for another day is not the answer. We are seeing such artificial price inflation and overwhelming demand that the situation is begining to bottle-neck. The market would benefit from more homes on the market and from an end to the credit. I feel that my job is to inform people of the economic truth to the options which are highly publicized but whose effects are not.

This article published on MSNBC.com puts it very well,

“The credit also artificially inflates the value of all eligible homes sold by up to $8,000, leaving the buyer with a debt that’s greater than the value of the property. Sound familiar? Inflated home values were a big part of what got us into this mess in the first place. Perpetuating this via the tax credit might lessen the pain in the near term, but as we’ve all learned the hard way, a correction’s going to come sooner or later.”

I think this may be the most enlightening article I have read in Real Estate news in a long time. As a current homeowner you may lose value in the short term, but real estate has intrinsic value unlike many other investments. This value will be regained in the long term. It is better to suffer some now in order to build a stronger economic foundation than to continue to try to push the pain away. Take a deep breath, breathe through the pain, and let’s try to solve the real problems, not band-aid them.

By Erin Goodrich

1. Know What You Want

The more you can focus your efforts the better position you will be in. This may be by narrowing which complex or area you are interested in, determining what floor plan you want, or choosing one specific must have feature (e.g. corner lot). Once you know what you want you can determine where those properties are that meet your requirements. Do not just look for active homes that meet your criteria, look for ANY home. Many homes in “hold do not show status” or “back up offers” on the MLS, while you may not be able to go look around inside them, are still actively in negotiations to purchase. There is also a chance, especially in more established communities, that someone was thinking about selling, but haven’t listed. If you really must have something, and are willing to do a little more negotiation it is possible to get what you want.

2. Price or Property?

Are you willing to pay the price for the property you want? Doing a closed sale comparison of the area will help you determine what price the homes are worth. If you are set on a particular area or feature you will most likely need to pay market price at the least. If price alone is your determining factor in a sale, you will need to be looking where homes are actively closing in your price range, rather than where homes are listing in your price range. Many homes are being listed very low in order to start a bidding war.

If you are willing to pay for what you want consider asking your Realtor to see if homeowners not currently listed would sell at the price you are willing to pay. While this is not the most likely outcome, it’s worth a try. The most important thing is that you have nothing to lose in trying.

3. Special Conditions Can Be Your Advantage

If you have patience and persistence you can gain an advantage offering on difficult properties. They may help you to ensure a position as the only offer the bank is looking at. In the event that there were multiple offers, many of those buyers are more likely to walk away from a difficult transaction. This can help you to get a pretty good deal on the property can be equated to the lottery. You can’t win if you don’t play. In order to play this strategy don’t be afraid of putting in multiple offers on several properties. Even if 3 offers were accepted at the same time, as a buyer you have 17 days (or as written into the contract) to complete your “inspections” and cancel the contract. This allows you to select the home you most want.

4. Getting In There

Many difficult properties are the ones that are not allowing potential buyers to view the property. If you have determined that this property meets your specific requirements but are not sure what the condition is, it’s still worth offering on. The contract should be “subject to satisfactory interior inspection” so that when the offer is acceptedyou can view it and determine if it is worth what you have offered before the sale progresses to escrow. You have nothing to lose, but everything to gain in the event your offer is accepted and the home is in good shape. Offer on the assumption that the home is in good condition, and if upon inspection it isn’t in line with other homes that closed at the price you offered, you can revisit the negotiation table.

5. How Does My Realtor Fit Into This?

If you are looking in the $500,000 and less price range in Orange County you really need to be sure your agent is willing to do the work necessary to get you what you want. This agent works for you. I am hearing from many buyers disapointed that their agent isn’t contacting other agents and that the home search process has been dragging on since the begining of the year with one offer rejected after the other. Persistance, perserverance, and a multiple approach strategy are the surest way to get you what you want. If they aren’t working for you, they are working against you.

How closely should we be following data and making observations? Today on the front page of MSNBC.com’s Real Estate section you can find 2 headlines, one reading “U.S. Mortgage Applications Rise as Rates Plunge” and a little further down, “Mortgage Demand Drops as Rates Rise”. These articles were written 1 week apart. So which is it? Are applications up or down? Are rates up or down? Both are true. On any given day these rates are rising and falling as are applications. We cannot infer too much from taking this information at any given point in time. We need to step back and look at it’s general trend. Rates have been trending upwards in recent months but are still historically low. Some months see a greater increase in mortgage applications and some see less regardless of interest rates. Families with school age children (who make up a large portion of real estate activity) prefer to find new homes and settle before the start of a new school year. With summer ending and the school year begining we will be entering a cooling period for real estate activity. We can expect that closed sales may begin to drop of slightly irrespective of price and interest rates. Beginning next week we should be able to start seeing this trend on a chart. Charting too little information creates the impression of volatility that is due to too small of a data sample size.

The closed sales data we are tracking supports the conclusion that Orange County is seeing a steady flow of activity. While it may go up or down any given week, the general trend looks to be pretty stable. When reading and watching media reports of economic activity try to avoid this tendency to infer trends from a single event. The media is constantly doing this, watching the numbers TOO closely especially regarding real estate, unemployment filings and stock market information.

by Erin Goodrich

by Erin Goodrich

by Erin Goodrich

There is speculation that the credit may be extended but I wouldn’t hang your hopes on that. There is plenty of competition and many multiple offers are going in on properties. A recovery is well under way here, and while that is not true of all markets, statistics show life in most states’ housing markets. The credit has been highly successful so we will have to see, but it is best to begin the process now because it often takes longer than one expects it will.

When you hear that there is a 7.5 month supply of homes in the market that means that at the current rate of home sales it would take that long to see all the inventory sold. On Monday there were 6682 homes on the market in all of Orange County. This week there were 337 closings in Orange County. This puts the supply of inventory at 19.8 weeks or 4.96 months.

According to Reuters.com article published Jul 31, “U.S. existing home sales notched their third monthly rise in June, while the inventory represented 9.4 months’ supply at the current pace of sales, down from 9.8 months’ in May, according to the National Association of Realtors. The historic average is about six months’ supply”

However we see that that is not the case in Orange County. Real Estate has largely gotten back to business as usual.