Foreclosures and REOs

Continuing on the topic of getting a deal, there is a lot of talk about foreclosure and bank owned properties (REOs) these days. People often think this is the best way to get a good deal.

Occasionally there are good deals to be had, but more often the properties are in disrepair and banks are not very open to negotiation. Their definition of TLC and yours could be worlds apart! Be prepared to invest both time and money, and be aware you are buying the property in 'AS IS' condition.

Banks also take their own sweet time. Even though our purchase agreements specifically state that 'time is of the essence', it's not uncommon to wait weeks to get a response during which time they collect multiple offers. Where negotiation usually is part of coming to an agreement, banks most often just accept or reject an offer...so make your best offer up front if you are making an offer on a bank owned property.

The best deals are still most often made buying from a 'real person' rather than a bank. They tend to be more motivated to sell, their properties tend to be in better condition and they are usually more willing to fix issues that may come up in an inspection.

Getting a deal

With all the buzz these days about foreclosures and the current buyer's market thoughts often turn to the deals that can be made.

It's a great time to be buying, but don't expect to buy for a price way below list price. In any market, list price is an indication of what a seller is willing to accept at that point in time... current market conditions have likely already been taken into account, and the current price may have already been reduced from original list price.

In any market, some properties are overpriced and some properties are priced below actual value. Before making an offer, do a comparative market assesment to get a sense of the property's current value... it could be that you're getting a good deal even at full list price!

Year-to-date average sale price in the 13-county Twin Cities metro area is 95.4% of list price. This means the metrowide average sale price for a home listed at $225,000 is about $215,000.

Keep in mind this is the metrowide average, and market conditions can vary significantly from community to community. Click here to find out current market conditions for 125 Twin Cities communities.

SOLD!

With all the talk of the downturn in the real estate market one would think buyers can take as much time as they want to make a decision because the property will still be available while they make up their minds.

Well, my experience just the last few days has shown that not to be the case. I had one client write an offer on a property to find that she was competing with another buyer...it happens in any market. I can't tell you how many times I have shown a property that has been on the market for a long time then ends up in multiple offers.

The lesson here is...if you find a property you really like, don't wait...it only takes one person to buy and you never when that person is going to come along. If you're thinking about making an offer on a property, ask yourself how you would feel if you decided to buy and it was gone. If you find yourself feeling extremely disappointed or have knots in your stomach...it's time to make an offer!

I'm going out with a buyer today who had selected three properties to view. Since yesterday morning, one by one all three have sold! Now we're starting over with a new list...hopefully we'll have some properties to see today.

Interest rates have been on the rise...could that be inspiring the buyers who have been waiting to see what the market is doing to make the move?

Quality Living

I've been spending a lot of time in St. Louis Park lately, a first-ring suburb of Minneapolis. For one thing, that's where our son's family lives and we had fun hanging out with them yesterday, spending a rainy afternoon at the Minneapolis Institute of Arts (MIA). Our grandson was fascinated by the Chihuly glass Sunburst, especially appropriate when looking for the sun on a cloudy day.

From a real estate perspective, I've been working with several people buying and selling in St. Louis Park lately and am reminded how the decades-long explosion out to the suburbs and beyond seeking bigger and newer may be coming to an end.

Today's focus seems to be shifting to higher quality...not just in materials and living spaces but also towards a higher quality of life. Although that translates to different things for different people, for many it means not spending so much time commuting and trying to keep living expenses more in check to allow more time for things like spending an afternoon at MIA. It also means living in a neighborhood that has a sense of communty.

A recent article from REALTOR Magazine Online headlines that 'Buyers Say Size Doesn't Matter'. Although the size of the average home grew from 1,500 sq ft in 1973 to 2,495 last year, architects, builders and designers are saying buyers are now choosing to put more focus on quality living spaces rather than ever-increasing size. Predictions are formal living rooms will evolve into a library or music room...master suites will increase...and new homes will continue to have high ceilings, meaning homes will still have a feeling of spaciousness even with smaller square footage.

This echoes the 'Not So Big House' philosphy of Sarah Susanka, whose inspiration came from a growing awareness that new houses were getting bigger and bigger but with little redeeming design merit. The problem is that what makes a house feel like home has almost nothing to do with how big a space is...it has to do with how we shape our homes to fit the way we really live.

As you prepare to buy a home, think about what quality living means to you...what is important to you not only in a home but also in community and lifestyle. Think about your daily rhythms...what you want to keep, what you would like to change with your move...and thoughtfully make your choices in both location and housing accordingly.

To Buy Now or to Wait...that is the Question

There's no doubt the market has been putting buyers to the test trying to decide whether it's the right time to make a move or whether they should wait a bit longer.

I was talking with a trusted lender who said he had been thinking about this very question and felt it was rarely beneficial to wait if you're ready to buy. The two primary factors to consider are rising interest rates and falling housing prices. He calculated that if interest rates rise .5%, housing prices would have to fall another 5% to make up the difference. Overall housing prices are currently relatively stable, neither rising nor falling significantly, indicating waiting isn't likely to be of benefit.

The past decade has been one of low interest rates coupled with unsustainably high home price appreciation as the supply of homes available for sale struggled to keep up with demand. As a result, home prices increased a dramatic 50.6% from 2000 to 2005. Unfortunately, consumer income didn't keep pace with housing prices, rising only 12.9% during the same period. This resulted in decreased housing affordability, which planted the seeds for our current market conditions.

In 2006 we saw a needed pause in the market...not only natural and expected after unsustainable price growth, but much needed to put our market back in balance. Home price growth stabilized in 2006, with prices relatively unchanged over 2005. Jeff Allen, Minneapolis Area Association of Realtors Research Manager, predicts that 2007 should be pretty stable with 2006 overall, with a bounce back beginning in the later part of 2007.

Flat housing prices and continued historically-low interest rates have improved affordability, creating a good environment for first-time homebuyers...a necessity for a continued healthy and growing housing market. If you're ready to buy, it's a good time to make a move.

Click to see the full Twin Cities Metro 2006-2007 Market Analysis by Jeff Allen, MAAR Research Manager.

Open House

The weekend was a forerunner to this beautiful week...it topped 60 degrees today!

People were out enjoying the weather this weekend, a perfect time for an open house. I had 28 groups of people through the house I had open on Sunday. It was interesting seeing the mix of people coming through... from just starting to look to ready to buy... from trying to decide whether to remodel or buy another home to getting ready to sell...from checking out neighborhoods to checking out other open houses while theirs was open...from looking around without their agents to searching for an agent...

Open houses are a great way to check out agents...it's a non-threatening way to get a feel for an agent. It's also a good way to get to know the market, both for pricing and for getting a feel for neighborhoods. One of the first steps after securing financing is deciding the area where you want to live.

Location is vitally important because while you can change the appearance of a home, you can't change it's location. If you don't like the neighborhood, the traffic, the view, the surroundings, there isn't much you can do except live with it anyway or move to a new location.

Don't skimp on your homework selecting WHERE you want to live...your sense of place can have a profound effect on your whole sense of well-being. Once you have that figured out you can focus on finding the specific property that's the right fit for you.

It happens over and over again that people 'feel' the right property almost as soon as they walk in...they don't even have to see the whole home before they know it's the right fit. Be patient and listen to what your body is telling you as you visit different homes...if you listen, you'll know when you've found the right home for you!

Spring

It's hard to believe that last week we had a dump of more than a foot of snow and now we're heading into the 40's and 50's. That, along with the daylight savings time shift tonight and the vernal equinox less than 2 weeks away means spring is really coming!

My compter went into hibernation...actually worse, the hard drive crashed and I've been 'making do' with various computers while bringing mine back to life...a slow process. The worst part of the whole thing was the discovery that the new website I'd been working on for the last couple months wasn't backed up!! Oh, well...it will be re-built even better...only much later!

Spring season is starting...I was out with clients yesterday slopping through muck and mud...a true sign of spring. We also had multiple offers on a new listing this week...another sign that spring is on the way.

If you're thinking about buying, it's time to spring into action. Don't neglect getting pre-approved before seriously looking, you never know when you're going to find the home you want to buy! Case in point...in reviewing the offers this week the buyer that was chosen was already financially underwriting approved, just waiting for a property.

You've no doubt heard the news stories about mortgage horror stories and companies going out of business. This makes true pre-approval, not just 'looks good' approvals, even more important.

A reputable mortgage company and trustworthy loan officer are also vitally important. Buyers need to know they will truly be able to afford their home and won't face rising payments and/or interest rates that may force them out in the future. Sellers want to feel confident their home will not just get a signed agreement, it will actually close!

Top defects found during home inspections

A home inspection , which involves a comprehensive examination of the structure and components of the home (electrical system, plumbing, heating/cooling, etc), is a vital part of the home buying and selling process. It's fairly obvious that it can protect the buyer from purchasing faulty property, but perhaps its biggest value is in giving the buyer a better understanding of the property. No property is perfect, and it's good to have an idea of what to watch out for and help make plans about what you might do with the property in the future. A home inspection is also good for the seller because it establishes a baseline in case anything comes up after the closing.

In a recent article published by the Minneapolis Area Association of Realtors, home inspector and instructor Denise Williams lists the following as the top 7 defects found during home inspections.

1) Poor drainage
This is the most common problem found by home inspectors. To improve drainage, you may have to install a new system of eaves, troughs and downspouts or have the lot regraded to better channel water away from the home.

2) Leaky roof
If the ceilings have water damage, older or damaged shingles or improper flashings may have caused it. It's inexpensive and relatively easy to repair shingles and small amounts of flashing, but if the roofing is old, you may face a much larger expense to replace the whole thing.

3) Unsafe heating system
An older heating system or one that has been poorly maintained can be a serious health and safety hazard. You may have to repair or replace the old furnace. This is a major expense, but new furnaces are more energy-efficient, which will probably save you money in the long run.

4) Poor maintenance
Examples of poor maintenance include cracked or peeling paint, crumbling masonry, broken fixtures or shoddy wiring or plumbing. You can easily repaint a wall, replace a fixture, or repair a brick wall, but makeshift electrical or plumbing situations are serious and potentially dangerous problems. Replace any such wires and pipes.

5) Minor structural damage
This means the house is not likely to fall down, but you should deal with the problem before it becomes more serious. Such damage is usually caused by water seepage into the foundation, floor joist, rafters or window and door headers. First you need to fix the source of the problem, then repair and replace the damaged area.

6) Plumbing problems
The most common plumbing defects include old and incompatible piping materials and faulty fixtures or waste lines. These may require simple repairs such as replacing a fixture, or more expensive measures such as replacing the plumbing system itself.

7) Exterior lets in water and air around windows and doors
This usually does not indicate a structural problem, but rather poor caulking and weather stripping that require relatively simple and inexpensive repairs around windows and doors.

I think I'm ready to buy...where do I start?

The thought of starting the real estate process can be very daunting...both exciting and scary at the same time. The fact that you're even looking at this is a sign you are off to a good start, gathering information. People often begin by searching for online information, looking in real estate magazines and local newspapers and going to open houses to start getting a feel for the market.

Once the whole idea of buying or selling becomes more 'real' it's time to put together your team of professionals to help you through the process. The two key players essential from the beginning are your real estate agent and your loan officer.

1. Find a real estate agent who's simpatico. Homebuying is not only a big financial commitment, but also an emotional one. It's critical you choose someone who is both skilled and a good fit with you personally.
2. Find a loan officer who can advise...and deliver on time. While rates and fees are obvious places to start, don't overlook the importance of wise counsel and the assurance that the funds will be there to close on time.

Sounds easy enough, but how do you go about finding these professionals? It's critical you work with someone you can trust, so people often start by asking trusted friends and family for referrals...be sure to ask about their experience to see if it might be a good fit for you.

Here are some other ways people 'shop' for real estate agents or loan officers...

1. Visit with agents at open houses
2. Check out websites
3. Look in the newspaper or real estate magazines
4. Attend a seminar

You can start with either a real estate agent or a loan officer. Once you have found one you feel comfortable with, they can usually refer you to a trusted colleague to complete your team.

Questions? Good/bad experiences? Share your comments....

Window of Opportunity

An article from Realtor Magazine Online last week again reminded me of what a great time this is for people thinking about buying a home.

"Buyers, especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity. These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced."

Right now is a great time for buyers (I know, you've heard this one before!)...here's why. The winter season is usually the time of year with best values for buyers regardless of market conditions...fewer people are buying so sellers are more willing to negotiate and prices usually come down a bit. The flip side is that there are also usually fewer homes on the market so you don't have as many choices. Because of market conditions this year, not only are prices down but inventory is up so you also have the biggest selection in decades. The other surprise is interest rates...they unexpectedly dropped below 6% again. In December they have been down to 5.75% for a 30-year fixed mortgage (no interest rate increases for the life of the loan).

Interest rates historically low...inventory historically high...prices low...all mean the stars are aligned in favor of buyers right now. (And with our long winter nights we have even more time to see the stars!)

What makes this a real window of opportunity is the fact that prices are not expected to drop any more come spring...they're expected to rise again, albeit modestly. Interest rates are also expect to rise in 2007, forecast to reach 6.7% by year end...that's still historically pretty low, but also about 1% higher than it is right now.

All that said, if you're planning to buy this is a good time. But only you know if this is the right time for you...if it's not right time, it doesn't matter what the market conditions are. A doctor recently told me that our gut is our second brain, with the same weight of neurons as our brain. It's smarter than we realize...listen to it! If your gut tells you this is a good time for you to be buying, the current market conditions are opening a window to help you fulfill your dreams.

Read the whole article quoted above...
http://www.realtor.org/RMODaily.nsf/pages/News2006121101?OpenDocument

Starting my first blog...is this like buying your first home?

As I start this, my first blog, it gives me pause to think this must be something like people's first homebuying experience...so much to learn, I feel like I'm asking dumb questions, where do I start?! These feelings, and more, are what has prompted me to give blogging a try. I'll be learning about blogging, as you learn about buying a home.

I don't know about you, but I'm sick and tired of hype. My goal is to make this an honest, down-to-earth forum of information and inspiration for real people thinking about buying (or selling) a home...as well as sharing a little bit about me along the way. I hope we'll enjoy the ride!

By the way, I'm a Realtor living in Golden Valley, MN...helping people find their sense of place and fufill their dreams of home. My goal is always to help my clients figure out what is best for them at this particular time in their lives...which may or may not turn out to be buying or selling a home right now.

It's hard to believe this is the last weekend before Christmas. I had to insert a picture with snow, which is what we should be seeing...after all, we do live in Minnesota! Unfortunately, we are still snowless...I for one am ready for a good dose of the white, fluffy stuff!!