Q. I have heard that, as a buyer, I should stay away from short sales. Are they really that bad? In my price range, there seems to be nothing but short sales.
A. The landscape of short sales has changed DRAMATICALLY in the past 6 to 18 months. While all of the complaints you have heard, both from agents and consumers, may have at one time been true, things are vastly different now.
Why? There are several factors that have impacted the short sale market.
1. Lenders are now fully staffed. Loss mitigation departments that were overwhelmed when this market changed now have trained staff in place to handle the number of files they are accommodating. Lenders are also better able to predict what properties will become short sales, based on offerings of loan modifications and better market information.
2. Training is at a much higher level, both with lenders and with agents. One caveat: there are still agents who refuse to acknowledge this segment of the market, bury their heads in the sand, and WON’T SELL SHORT SALES, or even get information and training for short sales.
3. Most lenders now have STREAMLINED SHORT SALE PROCEDURES, meaning that files which used to take 6 months are approved in 45 days. I had a short sale with Wells Fargo approved in 19 days last month. In addition, lenders such as Wachovia are now giving incentives such as $5000 moving bonus to the seller and 30 day approvals. Gone are the days of months and months with no answer.
4. Second and third trust deeds are willing to take much less on their liens, allowing short sales that were held up in the past to proceed.
I would suggest the following for you.
1. Watch this video:
A video with a young couple, Jen and Matt, two first time home buyers who HAD NO OPTION but to buy a short sale, because EVERYTHING IN THEIR PRICE RANGE was a short sale. (Sound familiar?!) They dispel myths and tell you what to watch for. Very helpful.
2. Get an agent TRAINED AND CERTIFIED in short sales, with experience in closing short sales. Ask how many short sales they have done, how many they have closed, what certifications they have, and what advanced training they have. Ask about the lenders they have worked with, and what their lender database includes. Also, what is their closing ratio? If you need a referral in your area, let me know. My agent database of REO and Short Sale Realtors is extensive. (The best of us all work together)
3. If you’d like a copy of my booklet, “A Buyer’s Guide to Short Sales”, please email me or call me directly. And please feel free to contact me with specific questions. I can explain the process in more detail for you, and answer any concerns you may have.
Q. Is it really a good time to buy, or should I wait?
A. “You should buy a home.”
That’s what your friends and family have been telling you anyway, right? But with the recent changes in market conditions is this really a good time for first-time homebuyers? Or is it better to wait until the market has hit rock bottom before you jump in? The answer may be in the famous words of Latin poet, Horace: “Carpe Diem.” or “Seize The Day.” And my caveat: “Make sure it’s YOUR day.”
First of all, you have sized up your situation and investigated the market. That means you do have an interest in owning your own home. The hidden question-within-a-question seems to be, “If I buy now, will my house depreciate?”
The short answer: No one can tell you. Historically, when interest rates go down, demand goes up, and prices go up. Not so this time. Nothing is “regular” about this market: we have low prices, excess inventory AND low prices. Will the corollary be true this time? (higher interest rates equals lower prices) No one knows. And every market, and micro-market, is different.
But what will be true is this: you will have locked in the REAL COST of your home (the monthly payment) for a period of 30 years (or until YOU chose to sell). Housing prices are irrelevant until the moment you enter the market as a seller, because until it is a commodity, your house is not an investment, it’s your home. When you look at it that way, you should buy when the time is right for you, because it’s impossible to time the bottom of the market. (See my blog post on Timing the Bounce, http://www.thebremnergroup.com/timing-bounce-2010/ )
Not in more than 50 years have the stars been better aligned for first-time homebuyers. The National Association of Realtors® reported that the median price of an existing home fell substantially in all markets over the last three years. The combination of lower prices along with historically low interest rates have combined to create even more marked affordability for consumers. According to the Freddie Mac Primary Mortgage Survey®, the average rate on a 30-year fixed rate mortgage now stands at about 5%, the lowest level in 50 years. (Not to mention the Home Buyer Tax Credits)
When home prices were soaring, many first-time buyers jumped to buy houses believing that they would be shut out of the market if they didn’t act quickly. Now buyers have time to search and assess all of the homes on the market within their price range and have the ability to choose the home that best meets their needs.
While the stars are aligned, history shows that the market won’t stay like this forever. Sitting on the sidelines might cost you plenty in terms of higher housing prices and interest rates. The 37-year average rate of appreciation for homes in California is 7.75%. Furthermore, any increase of interest rates even by just a half of a percent could decrease your purchasing power and alienate you from today’s unique market. We live in one of the most desirable areas in the world and regardless of the recent slowing in the market, there is still plenty of pent up demand.
Let’s examine a homebuyer in today’s real estate market. If in 2000 a person had made the conscious decision to continue to save money while paying high rental costs, rather than purchasing a new home for $250,000 – today that person would have missed out on the net 24-28% average appreciation that the market has experienced over the last ten years. And, that appreciation would not have just been on the 10% down payment, but rather on the total cost of his or her home. Had the homebuyer purchased in 2000 in equity, he or she today would have enjoyed a netted $70,000 in equity, in addition to the tax savings on homeowner interest.
The bottom line is that this may be a very good market for first-time homebuyers. And, while you may not be able to afford the newly remodeled four bedroom, three bath dream home, the purchase of your first home might serve as a five to seven year stepping stone towards that ultimate dream home and as the inception of your financial portfolio.
If you’d like to learn more about the current state-of-the-market, including details on determining your purchasing power in today’s market, please contact me today.