Itâ€™s amazing what a well-chosen new paint color scheme can do for the exterior of your home. Itâ€™s the least expensive major upgrade you can invest in and actually expect to make money on when you sell your home.
Itâ€™s amazing what a well-chosen new paint color scheme can do for the exterior of your home. Itâ€™s the least expensive major upgrade you can invest in and actually expect to make money on when you sell your home.
First, letâ€™s be clear about what shadow inventory is. These are homes that the bank has already foreclosed on, but which, for no apparent reason, arenâ€™t listed. The implication is that banks are holding REO properties back from the market to restrict supply and prop up prices.
Federal Tax Credit Extended and Expanded!
The best way to find out all the details is to go to this website: www.federalhousingtaxcredit.com. Itâ€™s a simple, clear, comprehensive website from the National Association of Home Builders (NAHB) that answers most questions you might have about the new law.
You must enter escrow by April 30, 2010, and close by June 30, 2010.
The income limits have been expanded to $125,000 Modified Adjusted Gross Income (MAGI) for singles, $225,000 MAGI for married couples filing jointly.
Some move-up buyers now qualify for up to a $6500 tax credit, if you have owned and lived in your principal residence for 5 of the last 8 years. Your new home does not have to cost more than your old home. I donâ€™t see any discussion of what you have to do with your old home, either, so you might be able to keep it and rent it out if you want. The new home cannot cost more than $800,000.
Of course, for tax and legal advice, you must consult your own appropriate professional.
If you have been thinking about selling and you can accept what the market brings you today, this is a great time to sell. The pent-up demand from first time buyers is terrific, but this new law opens up a whole newÂ market of long-time home owners who nowÂ have a new incentive to make a move. If you want to find out more about your own housing situation, please contact me.
The City of Los Angeles has long had a reputation for unbridled development and a disregard for the treasures of the past, but you would never know that if you first looked at the Citys own preservation website, www.Preservation.LaCity.org.Heres a great link from that website to a brochure on Caring for Your Historic Home: http://preservation.lacity.org/files/HPOZ%20Rehabilitation%20Guide_0.pdfPerhaps one reason the Office of Historic Resources, a part of the Department of City Planning, appears to have its act together is because the former head of the Los Angeles Conservancy, Ken Bernstein, is now the Manager.
Also on the website is a list of all the Historic Preservation Overlay Zones in the City as well as a list of proposed HPOZs.Another link is Search for a Property, http://www.preservation.lacity.org/statuswhich gives instructions how to research possibly historic properties through the City's websites.
To complement that website, I offer you the Should I Stucco My Wood Frame House?brochure that I had updated a few years back.
Many people are asking if now is a good time to buy real estate, especially those who have lost money and equity in the recent mortgage crisis. Bernice Ross lays out an excellent analysis of how buying for the long term is a hedge against inflation http://www.inman.com/buyers-sellers/columnists/berniceross/breaking-down-buy-vs-rent?page=0%2C1. There are many other important reasons to consider as well, though they aren't as easily quantifiable.
Pride of ownership is key to this discussion. And I don't just mean that when you own, you take better care of your property. That tends to be true, but in a way it's all about self-expression. My home is an extension of me”my accomplishments, my creativity, my style. Whether you have an architect design your home from the ground up to your specifications, you buy a home in a development , you have an historic home that has all the original details preserved, or you buy a starter home that needs a lot of work, you will imprint something about you and your personality on that property, even if it's only on the inside. Home tours and open houses are popular because so many of us love to see what other people have done with their homes.
Pride of ownership is also about civic involvement, security and freedom. As homeowners, we have more of a stake in our communities. If a new commercial development threatens to change the character of our neighborhood, we are much more likely to show up and protest, or vote, or question how it will affect our property values. It even affects how likely we are to pick up litter from the sidewalk. If we feel like the sidewalk is ours, we'll pick up the trash. Otherwise, the city should be doing it.
If you have ever gone door to door for a community issue, the most common response from the non-property owner is Oh, I'm just renting here. Most renters have a temporary feeling about their home”and they should, because the landlord can ask them to move out. Even in a rent-controlled area, there are ways to move a tenant out. If you own your own home, it is yours to keep as long as you make your payments and pay your taxes. That means a great deal to many of us.
At the end of the day, with any rent vs. buy analysis, if you own your home free and clear you have a place to live regardless of its value and if you rent you don't. Many of us are a long way from being mortgage-free, but small steps taken every day move us forward on the path to freedom.
Why should you buy a house in Eagle Rock, CA? Because you get the best of several worlds in this quiet little corner of the great metropolis of Los Angeles, CA: a home town, neighborly community with access to the jobs, culture, and amenities that a big city offers, as well as minutes away from hiking trails and the Angeles National Forest.
Once its own city, Eagle Rock was annexed to the City of Los Angeles in 1923, in order to secure access to the City's Owens Valley water resources. Consequently, Eagle Rock has the municipal services that a large city provides like the Department of Water & Power, police, fire, transportation, and public schools. We've retained our original City Hall which was built in 1922, and several other architecturally and historically significant buildings including the 1915 Carnegie Library which is now the Center for the Arts, Eagle Rock, and the Richard Neutra-designed 1954 Eagle Rock Recreation Center.
Eagle Rock is a community that likes to do things together. The Eagle Rock Block Party happens every second Saturday of the month. Created by a local art business owner, Jeff Bughouse, more and more businesses are hanging the special Eagle Rock Block Party light and offering deals, snacks, and fun stuff. It was designed to play off of the NELA Artwalk, a fun way to catch up on local art happenings all over Northeast LA, download the map of the month at www.nelaart.org. You can be a fan of the Eagle Rock Block Party on Facebook, http://www.facebook.com/pages/Eagle-Rock-Block-Party/110194926376#/pages/Eagle-Rock-Block-Party/110194926376?ref=ts
TERA, The Eagle Rock Association, is sponsoring a Night Out on October 17 this year, as a fundraiser. You buy a ticket for a dinner prepared and served in the homes of several of our wonderful residents. I've heard that the Eagle Rock Valley Historical Society may be serving up a special event at one of their meetings this fall as well. And the first Saturday in October is reserved for the Center for the Arts Music Festival, where they close down Colorado Blvd and there is music in the streets. It's a great event. Check it out at http://www.centerartseaglerock.org/index.php/music_festival
Public schools affect many buyers' decision to buy a home in Eagle Rock. Although part of the huge LAUSD system, Eagle Rock prides itself on its local schools. Four elementary schools feed into the one junior high and high school campus located in the heart of Eagle Rock. The high school placed 447th in the top 1000 high schools in the U.S. based on Advanced Placement tests given.
More great reasons to buy in Eagle Rock include all the fun restaurants, bars and cafes that populate Colorado and Eagle Rock Blvds, some fun vintage and modern clothing boutiques, a number of kids' fashion and accessory stores, a large number of established churches, and a very active and committed population dedicated to a number of civic organizations. We have a community garden so popular that there is a waiting list to obtain a plot and not one but two weekly Farmer's Markets. Every summer there are free concerts at Eagle Rock Park. There is something for everyone here, from the Eagle Rock Rockers car club to the Occidental College theatre program.
Only 26 homes are currently for sale in the 90041 zip code, which comprises most of Eagle Rock. A few more are available in the part of the 90065 zip code that is designated Eagle Rock schools, an area mostly known as Sagamore Park. With so few properties on the market, whenever a good home is listed, it commands immediate attention by the serious buyers. This lack of inventory has helped in part to maintain property values a bit higher than some of the surrounding communities. Where parts of Highland Park and Glassell Park may have seen values drop 30 to 50%, Eagle Rock has gone down 10 to 25% from its peak in most cases. Closed sale prices this year have been reported from $129,000 for a burnt-out shell of a house to $800,000 for a Mediterranean on Hill Drive. In the last five years, several homes have sold for over $1 million, and will again soon if I have my way. I currently have a wonderful Mediterranean with a full guest house on Hill Drive listed for $1,195,000.
And I just have to reblog this wonderful piece about the most holy Buddhist monk in the world who gives us the formula for happiness, the Dalai Lama. http://happydays.blogs.nytimes.com/2009/07/22/the-doctor-is-within/
Eagle Rock Real Estate Report February 13, 2009
What's the story with short sales? (Again, a short sale is where the owner owes more to the bank than they can get for the property, so they can't sell unless the lender agrees to take less). Are they working out for people? In Eagle Rock, 17 of the 47 active listings are short sales, 7 of the 22 properties in escrow are short sales, and 1 of the 9 closed sales so far this year was a short sale. So the percentage of each goes from 36% of the actives to 32% of the pendings to 11% of the solds are short sales.
Contrast that with foreclosures: 7 of the 47 active listings, 9 of the 22 pending, and 5 of the 9 closed sales are REO. The percentage goes like this: 15% of the actives, 41% of the pending, and 55% of the closed are bank-owned.
So there are a number of short sales that try to close escrow, few that actually do. On the other hand, foreclosures are selling like hotcakes. And, though it's a very small sample, two-thirds of the closed sales in Eagle Rock so far this year, 2009, were distress sales, which is almost as high a number as in Highland Park (see my February 7 blog). And actually, one of the "regular" sales was a trust sale, so that reduces the "normal" number even more.
My view is that the short sales you see clogging up the active listing inventory are confusing the general buyer public. You see these artificially low-priced homes, like the one at 4911 Townsend listed for $250,000, and everyone thinks they are going to get a deal. Well, let's follow that one and see how it pans out. It will be a learning experience for us all. My prediction: if it ever sells as a short sale, it won't sell for $250,000, it will be more, because the house is too big to sell for that little, even though it needs a lot of work. It will get bid up to a higher price. Will the bank approve that price? Or will it eventually go to foreclosure? Let's watch that one and find out.
**UPDATE** Today (November 14, 2010) I looked up the MLS record on 4911 Townsend to see what did ever happen to that property, and the answer is... nothing! It expired on the MLS July 29, 2009, which means that it either did not sell and the seller decided to keep making payments, or the listing agent never updated the listing. Looking up the property in the title records I see that it hasn't changed hands since 2006, so I'm assuming the lender did not give short sale approval and so the seller has kept making his payments and kept the house.
Here is an example of what pricing right will do: I saw 5420 Mt. Helena, which came on the market at $559,000 with a list date of 2/6/09 and by 2/10/09, the listing agent told me it had received 4 offers and was now in escrow. It was a trust sale and the family just wanted it sold. I'll bet that one sold for more than its list price as well, because you cannot underprice a home, even in this price-conscious market. If it looks like a deal, more than one buyer will think so.
Of course we all want a deal, we don't want to pay more than something is worth, especially in today's market. Which gets us into the whole discussion of value, of what is a fair market price? Is the price today the same price it will be worth in a month? If the buyer and seller can't agree on a number today, then we don't have a sale. What will the property be worth in two months? Is the market going up or down? If you are overpriced today, what does that make you in two months if you still have't sold? Or is it just that the right person hasn't come along?
It's not simple buying real estate today, is it? Unless you just want to buy a home, need to move, find a place you can afford, and buy it. Oh, that sounds simple. Why is all the rest going on?
And that's why we have the whole real estate industry, my friends. What should be a simple transaction is full of so many questions to be answered.
November 18, 2008 Today's Eagle Rock Market
Inventory in Eagle Rock hasn't varied much in terms of number of active listings this whole year. Today there are 45 homes on the active market, 14 of them short sales, 4 REOs, and 33 regular sales including trust or probate sales that don't require court confirmation. Since November 1, 4 have gone into escrow including 2 short sales, 1 REO and 1 regular sale while 4 more have closed escrow including 1 short sale, 2 REOs, and 1 regular sale. Prices are interesting: what is closing escrow is much lower in average price ($411,500) than actives ($568,500) or pendings ($565,725), but the actives and pendings are close in average price. I have to say that the most surprising sale to me is the short sale that actually closed escrow on Townsend, since most short sales have not ever closed. Let's see with the 2 that just went pending if they ever actually close. Perhaps banks are actually beginning to work with people to negotiate these, we'll see. This sample is too small to really tell. But really noteworthy is the fact that 3 of the 4 closed sales sold for more than their list prices. Hello, this is a pricing strategy that works!
Help for Homeowners
As I was canvassing the neighborhood last week, I encountered a couple of people who said they were "upside down" in their mortgages, had tried to contact their lenders with no luck, and didn't know what else to do. Here at last is real information with phone numbers, websites, and rules gathered by the California Association of Realtors.
Mortgage Workout Programs for Homeowners
The following information is intended for REALTORS® and homeowners seeking information on existing mortgage workout programs. In general, the loan modification programs on the chart and consumer information sheets (see links below) are intended for primary residences only.
.HOPE For Homeowners (H4H)
.Federal Government Loan Modification Â (Participants include: Fannie Mae, Freddie Mac, Federal Home Loan Banks, Hope Now participants, Department of the Treasury, Federal Housing Administration and the Federal Housing Finance Agency, and Wells Fargo.)
Mortgage loan modifications typically are handled on a case-by-case basis. Homeowners having difficulty meeting their mortgage obligation or interested in finding out more about a loan modification program should start by contacting their lender. Prior to calling a lender or loan servicer, homeowners should have the following information available:
.Income information and documentation
.Most recent mortgage statement
.Letter demonstrating financial hardship
If you want help with this, or if you can't access the website or the links, call or email me and I'll either email or snail mail you the relevant information. NOTE: It is illegal for people to charge you a fee upfront for helping you. I am offering information as a public service only. The fewer foreclosures in our neighborhood, the better the neighborhood will stay.
Many of us are dealing with the fact that our real estate is worth less than it was. Good news! For those of us who own property that is worth less than its current assessed value, we can apply for a temporary tax reduction. In 1978, California voters passed Proposition 8, which allowed for this. All the details can be seen at at the County Assessor's website, or from right here: decline-in-value-form. An application can be requested by calling 888-807-2111. You have until December 31, 2008, to file the form. Here's the press release from the Assessor: Press Release.
Note that we are talking about the assessed value, which you can see on your Annual Property Tax Information Statement at the bottom of the upper portion, not an appraised value or the fact that it might be worth less than what you currently owe on the property. Also, the property value is assessed as of January 1, 2008. Note that the biggest reduction in value in many areas has happened since that time, so the tax reduction may not be nearly as much as you might hope for or imagine. I asked someone who works for the Assessor if we can file again next year for a further decline in value even if we get one this year, and I was told yes. So don't despair, but you'll have to be patient, because you may not see much of a reduction until next year.
If you purchased a single family home or condominium between July 1, 2004, and June 30, 2007, you were already evaluated for a tax reduction and were notified in October if you qualified for one. If you don't agree with the findings, you can appeal. Start the process by calling your local Assessor's District Office. You have to file an appeal by November 30, so you'd better get on this.
If you purchased your real property before or after those times, or you own something other than a single family home or condo, you can download the Decline-in-Value form from the Assessor's website. To establish the value of your property, you can search on the Assessor's website, or as a public service, you can contact me and I will help you if I can. Be sure to read the press release on the Assessor's website, they warn of people who charge hundreds of dollars to help you. Now I'm not going to fill out the form for you - that's your responsibility, but even the Assessor says it's really easy.
How to navigate today's mortgage environment, Part 2.
First, have you been reading the newspaper lately? Well, stop it.
Let's look at other options for finding out what's going on in the lending markets. For starters, I called Ann Bedrossian at Lockheed Federal Credit Union (818-621-2758). She says they have lots of money to lend right now, their deposits are way up. And if you have decent credit and at least 10% down, you can get under 6% mortgage interest on a 30-year fixed loan up to $1 million. To join the Lockheed Credit Union, you pay a $25 application fee, that's it! Call Ann for the latest rates and programs, you might be pleasantly surprised.
I know there is scary news out there. I know everyone thinks the real estate market is on the biggest slide downward ever. But now is the time to be a contrarian! Do what Warren Buffet says, get greedy when everyone else is afraid.
If you are in the market for purchasing or refinancing a home today, you need to pay close attention to the mortgage news, and listen to responsible, knowledgeable professionals.
From Kirk Thomson, How To Plan Ahead For The New, Lower Conforming Mortgage Loan Limits in 2009. Conforming mortgages are limited by loan size, based on average housing costs around the country. Since 1980, as home prices have increased, so have conforming loan limits. The current conforming loan limit on a single-family home is $417,000. Earlier this year, as part of the Economic Stimulus Act of 2008, Congress authorized temporary increases to the conforming loan limit in high cost regions, as defined by median home sale price. In Manhattan, for example, where more homes sell for more than a million dollars than sell for less, mortgages as large as $729,750 are considered "conforming".
Beginning in 2009, however, that loan limit changes. Effective January 1, conforming mortgages will be capped at $625,500 in high cost areas, and $417,000 everywhere else. Therefore, homeowners in high cost areas whose mortgaged amounts exceed $625,500 are now operating on a defined timeline. Switch to a cheaper conforming home loan prior to December 31, 2008, or risk paying the "jumbo premium". This includes homeowners with: Two mortgages -- one for $417,000 and one for "the difference." An ARM that was begrudgingly accepted because jumbo fixed rates were too high. An expensive jumbo fixed rate mortgage. In addition, home buyers in the $800,000-900,000 price range may want to move up their closing dates. Today, at those price levels it takes a 20 percent downpayment to get access to conforming money. In 2009, it will take 30 percent.
My comment: In the last couple of months, FHA financing has been a great alternative to jumbo or "jumbo light" programs, because it is the only way many people have been able to obtain loans with less than 20% down payments. Keep in mind that FHA loan limits will also be decreased from $729,750 to the $625,500 limit. We'd better go shopping!
As a Realtor, the most common conversation opener when I meet anyone today is, "How are you doing in this terrible market?" Well, I'm doing okay, thank you. I'm focusing on the people who need to buy and sell right now, I'm paying a lot of attention to my business, and it's working. I opened 3 escrows last week, and yesterday closed escrow on the biggest sale of my career.
You see, people are always changing and that means that they are always moving. Everyone lives somewhere. The four big reasons why people buy or sell homes are: birth, death, job change, divorce. Those things don't stop when the economy gets bad, now do they? So life goes on, real estate goes on.
The next thing people say to me is "When do you think we're going to hit bottom?" My answer is that my crystal ball is in the shop. We'll know we hit bottom when we see that prices have begun to go up.
I was reading the April, 2008, Fortune magazine recently an interview with Warren Buffet, the financial guru of Omaha, Nebraska, and head of Berkshire Hathaway, one of the most respected stock holding companies in the world. Hm, what would something Mr. Buffet said in April look like in the light of what has happened in the last few months?
Mr. Buffett is a smart man. I didn't read one word of prophecy, nothing we can examine 6 months later and say, "Well, that didn't happen the way he said it would!" He did say this in reference to investing, though, "I always say you should get greedy when others are fearful and fearful when others are greedy." Do you feel a bit of fear in the market today?And he said in response to the question, "But you’re still bullish about the U.S. for the long term?""The American economy is going to do fine. But it won’t do fine every year and every week and every month." Mr. Buffett is a rational investor, one who holds stocks for the long term. I encourage you to read his interview and substitute the words "real estate" for "stocks" in what he says. I think his words are meant for any investor in any market. Here's the interview.
I have a thought for some of you who are sitting in your homes, wanting to get top dollar to finance your move to the next phase of your life, whether it be a retirement home, a sailboat, or a loft downtown. This could be a time to consider financing your buyer yourself. If you own your home free and clear, you could help an earnest young family purchase your home and make a decent return on your investment as well. Consult your tax and financial advisors and let me know what you think.
Every Tuesday, the Coldwell Banker offices and a couple of MLS organizations have Broker caravans where we look at the latest listings to come on the market. I thought I'd share the news with you, as several I saw today are really good deals! If you want to make an offer, call me! I would love to represent you.
1575 N. Los Robles, Pasadena, only $384,900! Near Howard St in NW Pasadena, this is a 1905 Craftsman, over 1200 sqft with really high ceilings, 3 bedrooms, a big lot (8841 sqft), and a super price! It's a bank-owned, sold as-is, but has copper plumbing, central air & heat, and still some character touches.
5315 Buchanan St, Highland Park, $499,000. A former bank-owned that was rehabbed extensively into a surprisingly nice 5 BR, 3 bath home with entirely new systems and interior. It's not a high-end neighborhood, but this is a real deal for someone who needs this much space.
4840 Hartwick St, Eagle Rock, $699,000. This is all about the backyard. If you want a kid's paradise where they can play as if they lived out in the country all in your own backyard, this is your dream come true. First, sit out on the deck overlooking it with a lovely south-facing view. It's a good house, too, with 4 bedrooms, 2 bathrooms, in good condition. Located at the end of a culdesac in the heart of Eagle Rock.
The good news is the Housing and Recovery Act of 2008, signed into law by President Bush last week. This bill permanently increases FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas (that's us) to $625,500. There is another provision that offers a first-time buyer tax credit of up to $7,500 that is actually an interest-free loan with a 15-year repayment plan. This is available to a person who has not owned a home in the three previous years. This credit is only in effect for buyers who purchase between April 9, 2008, and June 30, 2009. The purchase has to be for your primary residence, and there are a few more qualifying rules. For detailed information, you can go to the Federal Housing Tax Credit site.
The bad news is that Freddie Mac, the big mortgage finance company, posted a large quarterly loss. This resulted in opinions from various sectors predicting further home price declines and the possibility of mortgage interest rates rising.
So how does this affect the current market in OUR neck of the woods, Northeast Los Angeles and the San Gabriel Valley? Those of you who are in the under $500,000 price range know that outside of short sales (which aren't sales) and foreclosures (largely junk with the occasional deal that you better be able to pay cash or put 50% down and move really really fast on), there isn't much that is any good and those few are going in multiple offers. This price range was largely non-existent for the years 2004-2006 and is really the buying opportunity of the day.
I know you think "oh, she's just a Realtor trying to make us feel like we have to buy now and everyone else says prices are still going to come down." Go ahead, take the chance that something you like that is out there now at a price you can afford will be cheaper in a few months or next year. It might happen, but how much are you willing to bet that mortgage rates will stay the same as today? They have already crept up to 6.5% for most 30-year fixed loans and experts are predicting a rise to 7%. What will that do to your falling prices? Make it a wash, that's what. Your buying power drops dramatically when interest rates rise. For every $100,000 mortgage, the cost goes up $67 for a 1% rise in interest rate from 6.5% to 7.5%, meaning your buying power is actually almost $10,000 less. To put it simply, for every 1% increase in mortgage rate, you have a 10% decrease in buying power.
I know some people predict the market will go down another 10-20%, but once the foreclosures and shortsales work themselves out thanks to the Fed, what seller will put their house on the market? Only the few who really must. There you have the supply and demand dynamic, with fewer homes on the market, the demand goes up and so can prices.
Out in Pasadena's West, that is, west of the Arroyo and south of the 210 Freeway, is a lovely area that includes the San Rafael Hills. Most of the homes were built in the 50s, they've been well maintained, have great views, and it's a convenient location to both Pasadena's Old Town and downtown Los Angeles. I noticed some odd real estate happening over there last year when I had a listing that never sold that had appraised at $850,000, thanks to a couple of sales that seemed unusually high for the time. So here's my investigative report:
As of today, August 3, 2008, of the under $1 million market, if you look at the gross numbers it looks like there are 19 homes currently on the market, 19 have sold so far this year and 3 are in escrow. At this rate there are over 7 months of inventory. Since over 4 or 5 months' supply qualifies as a buyer's market, it looks like it's slow in the San Rafael Hills. It is truly slow, since we only have 3 properties in escrow.
Of the 19 homes currently on the market listed for $1,000,000 or less, 8 are short sales and 3 are REOs. Of the 19 properties that have sold so far this year, 2 were REOs, 3 were probate or trust sales and none were short sales. Of the 3 properties currently in escrow, 1 is a shortsale and 1 is an REO. Of the 11 expired or withdrawn properties, 4 were short sales and 1 is now on the market as an REO.
The current real estate commentary you read in the paper says that there is a lot of inventory on the market which is bringing the prices and the demand down. But if you remove the short sales from the equation, we now have 11 active listings or an inventory of about 4 months, which is closer to a normal or even a seller's market.
In my educated opinion which is verified by bankruptcy attorneys and many Realtors who specialize in short sales, most short sales will not be approved. Why? There are many reasons, mostly stemming from the fact that most people don't understand how they work and they advertise their property as a short sale with no idea whether they qualify for one. And Realtors take them on with the same ignorance. Of the 8 short sales now on the market, I'll bet you not one sells until they go through the foreclosure process and come back into the market as an REO, or bank-owned sale. What does this mean to you?
If you own a house in the San Rafael Hills and want to sell it, you are competing with some "fantasy" listings as well as some really bargain priced REOs. The 2 cheapest properties on the market are REOs. Unfortunately for you, you can't disregard them because the buyers and the appraisers are looking at them, and believe me, these properties will sell and sell quickly. So if you don't have to sell, you probably won't.
If you're a buyer, how can you take advantage of some of the really great deals that do appear, like those 2 REOs? First, can you pay cash? Or do you have such a large down payment that your loan can be under $417,000? You are in good shape. If you already own a home that you have to sell in order to buy another, you need to put it on the market and sell it for whatever you can and be willing to rent until you find the deal you want. It's not that difficult, there are lots of rentals out there right now. And when you're ready, don't be confused by the short sales you see on the market. Just ignore them and look at the homes that you have some chance of actually purchasing.
Well, I'll tell you one thing that's not real is a short sale. Those are properties where the sales price won't be enough to cover the loan and closing costs, so the bank has to agree to take less than they are owed to make the deal work. Guess what? They almost never agree to take less! They don't care that they may make less eventually when they have to sell it as a foreclosure. They want to make an example of these irresponsible sellers and make them suffer for getting themselves into such a financial pickle. If you are such a seller and need to sell, you had better be in real financial trouble or your short sale will not be approved. That means you can't have any other assets, or if you do, you have to give them to the bank. They'll transfer what you owe to another property, or they'll take a promissory note if you don't own any other real estate. And you almost always have to already be in default on your loan, so your credit is trashed regardless
So, you the prospective buyer say, what's the harm in looking at short sales? Here's the problem: you are wasting your time. Not just by looking at unlikely properties, but what if you fall in love and make an offer? What if it's actually accepted, pending lender approval, of course? Then you waste even more time waiting weeks, even months to find, 95% of the time, that the lender turned the deal down and foreclosed on the property yesterday. Not only is that really frustrating, but you have a huge loss in missed opportunities. That cute little foreclosure on the next street that sold in a day. That regular sale that sold in multiple offers last week. Oh, yes, and even though the paper says that the prices are dropping, now that you're back in the market it seems like anything that's any good is $20,000 higher than you thought you were going to pay with the short sale.
An interesting calculation in the June 2008 Money magazine is the TED spread, an indication of easy it will be to borrow money. It's the difference between the 3 month LIBOR rate and the 3 month T-bill rate. The T-bill is essentially risk free and the LIBOR is the rate the banks charge to borrow from one another. If they are nervous about lending to each other, they certainly are more fearful about lending to you and me. They say a difference of .4 % is what we need to see. The latest figures show a spread of .97%, which is a bit more than last month, and a lot more than 1 year ago when it was .41%.
My conclusion: this formula confirms that it is difficult to get loans right now. I already knew that anything but the most pristine of credit, 20% down, conforming loan type buyer was having trouble getting a loan, but this formula shows me why and also how I can know when it is changing.