Understanding foreclosures and why they’re not always the best deal

We have all seen the ads on late night television and the hype that has been generated by many investors regarding foreclosures. There is a lot of speculation that one who gets a foreclosure (or what the banks call a reo) is automatically getting this great deal. There are many great deals for properties out there right now and roe’s (real estate owned) are not always the best deals. What is it that separates a great deal from a not so great deal? The answer is very simple. Equity and location!

 A foreclosure that has little or no equity in the home may not be such a great investment for the average person unless the property is in a great location and the buyer can afford to hold onto the property until the market goes up.  Often times, investors are lead to believe that they can pick up distressed properties for pennies on the dollar. This is not as common as consumers have been told by the media and infomercials on TV. What they don’t tell you are that the banks don’t like to lose money on business deals either and negotiating the right deal for a reo can be tricky at times. Finding a home that is a foreclosure with equity on the other hand can be quite tricky as well considering most times the property can be refinanced.  The key to doing well in a foreclosure market is to not get greedy. Pick up properties for a little under market value and sell them for a little bit of profit. Investors who don’t lose sight of this rule are doing very well and will continue to do so. 

The key is to find properties that have enough equity to make them a good buy and to be able to re-sell that property for a profit. Purchasing a property that is fifteen percent under market is a good buy if it can be sold for five or ten percent under market quickly. There is another advantage to doing this. Many of us forget that the banks are operating very conservatively these days and appraisers are doing the same. If the appraisal doesn’t come in on target, there can be an issue with the transaction. The key is to keep is simple. It is also important to not lose touch with the fact that it is a buyer’s market out there and there are many great deals outside of foreclosures. Keep in mind that it is much easier to deal and negotiate with a seller that has equity in their property and just wants to sell it. Look around for properties that have been on the market for more than a hundred days. Often times, these can be diamonds in the rough.

It is an interesting market out there right now with property values across the United States, and especially New York, San Francisco and Hawaii, skyrocketing to astronomical values. What has happened is that many of us have become accustomed to property values continuing to go up. Everything has its rise and fall and real estate is no different. The days of making three or four hundred percent returns are gone for now and only the very well connected and savvy investors are doing it in this market. The good news is that it is a great time to buy right now.

Please contact Team Enterprise for more information on this topic or visit us online.

Matt Larsen
Bay Area Real Estate

2008 Winding Down With Bay Area Real Estate Purchases Revving Up

The end of the year is upon us with the holiday’s right around the corner. It has been a very interesting, volatile and bumpy ride with the economy, stock market, Presidential election and real estate crisis. We witnessed some of our largest financial institutions go under, Fannie Mae and Freddie Mac both become taken over by the government and the stock market loose nearly 4 trillion dollars. We have witnessed world renowned business and economic figures such as Warren Buffet and Alan Greenspan in the spot light stating they have never seen anything like this. Our national debt has accumulated to unprecedented levels and our economy literally nearly collapsed. We have had numerous phone calls and emails from worried clients who are watching their retirement portfolios dwindle before their eyes and many have felt helpless. It is during these times that I recall a quote my father used to say to me “with every disaster there is always a gift on the other side”. What does this mean for real estate?

Right now is the best time to buy Bay Area real estate in the past twenty years. For those who have been waiting to purchase, the time is right now.

We are seeing more buying activity in the fourth quarter than we have seen all year. The market is rich with great deals and multiple offers are happening frequently. Many people have been waiting for the “bottom” to hit but the truth is most of us will see it in the rear view mirror. According to Data Quick, Bay Area sales are at the highest volume they have been in 17 months and median values are down 40% from a year ago across 9 Bay Area Counties. Investors and buyers have stepped off the sidelines and into the game. We will most likely see more purchasing activity in 09 with the window of opportunity closing in quickly. The buying frenzy has indeed been initiated and the heat is on. This is a very important step for all of us. Our economy needs to stabilize and homeowners need their property values to stop declining. Bay Area real estate for many is a good investment strategy if it is long term. In today’s market it is not all that bad to have a saleable, tangible asset instead of an extremely volatile stock portfolio.

Much of the purchase activity in the real estate market is with bank owned or “distressed” properties. We would like to put out a word of caution when dealing with these types of properties. Many of the lenders who own these are located out of state and have lengthy contracts that are drafted by their own attorneys protecting the banks best interest. The purchase contract in California is designed to protect the buyer not the bank. It is important to watch out for clauses in the banks contracts like their contract supersedes the interest of the California purchase contract in case of a difference between the two. It is also very common in the banks contracts to revert back to the passive removal of contingencies instead of the California contract requiring an active removal. A passive removal of contingency means that per the banks contract the buyer has a certain amount of time to do inspections, remove the appraisal and the loan contingencies. If that date comes and goes, the contingencies are automatically removed and the buyers deposit is on the line. The California contract requires the contingencies to be removed in writing with both parties signing and dating those removals. Make sure to be very careful when dealing with bank owned properties and that you are working with a professional who knows what they are doing. It is also a very good idea to have an attorney look over any agreement from a bank before you sign it just to make sure you fully understand what you’re getting into.

The real estate market most likely will see a significant number of lawsuits arise in the following months largely due to bank owned and distressed properties. There will be many attorneys watching very carefully for negligent behavior and real estate agents and brokers should be cautious in their dealings. There is nothing to worry about as long as business transactions are done carefully and professionally. Real estate has made more people wealthy than just about anything and the Bay Area is no exception. This market is a niche and demand is always been strong. The population will continue to grow and the economy will remain a large player in the global economy.

Please contact Team Enterprise for more information or visit us online.

 

Best,

Matt Larsen

Bay Area Real Estate

Is Bay Area Real Estate a Buyers or Sellers Market For The End Of 2007? A Comparison With 2008

It has really been a rollercoaster year in the Bay Area Real Estate Market across the nine Bay Area counties. We have seen huge fluctuations in market prices, property values and sales with much confusion emerging especially in the fourth quarter. According to the latest numbers released by Data Quick Services, the market is apparently flat with the average at a mere 0.8% growth over this time last year. The ironic thing is that in certain areas, properties are getting multiple offers and in some cases going for over the asking price. There have been reports of multiple offers in San Francisco and Marin County especially. On the other hand, there have been reports of properties going for a hundred thousand dollars and under market value in Napa and Solano Counties. Properties in certain areas in the East Bay have been selling quite well like Lafayette, Orinda, and the Montclair District in Oakland, Piedmont and the Berkeley Hills. While in other places like Antioch, Brentwood, Richmond, San Pablo and Bay Point sellers would have a hard time giving properties away. It is quite a strange phenomenon.

It was not long ago that listings anywhere in the Bay Area were obtaining multiple offers and in many cases buyers were engaged in bidding wars. Part of the reason for this happening was that multiple investors from the stock market were playing in the real estate game instead. Interest rates hit all time lows and many programs were invented to help buyers get into the market with no money down and negative amortization loans. There were even loan products available that would go up to one hundred and twenty five percent of the value of the property. We watched before our eyes property values tripling, and even more in some areas, over a five year span. It was a feeding frenzy for mortgage brokers and real estate agents who needed their own vaults to hold all the money they were making. The only problem was the default rate of these so called “creative” loans was conservatively thought about at best and greed was prevalent and abundant. With the bulk of these loans set to adjust within the next three years, one could make a solid guess that it will remain a buyer’s market for quite some time. Yet there are many areas in the Bay Area that don’t seem to be affected by this at all.

The Bay Area is incredibly rich in diversity not only when it comes to cultures and values but also real estate. We live and work in an extremely unique area with industry, biotech, renowned universities, hi-tech giants, global shipping and a very large economy. It can be easily forgotten that there is an incredible amount of wealth and fortune in the Bay Area. On the other hand, the housing market during the past six years was largely fueled by the first time buyers with creative financing. We are now starting to see why we are seeing such a large fluctuation in the housing market. Areas that are the most desirable and prominent are being affected much less than areas that have been driven by first time buyers. There are other factors to take into consideration such as location, weather, public schools and amenities. The more desire there is for an area the more demand there is to own property there. This creates a pretty stable environment for property owners in the more affluent areas and less demand for the less affluent areas. One thing remains a fundamental, money talks and the rest walks.

We still have not come up with an answer to our main question. Is it a buyers or a seller’s market? I guess a simple answer would be it’s both depending on location and strategy. Eventually, the market will bottom out and the investors will come in and cherry pick the great buys. The demand for housing in the Bay Area will continue to exist and the population will continue to grow. There will always be a great demand for housing because there will never be enough of it to keep up with the demand creating market appreciation value over time. With very little land left to build on, and building permits becoming harder to get approved, this will only contribute to the increase in Bay Area property. If your investment strategy is long term, it is a pretty safe bet that property in a good location will pay dividends.

Contact team enterprise for more tips about buying or selling real estate or check us out online.

Matt Larsen

Bay Area Real Estate

Bay Area Real Estate Market Feels Tough Times Ahead

The Bay Area is one of the greatest places in the world to call home. There are many things to do, places to see, a wide range of cultures and many job and business opportunities. There is also a great demand for housing with only 15% of the population being able to afford homes. With the most recent events that have taken place in the mortgage finance sector, It has become much more difficult to enter the market place for first time buyers. The days of anyone being able to qualify for a loan are long gone and the mortgage fraud cases are stacking up. There have been more than 120 lenders that have closed their doors in the last two weeks and more are on the horizon. Why is this happening? What does this mean?

The investors who buy loans in the secondary market are reluctant to purchase these loans because of the risks involved. Interest rates for jumbo loans ( loans over $417,000 ) have significantly gone up making mortgage money much less affordable. Investors are weary to purchase loans that don’t fit into Fannie Mae or Freddy Mac standards because of the amount of foreclosures stemming from bad loans to begin with. To sum it all up: Investors are asking for higher interest, more documentation, higher credit scores and many are not doing stated income at all. This means that there will be less qualified buyers and a massive amount of inventory on the market. The good news is that now is a great time to buy and it’s looking like it will stay that way for a while. The Bay Area has historically been a stable investment over time and the market will rebound in time.

There are still some ways to get the right financing. The best things to do are to have a down payment, pay off as much debt as possible and find new ways to increase income. All of these things will prove favorable in the eyes of the underwriters and make it easier to get approved for a loan. Make sure who you are working with and that the lender has the ability to fund and close the loan. This has happened many times recently with lenders not being able to fund after all the documents have been signed. There are also many ways to clean up credit issues and boost credit scores up to where they need to be by doing some very simple things. Most of us don’t look at our credit all the time and have no idea what it says on the report. It is probably a good idea to pay attention to credit reports once in a while to avoid any potential surprises. Lenders are also doing away with alternate credit and so this is a very important step in the buying process. Contact us for more tips about purchasing a home or qualifying for a loan.

Matt Larsen
Bay Area Real Estate

Bay Area Real Estate Investors Come To Life

There has been much speculation and anticipation about where we are in this multifaceted micro climate of a real estate market. While some of the more affluent areas have continued to rise in value, other areas have hit extreme lows. The good news is the investors have come into the picture now and are making serious efforts to pick up fantastic deals. This is a good sign considering that the Bay Area market place will not go back to a normal state until the foreclosure market dissipates. The pickings are ripe right now for investors who are seasoned and have cash but not so well for newer investors who are trying to leverage the bank. The banks and underwriters have placed some hefty restrictions on mortgage loans that we have never seen before. Much of this is attributed to Wall Street getting involved in mortgage money and the serious amount of fraudulent activity that took place. We are also seeing multiple offers on just about anything that is of value and some properties are actually getting into bidding wars.

We have seen many frustrated clients this year who are still trying to hit a home run making low ball offers instead of getting to second base. The market has definitely shifted from where it was even six months ago and more buyers and investors have come off of the sidelines and gotten into the game. There is also another angle to this investment market that is different from any other moment in time. The foreclosure market is at an all time high and the banks have become significant players in the industry. This is giving investors who can pay all cash and close quickly a huge advantage over others because the banks have more security about the buyer’s ability to perform. Investors who can pay cash are getting much better deals than those who don’t. There is no doubt about it cash is still king!

On a different note, the real estate market is not as bad as the media has been telling us. According to the latest stats from NAR, the overall sales in real estate are only down 6.3% from where they were last year. This information is much more favorable than the 11 O’clock news reporting that everything is crashing and the forecast is dismal at best. Consumers should keep in mind that everything is cyclical including real estate and the Bay Area is one of the best places to be in the market. Interest rates are very low and the inventory is still pretty good out there. There is not nearly as much inventory as there was a year ago which tells us that people are still buying and selling.

For those who are interested in real estate investing, let’s talk a little bit about strategy. Instead of letting greed get the best of us, we could simply look at the straight ROI (return). Make reasonable offers that will allow a fifteen or twenty percent return instead of trying to make a fifty percent return. There is no stock or mutual fund out there that will give a return like that and it would make investment sense. Don’t purchase more properties than can be easily managed and are affordable. It is far too easy for investors to get bitten by the greed bug and take on too much resulting in a possible disaster. Make sure to be clear about what the investment goal is and what the strategy is. It is very important to have a clear and solid plan about the strategy. Some investors are looking for cash on cash return while others are looking for tax advantages or market appreciation through acquiring investment properties. There are many excellent opportunities in the Bay Area right now. This is truly the best real estate investment time the market has seen in over fifty years. It is no wonder that it has become somewhat of a feeding frenzy for the investor pool. This market should be prime time for the next twelve months ahead. The most important thing to remember is use common sense.

For more information about buying, selling or investing in real estate, please contact team enterprise.

Cheers,

Matt Larsen

Bay Area Real Estate

Bay Area Real Estate Continues To Jump Around. More News At 11

The Bay Area Real Estate Market is still showing signs of volatility affecting consumer confidence. This is truly a very interesting area with several niche communities doing completely different things. The more affluent areas seem to be stable and have more activity while the lower end sectors seem to be plummeting at a rapid rate. San Francisco, Marin and parts of the Peninsula are actually increasing in value. The East Bay reports that Danville, San Ramon, Pleasanton, Orinda, Walnut Creek, Lafayette and Pleasant Hill are remaining relatively stable. In Alameda County, Alameda, The Oakland hills, Piedmont, and Castro Valley are stable. The unique thing is that by simply traveling a few minutes away from these areas, there are deals galore. East Oakland has more than 100 homes for less than 200,000. There are bargains to be had in Richmond, San Pablo, Hayward, San Leandro, Oakland, San Lorenzo and Berkeley. Part of this niche market is due to being a very high cost area and prices tripling from 1999 to 2005 in most areas. Many were buying two or more properties hoping to jump on the get rich train and now are in foreclosure. The cost of mortgage money was dirt cheap and just about anyone who could sign on the dotted line could get a loan.

The good news is that the Federal Government has passed a bill to raise the conforming loan amounts. This will make a substantial difference to Bay Area buyers who can now obtain a conforming loan up to $729,000 compared to the previous $419,000. The median housing price in desirable areas is still above the six hundred thousand dollar mark. This combined with all of the new lending restrictions priced many previous potential buyers right out of the market place. The new Federal Bill is a good thing that should help to generate sales. There are also eight of the Nation’s biggest lenders who have teamed up with the government to help home owners redo their loans in order to avoid foreclosure. These lenders include groups like Citibank, Wells Fargo, Country Wide and Bank of America. The best thing for home owners who may be in trouble to do is to contact the lender right away. The worst thing in the world to do is not contact the lender. It is far worse to find out one day your home is being sold at auction.

We have seen more activity merging from the investor sector in the past few weeks. This is also a good sign for the Bay Area meaning that investors are sensing the bottom is near. Most of us will not know when the bottom will hit but will find out after the prices start going back up. The bottom line is that if for those who have been waiting to purchase Bay Area properties at a great price, the time is right now. There are hundreds of great buys out there many of which are thirty percent or more under market value. We had a showing for a property in West Oakland this last week that was listed for $84,000. This same property would have sold two years ago for more than $400,000. It has become difficult to keep and eye on the prices in the Bay Area market because of such fluctuation in prices from area to area. The rental market has continued to go up and many consumers we have talked to are just plain scared to make a move. It is important to remember to take the media at face value and not absolute truth. Their job is to sell stories to get viewers and sometimes paint a gloom and doom picture.

We are watching the greatest investment market in Bay Area real estate since the early 1990’s when the last down cycle took place. The inventory is fantastic and there are many great loan products available that are very affordable. Talk to your local professional and find out what’s out there. There is no reason to be afraid of making a move. Contact Team Enterprise with any questions. We are happy to help.

Team Enterprise

Matt Larsen

Bay Area Real Estate

Bay Area Real Estate Buying Spree to Stay For a While

We have witnessed a significant buying surge in the fourth quarter of 2008 due to rock bottom housing prices coupled with fantastic interest rates on mortgages. It has been a very unusual and controversial year in the financial markets with the real estate market being directly affected. The unraveling of more buyers losing their homes due to mortgage loans being made, that buyers should never have qualified for in the first place, has not hit bottom. The intriguing part of this is that inventory has been decreasing while foreclosure activity has been soaring. What does this tell us?

It has been proven time and time again that the real estate and stock markets are cyclical and follow trends and patterns. The stock market usually sets the path and will come back first prior to a full economic recovery. The real estate market tends to get hot, decline and remain relatively flat until the next cycle. There is a lot of uncertainty in the economic industry and money markets right now with the general public anxiously awaiting some sort of stabilizing indicators to happen. We have a new President about the take over a huge mess and extremely large companies bleeding financially. It is somewhat likely that we will see energy become the next hot streak with corporate spending on research and development along with new ideas regarding how to improve economic conditions here at home. This is going to take a while to straighten out and move forward in a positive direction. The real estate market is close to the bottom of the cycle right now and will take several years to revitalize itself back to a hot sellers market. First will be the stock market recovery followed by a slow moving real estate market increase providing great buys on property for a while. It seems confusing why we are seeing a decrease in inventory when it is evident that it will continue to be a buyer’s market. Here is what we see happening.

What we are seeing now is the investors getting back into the game and taking advantage of great opportunities to acquire Bay Area properties at fantastic prices. There are a few reasons for investors not wanting to wait but to take advantage now.

1. The selection is fantastic right now and investors can cherry pick more of the properties they want.

2. Interest rates are very low and financing is great for people who have cash for a strong down payment. This is also favorable for finding properties that can cash flow.

3. It is a great time in the market to purchase with rock bottom prices.

4. Investors want to maximize profit and therefore don’t want to wait five years to pay forty or fifty thousand dollars more for the same property.

5. The economy is down and businesses that sell materials are being forced to provide purchase incentives in order to move inventory. This allows investors a chance to cut costs on materials and helps to maximize profitability.

6. The supply and demand factor in the Bay Area is favorable for investors because of the demand for housing.

We are witnessing multiple offers on properties that are priced to sell and investors are helping the banks take negative debt off their books at the same time. Our prediction is that we will continue to see a similar pattern to follow in 2009 with things stabilizing in 2010. The time for serious real estate investors has never been better and the real players of the game are already in and set up to make an absolute fortune in the next up-swing. Historically there has been more wealth earned from the proceeds of real estate than any other investment opportunity in the United States. The San Francisco Bay Area is among the world’s elite locations for property with its climate and vast endless array of things to do. There is such variety in the Bay Area for culture, entertainment, strong job markets, cuisine, wine country and outdoor activity that is draws global audiences every year thus adding to the desirability. Local investors are in the market now for a multitude of good reasons and have the ability to recognize the full potential of its return on investment.

There is more good news. There will be a chance for first time buyers to enter the market that previously could not afford to get in. Lenders will continue to find programs to help first time buyers with affordable rates in order to produce loans. We have seen the return of favorable FHA financing and programs to help buyers with credit problems and down payment assistance.

The bottom line is that there will be those who become very wealthy and those who don’t. I guess the question is: Which side of the fence will you be on? For more real estate information, please visit us online or contact us with any questions.

Happy holidays,

Matt Larsen

Bay Area Real Estate