Buying in Today's Market

By now it's common knowledge that short sales, bank owned and distressed property are prevalent. There are many stories of buyers getting really "good" deals purchasing these properties. This is all true. The rest of the story is also becoming common knowledge that distressed properties are very difficult to buy. They are very challenging and much patience is required. It is rumored that 7 out of 10 contracts on short sales fail. Many, many buyers give up somewhere in the process.

I will go over the basics of short sales. Many homes are being advertised with very low prices that have "not" been approved by the bank. This in and of itself is frustrating to Buyers. However, from the real estate agent and seller stand point this makes perfect sense. They cannot get the banks to address value until the seller gets an offer of some kind. It is impossible to know from one week to the next what the banks value "might" be determined as. These values are determined by an appraiser or a real estate agent that is "not" party to the contract of sale. Not only do the values change over time they are subjective to the person doing the evaluation. There are so many homes available and the agent has a limited amount of time to work with before the home is foreclosed on. After a certain period of time the agent really has no choice but to drop the price and just get an offer. It seems the buyers are frustrated with this tactic. However, they buyers don't seem to want to pursue a reasonably priced house, they want a screaming deal. Don't get me wrong, there is nothing wrong with wanting a great deal but it is a bit of a double edged sword.

After the agent gets an offer to work with they much gather a great deal of financial information from the seller. The agent submits all of the financials, plus the offer to the bank or banks. The bank then orders an appraisal to determine the value of the home, and then via some formula, the bank submits a recommendation to the investor who made the loan. Saying that the banks have grid locked themselves in this process is an overstatement, however, to the many buyers who wait for months for this process to take place it probably seems like grid lock. This process is currently taking 3-4 months. At the end of the process the buyers are get some great deals, but many are spending much time with little guarantee of the outcome.

The buyers who are not pursuing short sales are also getting some very good prices. They close is an estimated 30-45 days. If you watch prices a buyer under these circumstances can get a very nice purchase and be virtually guaranteed of the outcome.

Don't get me wrong, pursuing either avenue is perfectly fine. It just appears that buyers want both the highly distressed price with the guarantee of time and outcome. If I had one argument at all for not pursing distressed sales at this time it would be interest rates. The time to pursue short sales really started 18 months ago. It gets dicier every day. The banks are getting tougher to deal with and they are taking less loss per property as time goes on. The stimulus monies are fast evaporating ($6000 down pmt for new construction is now a thing of the past and the $8000 tax credit will be gone in 6 months). Also, if interest rates change 1 to 1.5% this changes the outlook on your payments and financial situation over a 5 to 7 year period. These changes are likely to eat up most of what you may or may not gain through purchasing a distressed property.

I truly wish you well in your pursuit of homeownership. If you have further questions, please send an inquiry via email or feel free to phone me any time.

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