May, 2009
I am amazed at the number of “short sale experts” that have popped up in the real estate industry within the last 6 months. They range from real estate agents who have closed a couple of transactions in their entire career, to real bona fide experts… but the real experts are few and far between.
I take this personally, because sellers in this situation really need expert help. Truly being an expert in helping people in short sale scenarios involves a wide range of knowledge, organization, drive and specialized skills, that most agents don’t possess. That is why statistics show that on average across the nation, only 20% of short sale transactions make it to the closing table. That means that 4 out of every 5 short sale contracts fall through, and leave the seller in an even more precarious position… and closer to foreclosure. I believe this is largely due to listing agents who dont’ know what they are doing.
Being effective at listing, marketing, selling, and closing short sales involves some primary components.
- Understanding HOW to secure a buyer quickly, and at a price that is acceptable to the bank.
- Understanding what price will be acceptable to the bank. The bank is willing to give a deal, but it has to be within a certain percentage range of current market value.
- Understanding how to effectively present the property to get a reasonable BPO (Broker’s Price Opinion) value
- Knowing within what percentage range of the BPO value the price has to be to be acceptable to the bank
- Having systems in place to negotiate effectively with the bank to obtain a favorable result for the seller
- Having a strong team, including negotiating, attorney support, etc. to manage the file to completion
- Knowing exactly what documentation is needed to present a complete short sale package to the bank, to speed the process
- Understanding how to present the buyer’s contract, pricing history, multiple offer information, showings, etc., to bring the bank to an understanding of market value, and market conditions, to effectively complete the short sale
So, as you can see, being a short sale expert involves a lot more than listing the property, someday getting a buyer at a price you don’t know the bank will even consider, and winging it as you go along. I know this last part will seem a little self-serving, but hopefully you can see that I am passionate about this topic
My team takes great pride on being Foreclosure Buyers Specialists, and Short Sale Experts. When people ask me what I do… I don’t merely say I am a Realtor. I tell them, I specialize in helping people…. who owe more than can sell their home for… and don’t know where to turn. I help them. The situation is way too serious to take lightly, and not hire a team that knows how to get the job done. Enough said.
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The following article is national news, but has a significant bearing on the Fredericksburg real estate market. Since a large percentage of our home inventory is short sales, an act that obligates banks to be more cooperative may help resolve many of these tough situations.
Share on FacebookAnn Arbor, MI May 26, 2009 – The Helping Families Save Their Homes Act (S. 896) was recently passed by Congress and signed into law by President Obama last week. “There are five primary sections of the new law that will benefit home owners and consumers,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.
Benefit #1 – Loan Modifications and Short Sales Should Get Easier
“Most mortgage loan modification plans announced by the government to date have been voluntary, meaning that mortgage companies do not have any legal obligation to participate,” Nicholas said. The new law changes that by requiring servicers to modify loans and approve short sales for consumers as long as three requirements are met:
- Default on the mortgage needs to be reasonably foreseeable
- The home owner must occupy the property as their primary residence
- The mortgage company needs to be able to recover more from the loan modification or short sale than they would by sending the home into foreclosure
“These three requirements were also present in legislation that was signed into law in 2008,” Nicholas said. “However, this new law is more effective because it specifically states that servicers must consider any of the plans that have been endorsed by the US Treasury Secretary – including the Obama administration’s Making Home Affordable plan – when making their decisions. This means that home owners should find it easier to qualify for a loan modification or short sale because their mortgage servicers are finally obligated by law to consider some of these new plans that have been completely voluntary up until this point. It may take several weeks for servicers to start implementing the new law, but the bottom line here is that help is finally on the way.”
Source: CMPS Institute
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Throughout many conversations with sellers over the last year or so, I have discussed where the market HAS to go, before a true recovery takes hold. Where the market has to go is to a place called affordability. In 2005 and 2006 home prices jumped far beyond what many people could afford, and ultimately reached a point where homes just stopped selling. And like a pendulem, it the prices began to swing in the other direction…. then plummetted in the other direction.
The hottest portion of our market, and make no mistake, this segment is hot, is the homes that are around $150,000 and below. In the Fredericksburg real estate market, that price point specifically involves mostly first time home buyers, and investors. When a market moves to the point where first time buyers are back in the game, then it is reaching a healthy point again. I have seen more first time buyers purchasing homes in the last few months in the Fredericksburg real estate market, than we have in the last few years.
So, when I saw this article today from Realtor Magazine, I felt compelled to share it. Take a read.
Share on FacebookHome Affordability Hits 18-Year High
Housing affordability is reaching record levels with nearly 73 percent of all homes sold in the first three months of 2009 considered affordable.That’s the highest percentage ever reported by the 18-year-old, quarterly Housing Opportunity Index, compiled by the National Association of Home Builders and Wells Fargo Bank.
To be considered affordable, a family making the national median household income of $64,000 must be able to devote no more than 28 percent of their income toward housing costs
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That is a great question. I threw away my crystal ball somewhere in 2007… but I kept my opinions. Here is what I do know for sure. There are segments of the Fredericksburg real estate market, along with other areas we service, like Woodbridge real estate, Dumfries real estate, and basically the eastern portion of Prince William county, where homes are selling like a spreading wildfire.
If we are talking about homes priced under $150,000, it is solidly a seller’s market. In the Woodbridge, Dumfries area, if a home goes on the market under $150,000 it will almost certainly have multiple offers on the day it listed. So many offers in fact, that several agents listing these properties stop taking offers once they receive 10 offers… which usually occurs within a couple of days. Folks, that is absolutely a seller’s market, and a hot one!
We are experiencing similar effects in the Fredericksburg real estate market, although, not quite as hot. But, it is pretty rare these days to find a home under $150,000 that doesn’t have multiple offerswithin a few days anyway. Certainly, that segment of the Fredericksburg real estate market is a seller’s market. This scenario is really playing out on homes up to $200,000.
Breaking over the $200,000 mark to say $250,000 is pretty much in a balanced market. The homes are not staying on the market for too long, relatively speaking, and are selling pretty well. From the $250,000 mark and upward, we still find ourselves in a buyer’s market, especially above $300,000. Some of those homes are still selling, but a little slower than what would be considered normal.
So, what sellers should take away from this conversation, is that if you are going to sell, and especially if your home’s value is under $250,000, do it now. The buyers are out there. Trust me they are out there, because most good real estate agents I know are as busy as they have been in a long time.
For buyers, here is the train of thought you need. If you are looking to purchase a home under say $200,000, you need to act very quickly indeed. If you see a home that fits your wants and needs, you likely don’t have time to look at 30 more properties. Once you come back to the one you liked, it will either be sold, or you will be in a tough bidding war. But, with all of that said, the prices are great, interest rates are great.
So, is the market balancing out? Again, we don’t have a crystal ball, but I don’t know of any sign stronger than many, many buyers competing over properties, to tell me, I think it is. If that is true,, then we will begin to see a small,, steady rise in prices coming fairly soon. In fact, in places in our region that rise has begun.
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For several years now my real estate team has been a pioneer of sorts in the real estate industry. I say that because unlike a lot of Realtors, I have learned that the traditional real estate agent and the auctioneer do not have to be competitors with each other. Actually, we have done just the opposite, and have partnered with Nicholls Auction Marketing Group to better serve both of our clients… in what we term “Blended Marketing.”
Some people hear the word auction and they are ready to move on to another topic. So, why should my readers continue to read this article? Well ask yourself if you, or someone you know would answer yes to any of the following questions:
- Do you need/want to sell your home very quickly, in around 30 days or less?
- Do you want to avoid the contingencies that sometimes hamper or kill a traditional home sale?
- Do you have a unique property that needs the maximum marketing impact?
- Are you trying or considering trying to short sale your home?
- Do you want to sell your home without paying commission?
A blended marketing approach to selling real estate may be the best answer for you. Consider this, most properties that are sold with the blended marketing approach sell in 30 days or less, and often are a higher price than it would via a traditional marketing approach. The icing on the cake is that when the home is sold, it is done contingency free… meaning no financing contingency, no home inspection contingency, no well and septic contingency, no termite inspection contingency. That means a safe, solid sale for you the seller.
Unique properties are another matter. The blended marketing approach makes a huge impact on the marketplace, ensuring that virtually every buyer out there will notice your property. This equates to a higher number of truly interested buyers, and ultimately the sale of your home or property.
A couple of recent examples, all within the last 30 days…
- 3BR/2B Home in Spotsylvania County – Traditional sale approach estimated up to 90 days to sell, at a price of around $160,000 to $175,000. Blended marketing approach, SOLD in 20 days for $210,000
- Christmas Tree Farm – a very unique property indeed. SOLD in 37 days for $1,017,500
- 2BR/2B Home in Southern Stafford County (Fredericksburg Address) – Traditional sale estimate $150,000 to $160,000 in up to 90 days to sell. Blended marketing approach, SOLD in 36 days for $196,900.
What about short sales? Can I use this approach for a short sale? That is a question we often hear when discussing the blended marketing approach. People want to know if this approach can help them in a distressed property sale. The answer is yes, in many, many cases the blended marketing approach can work with a short sale. Especially when we add our short sale expertise and expedited short sale negotiations to the picture.
The home will likely not be sold in 30 days in a short sale scenario. But in many cases the home will be sold in a small fraction of the time it would take to do a traditional short sale. Calling upon the vast experience and people resources of The Edmisten Team, Nicholls Auction Marketing Group and RE/MAX Bravo, we can often have REAL negotiations underway with the bank within 7 to 15 days. With a traditional short sale it often takes 1 to 3 months just to get to this stage.
Is a blended marketing approach right for every property in the Fredericksburg real estate market, or the surrounding area? No, but for many it is just what the doctor ordered.
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There is so much misguided hype and misinformation regarding short sales in the media, on the Internet, and even by people in the real estate industry. But the real story is that short sales are a DRIVING force in the Fredericksburg real estate market today… and for the foreseeable future.
One of the reasons they are a driving force is because it is often (NOW) a viable option for avoiding foreclosure. As I have written before, in most cases, a successfully negotiated short sale leaves little or no lingering debt to be dealt with, whereas a foreclosure possibly leaves the entire loan amount hanging over the home owner’s head… for a long time.
When short sales are not successful, it usually because of a few reasons:
- The home owner waited too long to start the short sale process, and the home was foreclosed
- The agent handling the short sale was inexperienced or inept at handling the short sale
- A strong proven pricing strategy (a strategy, not just a really low price) was not put in place to aid in the success of finding a buyer quickly
- The bank is just very uncooperative
There are other reasons, but many failed short sales fall into one of the above categories.
A couple of things about short sales that are important to remember. First, the bank rarely ever genuninely considers working out a short sale until there is a valid offer on the property. So, a primary key is securing a buyer… and doing it quickly.
Secondly, you have to understand the bank’s position in a short sale. In most short sale scenarios, the bank has not given their “go ahead” on selling the home, and especially not for less than what is owed. It’s like me deciding to sell my wife’s car without her permission. I find a buyer who offers me $3,000. I then go to my wife and say, I have an offer for your car of $3,000. She has a couple of options at that point. She says, no, I am not accepting this offer. Or, she can say, not for that price, but I will take $5,000. She can also say, sure, let’s do it. That is a good analogy of a bank in a short sale. They basically are provided with an offer, and they have to decide, do we take this, do we ask for more, or do we decide to not do a short sale at all.
My team has put a lot of effort into becoming experts at handling short sales… again because they are a DRIVING force in the Fredericksburg real estate market today. We utilize a winning strategy that will in almost every case reduce the timeline of the short sale process SUBSTANTIALLY, and offers a lot better chance of preventing the home to going to foreclosure.
I suggest anyone who is pondering selling their home as a short sale do a couple of things. First, make sure that you interview potential agents and be sure they have an in-depth knowledge of the short sale process. Secondly, have them explain their strategy for securing a buyer quickly… because it is imperative to do so. There is no guarantee for success in a short sale scenario, but you can stack the deck in your favor by making very good choices about the real estate team you put in place to help you.
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Last 30 Days real estate activity – Fredericksburg Real Estate Market – Stafford County Real Estate Section
Activity for the last 30 days:
New Listings Added - 234 (78 of those new listings are already under contract and 2 have sold)
Average List Price – $309,754 Currently Under Contract All Listings - 463 properties
Average Contract Price – $249,085 Average Days on Market - 81 days
Sold Last 30 days – 120 properties
Average Sales Price Last 30 Days – $265,419
Homes for sale - 662 active listings
Absorption rate: At the rate of sale based on the last 30 days, there is 9.3 months worth of inventory in the Stafford County segment of the Fredericksburg Real Estate market.
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This report was just released by MRIS. MRIS is the MLS system that services the Fredericksburg real estate market, as well as Northern Virginia, among many other places. The report is titled “First Quarter 2009 Trends in Housing Report Highlights,” and provides some interesting opinion on what is happening in the Washington area housing market, which includes the Fredericksburg real estate market.
First Quarter 2009 Trends in Housing Report Highlights
The Washington area housing market has moved into the early phase of the correction cycle and is poised to begin recovery:Prices continue to decline, making homes more affordable and encouraging an increase in unit sales volume in the 1st quarter of 2009 as compared to a year earlier – especially in the Outer jurisdictions. And we expect prices to continue to drop into next year – until supply and demand come into better balance.
Days on market are down compared to a year ago, with properties moving the fastest in the Core jurisdictions. If interest rates remain at record lows through 2009, we expect days on market to continue to decline.
The ratio of inventory to sales (months of sales) is down sharply from a year ago, particularly in Prince William County. The ratio stands at 7.7 months metro-wide; a ratio of 6 months is regarded as normal and healthy – a ratio we may see by next year.Source: MRIS
It is widely agreed that an absorption rate of 6 months is a standard, normal and healthy. So, pay close attention to this ratio in our “Last 30 Days” series of posts, updating each segment of the Fredericksburg real estate market.
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Home prices to double by 2015. I recently read that headline in an article contained within a newsletter from Fairway Independent Mortgage, where my friend and long time preferred lender Kim Thagholm is a Mortgage Planner. I read the article with a skeptical mind, and contemplated how this would play out in the Fredericksburg real estate market.
After pondering the article (which is reposted below, with permission,) here are my thoughts. I would not go nearly so far as to say home prices will double by the year 2015. Nor would I say that prices will have tripled by 2018. That is not what my research on past market cycles tells me. BUT, I absolutely agree that there will be significant changes between now and then. Prices will surely be a good bit higher than they are today, and some of the other issues mentioned, like credit availability, etc., will be an issue.
The overlying theme of the article is that it is now a great time to buy. That, is a statement that I wholeheartedly agree with… lock, stock and barrel. I also agree that those who buy now will be happy they did when the prices do increase dramatically. So, read the article below, and ponder for yourself how this will play out in the Fredericksburg real estate market over the next 5 to 8 years.
Share on FacebookHome Prices to Double by 2015
Looking ahead long-term, home buyers and sellers will see a sudden upswing in home prices by year 2015, it was predicted by Dennis Torres, director of real estate operations for Pepperdine University’s School of Business and Management. In fact, the housing cycle will return to a robust market by that time, and the strong possibility of rampant inflation will increase the price of homes, Torres said. In 2015, homes will be worth twice what they are today, and by 2018 a home will be worth three times as much as today, he projects.
Torres suggests that now is a strategic time to buy a home. He predicts that durable goods, real estate, cars, machinery and other essentials will increase in value considerably more than the cost of living over the next several years, while salaries will fail to rise. That will make it incredibly difficult for a person to buy a home in 2015, he said. His educated rationale should certainly be considered seriously by prospective home buyers. And coupled with today’s lower prices and record low mortgage interest rates, it’s a very good reason to take action now.
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