Mistakes you can make with a lowball offer

Yes, yes, I know.  It’s a buyers’ market.  So much inventory, low housing prices, so the buyer gets their pick at the price they want.  But not so fast.  Yes, lots of inventory, lower housing prices.  However, there is still power to negotiating.  And you don’t want to insult the seller with a lowball offer and lose your dream home because of it.  Here are some mistakes that can be made with a lowball offer:

1. Not knowing the market.  And each one is different.  What may be a more acceptable offer in one market won’t be the same in another.  There could be an area where sellers are pricing homes more aggressively; therefore, they’re sticking close to their asking price.  Another neighborhood might be mostly made up of foreclosures and short sales, so the bank wants to get rid of the home ASAP and are willing to accept less.  So you’ll need to do your research with the help of a qualified Realtor (see #2)

2. Not picking the right Realtor.  They have the experience and the background and know the area you’re looking to purchase, so they’re your best asset going into a negotiation.  But you have to make sure they’re solid negotiators, since they are working on your behalf.  They’re not going to tell you not to present a really low offer, but they might say the sellers will reject it offhand so you might want to consider raising it by X amount or offering to waive one of your contingencies.  Trust their advice.  You’re working as a team and you want to make sure your agent also has your best interests at heart.

3. Not knowing what you’re willing to pay.  A lot of people these days in this market are focused on getting the best price.  But you have to be careful.  You have to know what your limit is so you don’t overpay.  And sellers will know what they need to walk away from the closing table or they won’t be able to make the sale.  No matter how wonderful the home is and how perfect your furniture will look in it and that you can see yourself having your morning coffee on the deck overlooking the pond, there comes a point where no deal is worth it at a certain price. Know that before you start negotiating or you’ll let your emotions get the better of you.  

You can also lose your positioning power by being too hard a negotiator at the beginning.  Don’t make your first offer your final offer and then start negotiating.  The seller will know that you aren’t serious and has the ball back in their court.  Make your offer one that you’re willing to negotiate and have your Realtor tell the seller you want to work with them and make the deal happen.

This MSN article has a few more mistakes that can be made and how to avoid them.  My Web site has some other great articles and tips for buyers.  Have a great week!

Home values not going up anytime soon

Unfortunately, the news I have isn’t good.  I mean, we all know the real estate market isn’t going to magically improve overnight.  But for those of you that thought the good news is right around the corner and that home values would start to steadily increase, I’m sorry to do this to you.

According to this USA Today article, “Already, more houses are for sale in America than people want to buy, and the roughly 1.6 million homes in the nation’s shadow inventory promise to drag down home prices for years, experts say. States like California, Florida, Illinois, Georgia, and Ohio have the largest shadow inventories, according to RealtyTrac, a firm that tracks foreclosures and delinquent properties nationwide.

“Sale prices are down across the state with none of the area being able to maintain more than a one month growth in sales prices, ” said Bob Niemi, director of the Ohio Mortgage Bankers Association.”

So this shadow inventory is going to keep home prices down for a while.  As I was flipping through TV channels yesterday morning, I caught wind of CNBC reporting the same news.  Banks had previously been taking extra long to process foreclosures because of problems they had with paperwork and their hope to keep as many homeowners in their homes as possible.  Because of that, it had held up a lot of new foreclosures from going on the market.  But that influx is what USA Today is dubbing “shadow inventory.”  And that’s going to keep prices down.

The market can’t handle all of the foreclosures and short sales on top of the current inventory.  It for sure doesn’t help sellers get the value they need/want out of the homes they’re trying to sell.  And even for buyers trying to score a great deal, it’s not clearing the inventory fast enough.  

So as I’ve stressed in the past, if you don’t need to sell, don’t.  It’s not worth it watching your home sit on the market just to try to buy something.  However, if you are looking to purchase an investment property or two, I cannot recommend a better time to buy!  I can be reached online.

What to do with all these foreclosures

So inventory is high with all these foreclosures and, therefore, property values are down.  So what does the government want to do about it?  According to the Wall Street Journal, they have two interesting options to help drive home values up again.

The first scenario is to sell packages of foreclosed properties in batches of hundreds or thousands to investors who would in turn agree to rent them out.  At the end of June, Fannie Mae, Freddie Mac, and the Federal Housing Administration owned about a combined 250,000 homes.  There’s about 830,000 that are still in the foreclosure process that would eventually land in their laps.  

 The second option they’re looking at is to “let investors enter joint ventures with Fannie or Freddie to invest in a pool of converted rental homes. A national property-management business would handle day-to-day landlord responsibilities. Investors would pay for rehabbing and maintaining properties and would share revenue from monthly rental income and the ultimate sale of the property.”  So they basically figure they can rent out the homes in order to keep them from being listed currently and to earn some money back.

Since there’s a lot less buyers today qualifying for loans or even willing to purchase, it’s investors who are picking up some of the inventory.

Both scenarios are interesting propositions.  I worry about the second one since that basically would make the government the landlord.  And that’s just another controlling factor that they shouldn’t be a part of.  And then on top of all the foreclosed homes they’re so slow to deal with already, how are they going to handle late rent payments or problems in the property?  They mention that a national property manager would deal with it, but that’s a huge influx of properties they will need to take over.  So can they really handle it?  I appreciate what they’re trying to do, but I don’t know if this is the best solution.

I’m definitely interested in hearing more about the first scenario, selling foreclosures in bulk.  By offering a package deal, that would also keep a lot of foreclosures off the market. 

I’d love to hear your thoughts on these scenarios and if you have other suggestions for how the government can or should be involved.  Please leave me a comment or visit me online.

 

In great reversal, Bank of America foreclosed upon

Now this is irony.  I read this article, and I just had to share it.  A homeowner has foreclosed on Bank of America.  Yes, that’s right.  They foreclosed on the bank, not the other way around.

So here’s what happened.  A couple in Naples, Florida bought a home with cash (no mortgage) in 2009.  In 2010, Bank of America began foreclosure proceedings against them.  This was Bank of America’s mistake, of course.  This couple, the Nyerges, hired an attorney to help defend them against this foreclosure, and then Bank of America realized their mistake and dropped it.

Well, it’s great that it’s been dropped, but the Nyerges are out $2,534 in legal fees.  So they’ve requested that Bank of America cover the cost multiple times over the phone and in writing.  They finally get a judge to order that Bank of America pay the fees.  When they still haven’t gotten their check after five months of more calls and letters, they obtained an order of foreclosure against the bank.

Their attorney “then reported to a local branch of the bank with sheriff’s deputies, who he instructed to remove cash from the tellers’ drawers, furniture, computers and other property.  Approximately one hour later, the Naples News reports, the bank manager produced a check for $5,772.88 to satisfy  fees and additional costs.”

 ”I talked to branch managers, I called anyone who would listen to me,” the couple told the Naples News. “And I wrote a certified letter to the president (of the bank). No response, nothing.”

Can you imagine what the bankers thought when they showed up to work that morning?  I think this is great.  The banks are so quick to foreclose on properties, yet when it comes to them paying a fee (a very small fee comparatively) for something they didn’t pay, it ends up that they can’t do it.   So I can only imagine how many foreclosures that are taking place behind the scenes are incorrect because of paperwork errors.  

Reading this article just puts a smile on my face.  I’m glad that it turned out for the best for everybody in this situation, but it’s fun to see the bank get a taste of its own medicine.

What do you think?  I’d love to hear your comments.  Please be sure to visit me online.

 

New program to benefit commuters

With the influx in gas prices, it’s getting more costly to drive your car to work, especially those living in the suburbs commuting to the city and vice versa.  And higher gas prices mean higher-priced tickets for the bus and train, too.  The Chicago Tribune has a new article about a great new program to benefit commuters. I am highlighting some of the main points below.

 There’s a Chicago organization called the Metropolitan Planning Council that is piloting a program called Commute Options.  What they’re hoping to do is recruit 10 to 15 employer this year that would offer their employees incentives to reduce the cost of commuting to work.  Right now a lot of affordable homes are in areas where there doesn’t happen to be a lot of job openings.

According to a council spokesperson, “A lot of communities where people can afford to live in our region are not the places where there’s a thriving job market.  In order to bridge that gap, we’re working with employers to give employees some options.”

So this is important information that can also benefit home sellers.  If you live within 2 minutes to a highway or are a 2-minute walk to the Metra station, you definitely want to highlight that in your home listing.  More and more people find commuting information as important as the number of bedrooms in a home or what type of flooring there is.  

The article also mentions a recent survey of Coldwell Banker agents.  75% said the increase in fuel prices has led their buyers to adjust their thinking on where they want to live.  More and more want to be closer to work or in a location that work is easily accessible and affordable.  

So sellers need to make sure their Realtor knows all the information about public transportation that’s close as well as proximity to highways and major roads.  It’s important to highlight.  

I hope everyone had a nice holiday weekend.  I can be reached via my Web site.

Foreclosures down, backlogs up

Well, I’ve got good news and bad news.  And the bad news can even be interpreted as good news for some.  Good news: foreclosure rates across the country are at a 3-year low, according to MSN Real Estate.  Bad news: Courts are so backlogged by the foreclosure filings that it’s taking a year or more for foreclosures to be processed on some homes.  And that can be good news for those underwater on their mortgages, as they can live in their home for even 2 years in some states without being evicted and without a mortgage payment.

RealtyTrac Senior Vice President Rick Sharga says that “This is really all part of the robo-signing paperwork issue.  Almost none of this is related to a decline in distressed properties. ”  It’s just that Courts can’t keep up with all the paperwork.  And Sharga is unsure whether we’ve reached our peak of foreclosures or more filings will occur once the banks and Courts start catching up.  Even new hirings aren’t helping the banks move the process along any quicker.  And that’s also bad news for buyers interested in foreclosure or bank-owned properties.  The waiting process can still take a while for someone to review all the paperwork.

I just mentioned how some homeowners can live in homes for 2 years prior to being evicted.  In some states, like New York and New Jersey, it’s taking the bank an average of 800 days to finalize a foreclosure once the process has started.  And now the government is going to charge lenders for handling foreclosures improperly.  They’ve also passed regulation requiring 14 mortgage servicers to hire more staff and have a single point of contact for a homeowner dealing with a foreclosure or loan modification.

Nevada leads the country with the highest foreclosure rate.  1 in every 35 homes has received a foreclosure filing.  Arizona and California round out the top 3.  And, unfortunately, Illinois also is included in the top 10, along with Colorado, Idaho, Utah, Georgia, Michigan, and Florida.

And analysts say it can take years for all these foreclosed homes to clear the market brining home values up again.  But it could take even longer because of the backlogs in the courts.  Fannie Mae and Freddie Mac even said they’re going to slowly trickle foreclosures into the market instead of releasing them all at once.  While this is beneficial to home values now, it just means it will take even longer for the housing market to stabilize.

What do you think?  Should banks be allowed to control when foreclosures hit the housing market?  Please leave me a comment or visit me online.

What buyers are looking for this year

We all know there’s a lot of houses on the market.  Inventory is high.  Values are down.  It’s harder to get a loan.  Interest rates are low.  People’s discretionary income is lower.  So what does all this mean in terms of the housing market?  Here’s a list of some items that Bankrate.com has put together of what home buyers are looking for when they buy a home this year.  This will also help sellers be aware of how to stage their home and what buyers are looking for when it comes time to negotiate.

1. A deal.  An amazing deal.  They want to tell everyone they know that they got this amazing house for such a good deal.  In 2007, it would have cost them $500,000, but they just closed on it for $395,000.  So this makes them a lot more critical.  They’re going to take longer than usual to find a house.  They’re not going to feel like they have to settle.  And that’s because they don’t.  Unfortunately for sellers, buyers hold the power when negotiating right now.  So understand that when turning away a low offer.  It might be worth it just to counter to see what happens.

2. Good condition.  I mentioned before that discretionary income is limited.  They don’t want to have to redo carpet and paint and put in new appliances.  They want homes that are more updated and in good condition.  When showing your home, make sure it’s clean and presentable.  It’s like putting your best foot forward at a job interview.  You only get one shot.  Make it a good one.  And reconsider taking your appliances with you when you move.  It’s likely the buyers want them to stay with the home.

3. More green.  It’s a lot more common these days to find buyers looking for energy-efficient appliances, windows, furnaces, and air conditioners.  Again, this helps them save money down the line, aside from being good for the environment.  Buyers want to know that maintaining their home will be easy on the wallet.  So if you are looking to sell and plan to upgrade some items, try to go as green and energy efficient as possible.

4. Smaller homes.  This is not to say that if you are selling a 5,000 square foot home that nobody will be interested.  But consider how you stage your home.  Make use of space.  It’s more common that buyers aren’t interested in a sitting room.  Make it into an office.  Create a craft room with your sixth bedroom.  Buyers want homes that serve a purpose because they don’t feel like they need the extra space if all it is is just space.  “Three to five years ago, if they could get a loan that would get them into a McMansion with stone and tile and brick and more rooms than they needed, they would do it,” says Jeff Wiren, president of the Portland Metropolitan Association of Realtors. “Now they’re saying ‘I don’t know if I want to heat that place and clean it.’ They’re being much more realistic.”

So those are four of the nine items that Bankrate thinks buyers are looking for in 2011.  What do you think?  As a buyer, do you agree?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.