Appraisals are becoming the bane of the Real Estate world. Banks that have customers in the short sale mode are over estimating the value of the property to assure that they get the greatest dollar value for the property. Foreclosures are undervaluing property, then putting an overly attractive price tags on a property which then results in price wars on undeserving properties. Mortgage lenders are undervaluing properties and offering insufficient financing for properties.
The buyer and sellers are the ones who lose in this writhing market. Most realtors are have a difficult time advising customers on how to bid for a property. If the customer bids too much, they may get the property, but can't get a loan. Conversely, if a customer bids too low, the offer is rejected by the foreclosure bank which typically doesn't counter offer, just accepts the highest and best.
Currently no convenient answer exists as to what the buyer or seller should do. However, the first step in either buying or selling your property is to ask your realtor for comparables of the property. For a seller, it may be worth the $200-400 to have an appraisal done that can be included in the MLX listing. (That is if it supports your asking price.) For buyers, have your realtor explain their purchasing strategy on how to best get the property you want. (Negotiating has a different strategy than bidding.)
Friday, June 11, 2010
Wednesday, June 2, 2010
Short Sales, Foreclosures and Regular Sales
As a buyer, what do you need to know about the differences between regular sales, foreclosures and short sales? Each has its advantages and challenges. This posting will discuss just a few of the differences between the properties and why one may be better choice for you than another.
Offers placed with regular sales of non-distressed properties tend to move the fastest. An owner is presented with the offer and makes a yes/no decision immediately. This sale allows for a bit of negotiating on terms or price. However, sometimes sellers have an unrealistic expectation of the value of their home and this factor can sometimes create a impasse in the negotiating. If a buyer needs to get a purchase a price within a restricted time frame with controllable parameters, the regular sale may be a better choice when looking at properties.
When sale price is the over-riding concern, a foreclosure may be the best route. However, foreclosures are set up for bidding, not negotiating. So buyer needs to put forth his/her best offer up front. For the early part of 2010, most properties under $75K have been in a price war, verse and low bid type scenerio. For a cost conscious buyer a foreclosure may be a good purchase. However, there is typically a lot of handyman work required. The time and build out costs of bringing that property up to standard may in the long run cost more than if you purchase a regular sale. Many foreclosures are not allowing financing or even inspection periods. All these elements factor into the buyers decision.
Short sales are the nemesis of realtors. Closing can take up to a year--if it closes at all. Parameters are dictated by the bank and buyers are at the mercy of everyone else. But with the price wars happening in the foreclosure market, the short sale may be the best deal. Often short sales have the owners living in the property, so the property may be difficult to show and deter less patient buyers from considering it. Be forewarned that short sales are a very long roller coaster ride. Banks are trying to expedite the short sale process, but there are still lots of delays and frustrations. The property could devalue over the life of the short sale closing which may make a buyer's offer a bit high at the end. However if the price increases in value, the bank will try to renegotiate the property before closing (always higher, never lower!)
Ask your realtor to clarify the differences to you and which would be best for you to consider in your unique situation.
Offers placed with regular sales of non-distressed properties tend to move the fastest. An owner is presented with the offer and makes a yes/no decision immediately. This sale allows for a bit of negotiating on terms or price. However, sometimes sellers have an unrealistic expectation of the value of their home and this factor can sometimes create a impasse in the negotiating. If a buyer needs to get a purchase a price within a restricted time frame with controllable parameters, the regular sale may be a better choice when looking at properties.
When sale price is the over-riding concern, a foreclosure may be the best route. However, foreclosures are set up for bidding, not negotiating. So buyer needs to put forth his/her best offer up front. For the early part of 2010, most properties under $75K have been in a price war, verse and low bid type scenerio. For a cost conscious buyer a foreclosure may be a good purchase. However, there is typically a lot of handyman work required. The time and build out costs of bringing that property up to standard may in the long run cost more than if you purchase a regular sale. Many foreclosures are not allowing financing or even inspection periods. All these elements factor into the buyers decision.
Short sales are the nemesis of realtors. Closing can take up to a year--if it closes at all. Parameters are dictated by the bank and buyers are at the mercy of everyone else. But with the price wars happening in the foreclosure market, the short sale may be the best deal. Often short sales have the owners living in the property, so the property may be difficult to show and deter less patient buyers from considering it. Be forewarned that short sales are a very long roller coaster ride. Banks are trying to expedite the short sale process, but there are still lots of delays and frustrations. The property could devalue over the life of the short sale closing which may make a buyer's offer a bit high at the end. However if the price increases in value, the bank will try to renegotiate the property before closing (always higher, never lower!)
Ask your realtor to clarify the differences to you and which would be best for you to consider in your unique situation.
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