The Truth About Buying Distressed Real Estate; Are Short Sales and Foreclosures Really a Good Deal?

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There is no doubt about it. Some buyers have landed incredible deals buying real estate that was sold either as a short sale, foreclosure or bank owned property. But was there really a deal?  The truth is that it all depends. It depends on whether or not you found a property in good, saleable condition. It also depends on the location of the property plus its potential value in the long run. Either way, buyers that do opt to pursue a distressed property in their home-buying endeavors will face some challenges.

Timing Is Everything – And Distressed Sale Timing Is Unpredictable

Let’s say you found your dream home – or maybe you found a distressed sale property in a location that you have always desired but could never afford, until now. Though it sounds like a win-win situation with a potentially lower price and the great location – it is important to keep in mind that the process can drag on unpredictably. Unlike conventional sales, distressed sales are dependent on the bank (or banks) involved and entail several more steps than a conventional property purchase.

At the beginning of the post-market crash period when short sales first began appearing more frequently in the market, many buyers were dismayed to find that the process could take as much as a year in some cases. The reason for this is that banks must approve the purchase price that was set by the seller. Since in the case of short sales, the bank is owed more money than what the property is worth, there is a sizable difference that must be reconciled upon sale. So when you make an offer on such a property hoping to get a good deal, the bank has to agree to that price first.

More recently, short sales have become more streamlined and can take a lot less time but still the process can add up to months of waiting – something difficult to manage for buyers that are also selling their home. Further, if the purchase is taking place due to a time-sensitive situation such relocation then the timing can be a deal breaker.

Financing Required for Distressed Sales May Be More Difficult to Obtain

One fact about traditional financing that many buyers may not realize is that lenders require certain viability on the properties they lend against. Of course this is because the property serves as collateral against the loan. But when dealing with short sales or foreclosed properties this can become roadblock since a lot of these properties are without major components of the home. Things like an incomplete kitchen, uninhabitable bathrooms or unusable living space can hinder a bank’s willingness to accept a mortgage.
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With interest rates as low as they are and inventory fast dwindling in many areas – this is the time to buy if you are looking to buy. But the good deals go beyond just distressed properties so it is important to work with a real estate agent that can provide you the sort of guidance necessary to tap into all areas. Time is running out though – so we advise you to contact us today!

Delaware Valley Market Heading In a New Upward Direction!

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For a few years now, like the rest of the nation, we have been experiencing a downturn that hit our marketplace with a slam and then remained at that low level month after month. The subprime crash of 2007 led many areas to doom, plunging the environment into a buyer-controlled imbalanced market – consistently fueled by a challenged economy and dismal jobs market.

But today, we are finally seeing things move in the right direction. As is true with all businesses, the basic principle of supply and demand comes into play particularly with real estate and as we find ourselves in a climate of pent up demand combined with dwindling inventory – the resultant equation is one that pushes prices up.

Montgomery County Inventory Down, Sales Up

Looking at the previous year’s inventory levels the number of homes available on the market today comparably have dipped drastically. A twelve percent decline in the number of open property listings has pared down the choices for buyers out there looking to buy now while the market is still on their side. On the other hand, sales have risen dramatically in our area. With a 32% rise in sales this month as compared to the previous month, buyers are helping to push prices up with the increased demand coupled with fewer available homes.

Unprecedented Opportunity For Buyers

One of the reasons for the accelerated sales recently has been that buyers are sensing a shift in the market. They realize the record-setting low interest rates will begin to climb soon if they have not already reached bottom. Currently, in our area we are still seeing interest rates on a 30-year fixed rate mortgage as low as under 4% and for qualified buyers some ARMs are coming in at below 3%.

Savvier than ever before, buyers today are taking advantage by trading up into bigger and better homes. Homeowners are refinancing to get a lower monthly payment and shave off years from their existing amortization schedule. In fact, there are some government programs designed to shave off some costs of obtaining a refinance for some homeowners.

Sellers Have Increasing Control

For the first time in years, sellers are finding themselves faced with multiple offers. Bidding wars are common for homes that are effectively priced, located in a great area and have been kept up well with plenty of attractive features and desired amenities. As demand continues to rise against consistently lower inventory, the opportunity to yield top dollar on their homes while being able to sell fairly quickly has many sellers on the fence choosing to list now.
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If you would like to explore your options today and find out what you might be able to get for your money today, contact us today. And if you are on the fence about selling your home but are not sure if now is the right time – we can do a comparative analysis on area homes to help figure out what you can get for yours keeping in mind the shifting market. We look forward to hearing from you soon!

What Determines the Value of Your Home?

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Basically, a home's worth is determined by its market value. How is "market value" determined? Most often, it's figured by a comparison ("comp") with homes similar to yours in the surrounding area. So, if the homes in your neighborhood average, say, $250,000, then it's likely that the value of your property will fall in the same range. But market value is also determined by a number of factors including the following: 

External Factors 

There can be several external factors influencing the value of your home. One is "curb appeal", or the first impression your property makes upon prospective buyers. A home that's in excellent condition on the outside will make a great first impression; a home in poor repair instantly loses its appeal to buyers. Other factors can include lot size, popularity of an architectural style of property, water/sewage systems, paved roads, sidewalks, etc. 

Internal Factors  

The condition of a home's interior also has a huge influence on prospective buyers. When you've demonstrated "pride of ownership" and kept up the maintenance (quality paint, trim, molding, etc.), a buyer's interest will immediately perk up for the simple reason that they know your care and concern will result in less cost and maintenance for them. Other internal factors include construction quality, condition of appliances, size and number of rooms, heating/cooling type, energy efficiency, etc. 

Supply and Demand 

"Supply and demand" simply refers to the number of homes for sale versus the number of buyers. When there are more homes than there are buyers, prices tend to be lower. When there are a lot of buyers chasing few homes, then prices tend to rise. In effect, supply and demand affects how quickly your home will sell. Location More than likely, you already know the old saying, "There are three main factors in real estate - location, location, location." While that's not the whole story, desirability is a big factor for home buyers. They may want to live in particular school district known for its education excellence…a great and safe neighborhood with rising property values…etc. 

But I Know My Home Is More Valuable Than a Lot of Comparable Homes in My Neighborhood  

Aren't Allowances Made for This? Definitely! Sometimes, it can be difficult to find homes exactly comparable to your own. So, dollar adjustments are made for the differences between your home and comparable properties. 

Where Do I Find Sales Comparison Information? 

The easiest source to access is your Realtor. After all, it's his or her business to know such information! But, there are also other sources you can tap into in order to get a complete picture of your home's value in comparison to others in your neighborhood. Here's an overview of them:

1. ) The Local Assessor's Office  

It's very likely that your local assessor will be able to provide the sales history of a particular house, neighborhood, or style of architecture. Many assessors also provide lists of recent sales which you can browse and compare to the assessment roll. Today, many municipalities provide local sales and assessment information online making it very easy to access. Check with your local government agency to find out if they provide this service. 

2.) Online Private Companies  

You can search for these companies using the Google search engine and the keywords "comparable home sales" or "comparable sales." Some companies offer free information; others charge a nominal fee. If you wish to get more specific, you can Google "real estate database" and type in the name of your particular state to get additional property information. 

3.) Your Local Newspaper  

It's likely that your local newspaper is a great source of specific real estate information. Look for quarterly sales reports in the real estate or business sections.

The Key to Getting the Price You Want (or Close To It) for Your Home 

The key to getting the best value is finding and matching the right buyer to your home. And that's the job of the Realtor! He or she should work hard to qualify those buyers upfront so the right people are viewing your property! In other words, the Realtor should weed out "lookers" and other unsuitable buyers as a first step in working with you. See how I do that for you by calling me today!