Entries Tagged 'Real Estate Blog' ↓

Westcoe Realtors, Riverside California…Ok, a show of hands please.  How many normal, standard homeowners (homeowners with equity) out there are under the impression that the real estate market stinks, there are no buyers for your regular, good looking home, and that your best bet is to just sit tight and wait for all the bank repos and short sales to get out of the way? 

Well, we don’t blame you for thinking that way because the media, in all it’s varied forms, has done a terrific job at making everyone think that the only path to a home sale today is to give your home away because of all the repos and short sales that surround you.  The only problem with this line of thinking is that it is entirely wrong.  Not only is there a place for a standard seller in today’s market, one could make the case that these homes are selling at a premium.  Standard sellers unite…we desperately need you.

Are you aware that standard sales account for 36% of all closings in the Riverside area as of today?  That there have been over 1200 actual homes close this year that were standard sales?  That there is a shortage of good quality homes for sale, and that our market has buyers who want nice homes?  That not all buyers are investors looking for beat-up properties to spend tens of thousands of dollars fixing up?

From a Realtor point of view, understand that we have many buyers who do not have the time nor inclination to re-hab the home they wish to purchase.  These buyers are normal people with normal lives…and while a few fix-ups are OK, they do not want to rebuild the home as a family project.  On the contrary, they want to move into their home and be comfortable using it from day one.  They have jobs, soccer, teenagers, and life to live, and do not want to spend the next 2 years working like crazy on the weekends to simply make the home “nice.”

And what do these buyers have to choose from when they go house hunting?

Mostly garbage.  If 36% of the closings are standard sales, then the remaining 64% are either bank repos or short sales…and both of those choices stink for our above described buyer.

Think about it.  Most bank repos are in some form of disrepair, due to either the former owner taking their anger out on the home, or from months of vacancy and neglect.  Either way, most bank repos are somewhere high on the disaster scale, and most of the banks refuse to do any work on the home…they will simply sell the home “as-is” and let the new buyer put in the time and money to repair the home.

And short sales?  They have issues as well.  Sure, they may be in better shape since in most cases, the homeowner is still occupying the home, but even here, there are problems.  One, the owner may have stopped fixing or caring for the home since every dollar invested in the home is a dollar they are not going to get back.  So yes, these homes are better than repos, but sometimes, not much.  Secondly, every buyer knows that entering into an escrow on a short sale has the definite possibility of a 30-90 day process just to find out if the bank will accept your offer….30-90 days of frustration and wasted time if the bank, as they often do, reject your offer.  After a while, our buyer described above simply takes a pass and skips short sales altogether as a possible purchase.

That leaves standard sellers as the cream of the crop.  With you, real estate life gets good again.  First, the home is usually in far better shape than either repos or short sales.  Also, the seller is a real, live human being…capable of actual conversation with a normal time frame for decisions.  You have no idea how refreshing it is to not have to rely totally on email for answers, or to be put on endless hold only to have the call dropped after 20 minutes of waiting.

You Mr. & Mrs. Standard Seller are the rare breed of normalcy on a real estate market devoid of same.  Your house looks nice, you are there to answer our questions, and most importantly for you, there are buyers out there who really want what you are selling.  In fact, they will pay a premium to work with you.  What a novel concept!

So…the next time the media tells you there is no place in our bizzaro world of real estate for a normal seller, simply smile and call a Realtor…because once the real estate professional stops hyperventilating at having a real seller on the phone, things only get better from there.

Standard sellers…your real estate market awaits.

As always, thanks for reading and let us know if there is any issue you would like to see addressed in our blog.

Westcoe Realtors, Riverside California…We had a reader write in this week with the above question…and it’s a good one, since we can now save our reader (and possibly someone else) some money.  Here’s the answer.

In a nutshell….NO, do not get an appraisal first.  Do not pass GO, do not sit and chat with Forrest about chocolates, and for goodness sake, don’t waste your money.  Here’s why.

First.  If you are in the market to sell your home, your Realtor should be able to provide you with all the information you will need to establish a fair market value for your home…and your Realtor does this for free as part of his/her listing presentation.  Understand that the Realtor and the appraiser use the same information to arrive at the home value…which is neighborhood activity for similar properties that are both listed for sale, in escrow but not yet closed, and closed within the past 3-6 months.  If your Realtor is good at what they do, their presentation will give you all the data you will need to make an informed decision, and you will be comfortable with the price range they suggest.  If your potential Realtor cannot do this and make you feel comfortable, smile…usher them out the door…and find someone who is better than the person you just refused to hire.

Second.  If you refuse to believe the above, then by all means go ahead and get the appraisal…and you will have just wasted between $400-$500 for an opinion of value that cannot be used by your buyer whenever you get one.  Appraisals are expensive these days.  $400-$500 is a lot of money, especially when whatever lender your ultimate buyer will use will have absolutely no interest in your appraisal.  Whatever buyer purchases your home will have a lender that will only use a new appraisal ordered by that lender.  The new lender will not use the seller’s appraisal.  You-know-what will freeze over before the new lender will use an appraisal that was not ordered by them…and even better for the seller, the buyer will have to pay for it.  So…do yourself a favor and save the money.  Don’t forget…the appraiser will use the same data your Realtor used to arrive at a price…so be realistic with your Realtor and save yourself some money.

Lastly, as an FYI note here, sellers should understand that in almost all cases, if you were to get an FHA appraisal, said appraisal stays with the property for 4-6 months, regardless if you agree with the price or not.  Understand that the value of your home is not like going to the store for milk, where the price is the price, and there is no subjectivity in the value of the milk.

Appraisals are all about subjectivity.  I mean really…what exactly is the difference between an appraiser valuing a home at $325,000 or $325,500?  In the case of a sale, where the actual sales price was $325,500, and the appraiser has a choice, more often than not, the value will be the full $325,500 of the sales price.   However, in the case of no buyer, where a sale is not hinging on the outcome, then it is also entirely possible the value will be made at $325,000…or $324,000.  Our point here is that there is always a certain amount of subjectivity…and you want that working for you as a seller, not against you.  And in the case of an FHA appraisal ordered without a buyer, the seller should be aware that this subjectivity may work against you, and you will be stuck with it for around 6 months.

So…to our avid (and now $400-500 richer) reader, do yourself a favor and skip the cost of the appraisal and simply get a good, professional Realtor to come value your home.  Saving money is always a good thing…and we just might have a good idea where you can get the good Realtor too!

Take care, and as always, thanks for reading.

Westcoe Realtors, Riverside California…OK, call us crazy (and maybe even a little naive), but all this time we thought the Federal Government was actually trying to help the housing market, not stab a knife into it.  But hey, what do we know?

In a move that has not received the media attention that it deserves, effective October 1, 2011 (as in a few days from now), the Federal Government, through it’s control of Fannie Mae and FHA, are reducing the maximum loan amounts for both FHA loans and conventional loans in all areas of the country.  This means that for our Riverside area, the maximum loan a buyer can get for a home will be reduced from $500,000 to $350,000…and for conventional loans, the “conforming” limit for a loan (we will explain conforming below) will drop from $500,000 to $417,000.

This means that a lot of people who could have purchase a home using the favorable terms of these loans may now be priced out of the market by Federal edicts that make no sense to a struggling housing market.

FHA Loans

Let’s start with the FHA loan reductions.  Right now, FHA funds a huge amount of the loans generated in our Riverside area.  We have no reliable stats on this, but our best guess as a busy real estate office is that in our Riverside area, FHA probably accounts for 40% or more of the current financing.

Why?  Because the down payment requirements are only 3.5% of the purchase price, and the rates are some of the lowest possible.  As you can imagine, this appeals to many buyers.  There are some restrictions with what type of properties one can purchase, and the appraisal requirements can sometimes be a tad more stringent, but for the most part, this is a very popular loan product used by many of today’s buyers.

Now, with these maximum proposed loan changes, any buyer who was intending on getting a loan over $350,000 will have to look elsewhere…period.  No exceptions, no sob stories.  Get your loan under the $350,000 mark or go conventional with your financing.

Conventional Loans

In many ways, this is even worse, because it totally affects the higher end real estate market…a segment that is already reeling from the lack of buyers.  In this case, once the loan limit is reduced to $417,000, any buyer who wants to have a higher loan amount is going to “pay through the nose” for the privilege of getting a loan over this amount. 

Why?  Because any new loan over this new threshold will now be classified as “non-conforming” or “jumbo”…and Fannie Mae will not purchase from your local bank any non-conforming or jumbo loan.  That means that in most cases, the bank making the loan will have to hold on to the loan instead of selling it, and when a bank is forced to use it’s own money to make a loan, they make sure they will be compensated in the form of higher rates etc.

Remember, as we have stated here many times, when local banks and mortgage companies make a buyer a loan, they eventually sell that loan to organizations like Fannie Mae and Freddie Mac, thusly getting their money back to loan again within the community.  This keeps the banks in the lending business, and money flowing into the local housing markets.

Now, with the drop in maximum loan limits that Fannie will purchase from the banks, the only way a bank will make a loan above the new limit of $417,000 will be if they really get paid well on it.

As an example, if a loan was funding today for $425,000 (a limit that could be sold by the bank to Fannie Mae under the current loan limits), the interest rate on that loan would be about 4 1/8 percent…making the monthly payment around $2,060 per month.

Next week, under the new loan limits, that same loan would have an interest rate of approximately 5 1/8 percent…making the payment skyrocket over $250 per month to a new payment of $2,315.  Same loan…different week.

But wait, there is more (as they say on late night TV)…not only will the monthly payment rise, but the cost of obtaining the loan will likely increase, as well as the qualifying standards.  The guidelines for making a “non-conforming/jumbo” loan are far greater than a “conforming” loan…and usually come with larger down payment requirements.

The net result is that getting a loan over the $417,000 amount will cost more, require a larger down payment, and be harder to get.

Wow..sounds like a real elixir to the real estate market to us.

Consequences?

While not wanting to get too carried away until we actually see the results, on first glance, properties requiring a loan over the new FHA $350,000 will certainly feel the effects, although conventional “conforming” loans will still be available at the same low monthly interest rates…but they will require a higher down payment on the part of the borrower.  This higher down payment (generally 10-20% vs. the 3.5% required by FHA) will keep some/many buyers from purchasing a home over the $350,000 level.

However, the conventional loan drop from $500,000 to $417,000 will make it even harder for anyone to purchase a home requiring a loan over the $417,000.  This “upper” end housing market has already been hit pretty hard, and this new loan limitation will not help.  Our guess is that unless a buyer feels they are getting a “deal” strong enough to warrant the extra hassle and monthly interest expense of a jumbo loan, they will pass…and you can interpret the word “deal” to mean a lower price!

In the end, it is our fervent hope that congress listens to all the real estate professionals who feel as we have written here, and keeps the current loan limits without the drop…but who knows.  Certainly we are all aware that the usual congressional pattern is to wait until the last minute to do anything, so perhaps we will have good news on Friday. 

Time will tell…but until then, we are back to the heading for today’s blog…What in the world could they be thinking?

Westcoe Realtors, Riverside California…In last week’s blog, we trotted out a few stats from our local MLS  data regarding listing inventory…specifically was our available inventory rising, declining, or staying level.  Our analysis suggested that inventory was basically keeping pace with buyer demand and that our market has been relatively level for the past year or so.

However, one of our more curious readers emailed us and asked if we could provide a breakdown of what type of inventory is in our local Riverside market.  Specifically, could we provide any data on the relationship between bank repos, short sales, and regular standard sales in our available listing inventory.

And the answer is Yes…if you just click your heels together three times and say…”There is no place like Riverside, there is no place like Riverside.”  OK, so maybe we are still looking for our good witch, but we can at least give you what you wanted.

As of today, September 19, 2001, when you analyze the current listings for sale in the Riverside area, they break down as follows:  Standard sales…38%, Bank repos…17%, and Short Sales…44%.  The remaining 1% is lost is some computer,  floating in cyberspace.

At first glance, it would appear that banks have a limited supply of repossessions, and that the amount of short sales is rising…but this listing data only provides half of the picture.  Let us look at the other half before we draw any conclusions…the percentages as they relate to closed escrows.

For the month of August (the last full month of MLS closings) the stats tell a different story.  Standard sales represented 38% of the closings, but bank repossessions jumped to 35% of the closings, and short sales dropped to 27%.  Why the big changes for the repos and the short sales?

Easy.  Bank repo’s will move through the market at a much faster pace than short sales, because in the case of a repo, the bank has already decided to sell the home, and has given the real estate agent a price they will accept for the property.  Therefore, the buyer of a bank repo knows for sure the property is available for sale, and exactly what price the lender will accept.

In a short sale, the opposite is true…the property is not “officially” for sale since the bank has not yet even decided if they will accept an offer on the home (remember, they are losing money on a short sale), and the list price on the home is just a guess by the listing agent on what the bank may accept if they even decide to sell the home.  Therefore, not only does this process take significantly longer to get any answers from the bank (think months instead of days), but there is the real possibility that after months of promises and negotiations with the bank, they will simply say “no”.

Now lets go back to our listing data.  When we see there are so many short sales listed for sale, it may be because many buyers are shying away from them unless they feel they have a real shot at getting the home.  Therefore, they remain on the market “available” for sale instead of selling and getting into escrow.  That would also explain why the closings for bank repos jump by over 100% from the listing stats.  Buyers want certainty, which is exactly what a repo offers and a short sale does not.

The bottom line here is that like your mother told you…One in the hand is worth two in the bush…and short sales are definitely two (maybe three) in the bush.  Standard sales remain basically the same (37% vs. 38%) for the same reason…a buyer knows exactly what is happening when they make their offer, and can get an answer within a reasonable time frame.  No waiting months like for a short sale.

Hope this info is helpful as you dazzle your friends with your insight into the twilight zone that is real estate these days.

 Thanks for reading…and let us know if there is any real estate issue you would like to see addressed in our blog.

Westcoe Realtors, Riverside California…As Real Estate professionals, we get asked a lot of generalized questions about our local market.  We call them “cocktail conversations” because they are usually the type of questions that come about when people are simply socializing in a relaxed situation.  You know…just general conversation as it relates to the real estate business.

So…this week, we have had a few of our clients ask us about the inventory levels of properties for sale in our Riverside area…and specifically, is the inventory rising, falling, or staying fairly level.  This curiosity comes up every now and then usually in response to some article in some media that touts something about “shadow inventory”, or when the government introduces yet another idea to “help” our marketplace. 

In any event, here is the latest on current housing inventory in our area…with a little recent history to put it all in perspective.

In Riverside, the inventory of available properties has been holding steady at around 1300-1400 homes for sale at any given time.  Sometimes those numbers are up a bit, and sometimes down, but they have remained relatively steady for about the last year (As I say this, properties for sale on August 1 was 1604, and on September 1 was 1186, but that big a spread is way too large…so we are betting on some type of MLS computer error.  We’ll know more on October 1). 

To put this in some type of content, in 2009, our range was from a high of 2385 in January, to a low of 983 in October…much more volatile than today.  Not so coincidentally, that is about the time that banks stopped foreclosing on properties at the pace they had been since 2008.  The reasons they reduced their foreclosures have been well documented here before…changing laws, homeowners rights, political pressure to slow the rate of foreclosures, failure of the banks to follow the foreclosure rules, etc.  The list goes on, but the net result is the same…fewer homes for sale in the marketplace. 

In 2010, we saw the year start off with 1034 properties for sale, and end with 1383, which was near the high for the year, as more stability began to return to the inventory side of the housing equation.

So what does all this mean?

Well, in general it means that the Riverside real estate market is fairly balanced, and has been for some time.  Demand for houses seems to be keeping relative pace with the supply of houses.  Now understand, the bulk of the sales activity is still taking place below the $350,000 level (about 85% of all sales occur below this price range), but that is to be expected, as to purchase at the higher levels generally requires a larger down payment…a down payment that in the past, came from the sale of a lower priced home.  However, since many of today’s sellers are either sellers with no equity (short sales) or bank repossessions, then it stands to reason that there is no equity being brought back into the resale market to purchase the higher priced home.  This will change in time, but for now, the lower end prices still rule the roost.

Other than that, there is not too much to read into these numbers…but at your next cocktail gathering, you can now amaze and dazzle your friends with some statistical trivia about the Riverside real estate market…and what could be more fun than that?

Take care, and thanks for reading our blog.

Westcoe Realtors, Riverside California…We know…we know.  The real estate news in almost every direction this week has been chock-full of little negative tid-bits.  Not enough to have you head underground, but most everyone has had to keep their “media umbrella” handy to shelter them from the written and verbal storm.

So…how about a little ray of sunshine?

Let’s chat about overbidding.  As you know from past readings of our scintillating blog here, overbidding is when the ultimate sales price for a home is higher than the list price.  It is usually the result of more than one party wanting the home, and so the ultimate buyer of this “hot” property is the highest bidder…and this highest bid is usually above the list price.  The buyer feels that even at a price above the list price, the value is still solid. 

Sometimes the final price is only a few hundred dollars over the list price, and sometimes it is tens of thousands over…it just depends on both the original list price, and the value of the home as it compares to other similar properties in the area.  The bottom line here is that overbidding is a simple measuring tool to gauge the activity in a particular area.  After all, if there were not more buyers than sellers, then there would be no overbidding.  Buyers aren’t in the habit of bidding against themselves!

Anyway, we have reported here in the past that in 2009, the total percentage of properties that closed escrow at a price equal to or greater than the list price was 64%…and in 2010 it was 66%.  So how is 2011 stacking up against the two prior years?

Well…it is down a little, but it’s still a very active bidding market out there in the Riverside area.

Through July of 2011, the total percentage of properties that have closed escrow at a price equal to or greater than the list price is 60%.  That means that 6 of every 10 buyers sees the value of real estate in our area and is willing to offer a price above the list price.  In breaking that 60% down just a bit, at prices below the $350,000 mark, the percentage is 61%…and at prices above the $350,000 level, the overbidding drops to 44%, which makes sense given there are more buyers for the lower price ranges than the upper.

What does all this mean?

A couple of things. 

First, don’t believe all that you see and hear on television and the Internet.  Hard to believe that they are interested in ratings and may have a tendency to slant the “news” to get your attention.  Secondly, there are still a lot of buyers who understand what we have been shouting for quite some time now…that today’s housing prices coupled with unbelievably low interest rates make the purchase of a home a very smart investment in your future.

We know it’s tough to ignore the volume of the media…but 6 out of every 10 buyers in Riverside is doing just that…hopefully you can be one of them in the near future.

Take care, and have a wonderful week…and thanks, as always, for reading our blog.

Westcoe Realtors, Riverside California…Imagine if you will (OK, I stole that line from Rod Serling…Google the Twilight Zone for you young ones)…but think back to 2005.  You are in a social gathering…church group, service group, drinking buddies. etc…and one of the group offers you the following option:  If you could go back in time to around 1995, knowing what you now know in 2005, would you go back and buy a house in 1995 and hold it until “today” in 2005?

Well…even Chuckle Head the Clown could figure that one out.  Of course you would.  Who wouldn’t purchase a home at the ridiculously low prices of 1995 only to own (and hopefully sell) said home in the much, much higher market of 2005?  Granted, in 1995 we were still in a housing recession, many people were scared to purchase a home because we were inundated with foreclosures, and the “experts” of that time were touting their predictions of the demise of the housing market, never again to reach the heady heights of 190.

Sound familiar?

Warren Buffet has said many times that it takes great courage to swim against the tide of public financial opinion.  It is hard to turn left when many of the “experts” are absolutely certain the correct turn is to the right…and it is never easy to do the opposite of what the masses are doing.  And yet, there is also the famous saying (paraphrased here)…”doing what everyone else is doing and expecting a different result is the real definition of insanity.”

We’re not saying that anyone here is insane, but a look back a modern housing market history makes clear what will happen in the future…this housing market in Southern California will come back, and when it does, we will all be in  our social circles at some point in the future wishing we had purchased every home we could afford at the prices of 2011.

That this will happen is a virtual certainty.  The only uncertainty is when it will happen.

Look around you at the housing market of today.  The prices have dropped to (according to one study) to the levels of approximately the mid 90’s, and interest rates are lower than they were at that time.  Today, you can borrow money at a fixed rate of 4.25% for 30 years…which makes your principal and interest payment on a $250,000 loan only $1,230 per month.  In many cases, that  is cheaper than the rent you pay to someone else who is taking advantage of what today’s housing market has to offer.

As to timing, be very clear that no one rings a bell at the bottom of the housing market.  In the real estate business, the only way you know you are at the bottom is when it is in your rear view mirror as prices begin to rise…and rise they will.  History shows us that.

History also shows us that when housing prices begin to rise, they will do so in a hurry.  It will do so because the pent-up demand for housing is huge at the moment and there will be even more people who have rented for many years that now want a part of the American dream.  It will do so because the national media will ultimately tell everyone it is safe to come out and play the housing game again.  This will lead to rising interest rates due to the new demand for housing money…which will lead to rising housing prices for the same reason, and this spiral will continue because everyone will want to get in on the housing market purchase boom.

Think we are wrong here?  Just look at history.  Investors are running rampant right now for this reason, and this is exactly what happened the last two hosing market declines…and this one is no different.  Yes, it looks different now, but it will not look differently in the future.  The bottom line is that at some point in the relatively near future, you will wish you had bought a house (or two) at today’s prices.

Or think of it this way…you really have taken the real estate time machine back to 1995.  Are you going to take advantage of it, or simply hang around until you return to the future, listening to your buddies talk about how they did what you did not?  The choice is yours.

Welcome to 1995. 

Westcoe Realtors, Riverside California…We have touted the need for home inspections many times in the past…and almost everyone understands that a thorough home inspection can either give a buyer some serious peace of mind, or save them from a very nasty (and costly) unexpected repair bill after the close of escrow.

However, let us explain why a home inspection can also save you from a home protection insurance plan denial.

Home inspections are not to be confused with home protection insurance plans (also called home warrantys).  A home inspection is just that…an inspection by a professional to examine all that comes with your home…electrical, roof, appliances, etc.  Home inspections are done prior to the close of escrow so if their are any problems, they can either be fixed, or the buyer can bail on the transaction of the problems cannot be negotiated away. 

A home protection insurance plan is what takes place after the close of escrow.  Here, there is an insurance plan placed on the property (usually the 1st year cost is paid by the seller…renewals are paid, if desired, by the buyer), and if there is a system failure, or an appliance failure, or an air conditioner/heater failure etc., a call is placed to the insurance company.  The insurance company will send their repair person to the property, and the insurance company will then either fix the problem, or in the case of many appliances, install a new one if the problem cannot be fixed.  There is a small service charge paid by the buyer (who is now actually the homeowner), and all is well.

However, like all “simple” things, sometimes there are glitches.

While home protection insurance policies are a good thing, they do not always work the way we expect them too (what a shock, eh?).  All of the home protection policies carry the verbiage (in one form or another) that they will not be responsible for any “pre-existing” conditions in the property.  This actually makes sense, in that an unscrupulous seller could have a variety of busted appliances, place a policy on the property, and then when escrow closes, have the buyer call to make a claim, and get all new appliances for those that were not working in the first place.  This is supposed to be an insurance plan for items that work, not a repair plan for the seller’s already broken items.

However, some home protection policies use the “pre-existing condition” wording to claim they do not have to repair/replace an item when in reality they should.  A classic example is an air conditioner condenser that breaks, and when the repair person comes to deal with it, denies the repair because of the dirt and debris that was in the condenser…dirt and debris that took years to get there, so it becomes pre-existing, which allows the insurance company to deny the claim.  Maybe they are right, but who checks the condenser of their air conditioning unit…and besides, it worked on the walk-thru, so what’s the problem? However, it is the new owners word that the unit worked, so many times, the claim is denied.

Now…how can you keep this from happening (and trust us, all the home protection companies fall into this boat at some point in time)?

Easy…get a home inspection when you purchase the home.  Why?  Because when your home warranty company decides to pull that “pre-existing” garbage, you can simply pull out your home inspection company report, and show the insurance company that the item in question worked at the time of the inspection, and therefore cannot fall under the pre-existing category.  The bottom line is that the item worked before, so the insurance company needs to fix/repair it now.  Cool, eh?

This works almost 100% of the time a home warranty company tries to play the “pre-existing” card.  However, if you didn’t get a home inspection at the time of your purchase (shame on you), or your inspection was done by your contractor brother-in-law with no written report issued, then you obviously cannot go down this road.

The moral to this story?  Get your home inspection by one of the many professional reputable home inspection companies out there…it can help you in more ways than you know.  As you mother always told you…an ounce of prevention is worth a pound of cure!

Take care, and as always, thanks for reading.

Westcoe Realtors, Riverside California…Five years ago, the word “foreclosure” was on the dust heap pile of daily lingo, surrounded by the likes of “8 track and cassette tapes”, “black & white TV’s”, “Walkmans” etc.  The problem is that while the latter will not be making a comeback any time soon,  the word “foreclosure” has catapulted back into vogue and looks like it’s here to stay a while.

Any newly licensed Realtor can tell you that the law says that a foreclosure takes 111 days to complete.  A delinquent homeowner has 90 days to make up any back payments, and then an additional 21 days to pay the loan off completely if they can’t come up with the money owed (anyone ever wondered how a homeowner who can’t find 90 days worth of payments is supposed to now pay off the entire loan balance?).  However, I digress.  The salient point here is that a foreclosure, by law, takes 111 days.

Anyone want to know what is happening with foreclosure times in the real world, and not the one in the legal books?

In the State of California, as of June of this year, the average time for a foreclosure is (drumroll please)…317 days!  That’s right…just a little short of 1 year…and that is the average, which is, as we all know, is made up of some that take less time, and some that take more.  In Nevada, it is about the same…319 days. 

How about the longest?  That would be our good friends in the great State of New York.  The state that brings you massive deli sandwiches and the Empire State building also goes big with foreclosures, because in that state, the average time is…(bigger drumroll please)…960 days.  Yes, that is not a typo…it takes over 2.5 years, on average, to foreclose on a home in the land of the Big Apple.  Amazing, isn’t it?

And the shortest?  That would be the cowboy State of Texas.  I have never spent much time in Texas, but rumor has it that our Southern neighbors don’t mess around, because the average time to foreclose on a property in Texas is 92 days.  That’s right…if you can’t (or won’t) make your house payment…no problem…but the bank is not going to mess around with your plight.   You are supposed to pay, and if you don’t, then start packing.

 There is a moral to this story…and here it is.  Guess which state has had the lowest drop in residential housing prices since all this housing “mess” started in 2007?

I know, it’s too easy…but God Bless the people who shoot straight in Texas…because they have the lowest percentage of housing price loss in the country.  Some may call this a coincidence…others a cause and effect.  Hard to say.  We’ll let you decide…but come on…2.5 years to get someone out of a home that they are not paying on?  Welcome to the Bizarro World of real estate, where truth is far stranger than fiction.

So dazzle your friends at your next gathering with this new found information…and watch the ones who are making their house payments choke on their drinks.

Westcoe Realtors, Riverside California…If you look at last week’s blog regarding seller’s disclosures, we seem to have hit a nerve with many of you out there.  Our response from homeowners was fairly strong, and many of those who took the time to thank us for our disclosure list (A big thank you, by the way) asked if we could do the same thing for the costs a seller will incur to sell a home.

It appears that some of you have had situations where your close of escrow check was less than expected, and the myriad of costs were hard to comprehend…so the question posed was…”Could we at least get a list of the costs a seller could be expected to pay when selling and closing a home?”

And the answer is a hearty….YES.

First, our suggestion is that if you are ever selling your home, and your listing agent does not provide you with a detailed explanation of all your expected costs, do like Forrest Gump…and run, run, run.  Any real estate agent should be able to figure your costs, and get you very close to the exact amount…and if they can’t…or won’t…then find someone who will.  Expressions like “trust me”…or approximations that are given in percentages…or anything else that is general in nature simply are not professional.  So make sure you get exact quotes from your agent.

Ok…below is listed all of the general costs of selling a home along with a brief description of what each item is.  We need to be brief here so we don’t rewrite War and Peace, but we will give you enough to get the general idea.

Title policy…the seller must provide a clear title to the home for the new buyer…and this insurance policy guarantees that for the buyer.  The cost is based upon the sales price of the home.  For example, for a $250,000 sales price, the cost would be approximately $920.

Escrow fees…These fees are generally split between the buyer and seller, and escrow makes sure all conditions of the sales contract and new loan (if any) are fulfilled.  Once everyone has done what they are supposed to do, escrow closes, title passes to the buyer, and the seller along with everyone else gets paid.  These costs are also based upon the sales price, and vary widely…so make sure you shop around.

Documentary Transfer Tax…This is the city or county’s finger in your equity pie.  The bottom line is that they tax the sale of your home.  How much?  If you are in the County (Riverside), it will be $1.10 per thousand dollars of the sales price.  If you are in the City of Riverside, it will be double that.  Why more in the city?  Good question.  Probably because they can.  Ask your council member.

Demand Statement…your existing lender needs to send to escrow a statement showing your exact loan balance so escrow can pay off the correct amount at close.  If you own your home outright, then this will not apply.  Cost is approximately $75 per lender (ie; if you have a 2nd loan, then figure $150).

Termite inspection…In most cases, the new buyer (or their lender) will require the home to be free of termites, dry rot, fungus, etc.  The cost for an inspection is approximately $75, and if there is any work to be done, the termite company will provide you with a bid. 

Natural Hazard Disclosure Report…This is information that you are required to provide to your buyer about your home.  Are you located in a high fire area?  Are you subject to liquefaction in an earth quake?  Questions like that.  A separate company will provide all that the State demands at a cost of $100.

Real Estate Commission…This is completely negotiable between you and your listing broker.  You pay your listing broker a stated amount, and the listing broker pays the buyers broker from that.  However..beware…be sure to know what your listing broker is paying the buyers broker, and what they are keeping for themselves.  This can have a big effect on your sales activity.

Homeowners Association…If you have an HOA, there will be fees to pay for the HOA docs, and the transfer from the seller to the buyer.  On average, this is around $650, depending on your HOA.

Grant Deed, Notary Fees, Title Co. Sub-escrow fee, Reconveyance Fee, Tax Service…All “little fingers in the pie” costs from either the title company, escrow company, or new lender requirements.  Bottom line here is that all of the above will total around $400-500.

OPTIONAL COSTS

The following are costs that may be included in your sale…with your permission.

Home Warranty Policy…a separate insurance policy that allows the buyer to call a repair company instead of the seller when certain things break after the close of escrow.  This eliminates the arguments and court appearances between the buyer and seller, and let’s the repair company solve the problem.  Cost for a basic policy is around $350.

Buyers Costs…Sometimes the only way a buyer can purchase your home is if you, the seller, help them pay their closing costs.  Why would you do this?…Because if you don’t, they will find someone who will.  The good news is that the buyers know you are helping, so they usually don’t haggle on the listing price if your listing price makes sense.  These costs can be anywhere from $1,000-6,000 or more.

PRORATIONS

Interest and Tax prorations…All you need to know here is that you will be paying for your home up to the day it closes…after that, it is the buyers responsibility.  Therefore, your loan payments (really the interest) and your taxes will be prorated to your closing date.

The above list is pretty much it.  Once you have your agent fill in all these costs, then simply subtract this amount from the sales price, subtract again any loan amounts you owe, and there you have it…your net equity at the close of escrow.  As we said before, there should be no surprises, not major costs you were not told about, no “oops” on behalf of your agent…and if there is, get on the phone to the broker and raise you-know-what…because you have a right to expect your agent to get it right.

Take care, and as always, thanks for reading.  Let us know if there is anything else you would like to see us address in our blog.