Susan’s Home Safari

I just wanted to take a moment to share some information that I have acquired that others have been asking me about recently. For both buyers and sellers this has been of interest.  Buyers see and hear about all the foreclosures and think they should be able to get a home for next to nothing. Yes, there are a lot of great deals right now in this market that buyers should definitely take the opportunity to purchase. But not all homeowners are desperate to sell and want to protect their investments. Also, if there are several homes in the same neighborhood that are short sales, foreclosures, bank owned properties-the sale of those homes effects the future property value of the home you are interested in purchasing. Many people don’t understand what short sale, foreclosures, REO- Bank Owned Properties, and Deed in Lieu of foreclosure means.

Here are short definitions of each before I proceed further:

1.      Short Sale- When the sellers owe more on their mortgages than the value of their home, the sellers are in a shortage situation if they decide to sell. There will not be enough money to pay off the loan(s). The seller would need to come to the table with proceeds to satisfy their lien(s). In order to be considered for short-sale eligibility one would have to have a hardship such as divorce, medical expenses, job loss, death of family member or some similar life catastrophic situation. In addition, the seller’s expenses must exceed his/her/their assets and income; they are behind on their payments and have no way to repay the bank. Simply owing more than the home is worth yet wanting to sell regardless of a lack of hardship is not a reason to apply for a short sale.  Homes listed for sale that are short sale usually take several months to purchase and a lot can happen that affects the outcome.

2.     Foreclosure- There are many ways homes can be foreclosed on in regards to who may “foreclose” on the homes. For purposes of keeping this a simple answer for this article, I have summarized this and recommend you seek legal counsel for a more accurate description if you are in need of further explanation.  When the owner of a home has defaulted on their mortgage(s), this is the legal and professional proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor’s equitable right of redemption. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien“.  

3.     Deed in lieu of foreclosure- where the bank accepts the deed of the home in place of paying off the loan.

4.     REO-Bank Owned Properties- where the bank/mortgage company owns the home after a foreclosure sale or acquired the home from deed in lieu of foreclosure. These are properties that could be listed for a quick sale at a reduced price to lessen the bank’s inventory of homes (banks are in the lending business, not usually real estate property management). 

Sellers are wondering is now a good time to list their homes for sale. That depends on the seller’s situation.  Generally speaking, the spring/summer is a great time to list your home for sale as that is usually the time buyers’ start looking for a home to purchase. Home owners that purchased their homes prior to 2003 before the great appreciation increase will most likely have equity in their home and will not likely sell their home below what they paid for it originally. But again, it depends on each homeowner individually. Many homeowners used their homes as a bank by refinancing taking their equity out of their homes to pay off credit card debt. If you did that and if you are in an area that took a depreciation hit because of foreclosures, you may take a loss on the sale of your home because of that additional debt.  Purchasing a home is usually the greatest investment you can make if done wisely.

Here is something to think about if you own a home and are thinking about selling.  If you own a home right now and want to purchase another home (various reasons such as downsizing or wanting a new home) and are worried about taking a loss on your home when you sell it, think about the big picture.  Interest rates are at an all time low with some being as low as 4.875 % (varies daily) and homes are being affordably priced, focus on the money you are saving in the long run of having the lower interest rate and getting the bigger or better home at reduced prices versus taking a small hit on the sale of your current home. Most sellers are looking at what their homes could have sold for during this most recent appreciation time frame and thinking that if they sold now-they are taking a loss.  When in reality you may not be taking a loss at all because you didn’t purchase it at that higher price. If you did purchase a home from 2006 to 2007, there may be a possibility you would be taking a loss because of the correction in the market. Again, everyone is in a different situation, but if you are interested in me doing a current market analysis of your home with a net proceeds calculation to give you a perspective of whether you can afford to sell and/or purchase a home- give me a call as I do this for you of which I do this service for free.

Buyers are waiting thinking that the bottom hasn’t hit yet.  Sounds familiar with stocks in the opposite direction of holding on for the highest price. A little like gambling in some ways with that way of thinking. Most of this area in Snohomish County has experienced the correction in the market. Builders are and have slashed their prices of the pre-sale homes trying to stimulate buyers into purchasing. I wouldn’t wait if you want to capture these great deals because in my opinion come summer time more buyers will be buying and builders are not going to be as receptive on giving incentives. Supply and demand, once that demand is there prices stabilize or go up. Give me a call or email and I can update you on the great deals that are available right now. I will do my best to negotiate the best deal on a home purchase.  Check out other areas in my website to learn more about how I make you my highest priority!