All Foreclosure Buyers are Cash Buyers

Last week, we got a question from a reader who had been pre-approved for an FHA loan and her Realtor told her that she can forget buying bank owned homes because all bank owned home buyers were cash buyers.

Are All Bank Owned San Mateo Homes Bought with Cash?

That is completely untrue. If you take a look at the pie chart I created, which shows how San Mateo County buyers financed the 391 bank owned homes and condos sold in the past 6 months, you can see only 31% of these 391 transactions were purchased with all cash.

Only 31% of Bank Owned Homes Purchased with Cash

Yes, that’s right….and that means 69% (152) of bank owned homes and condos bought within the last 6 months (between 11/19/09 and 4/19/10) were purchased with some sort of financing. Sounds to me like MOST bank owned homes in San Mateo County are bought with a loan, not all cash.

Why is Cash Seen as Better?

In this San Mateo County foreclosure market, we have two groups of people competing to buy the same group of bank owned houses: investors and home buyers. On the more desirable bank owned homes, we are seeing multiple offers and sometimes overbids. In this situation, banks have been known to take all cash offers over offers where financing is involved because they can usually close in less than a week and the bank doesn’t have to wait for the buyer to be approved for financing and an appraisal to be done. Banks want to know they have a done deal with they agree to sell someone the house. Cash takes a lot of the uncertainty out of the equation.

Are Cash Buyers in Every Bank Owned Transaction?

Definitely not. If so, you’d see a LOT higher percentage of all cash transactions. With only 31% of bank owned homes purchased with all cash, it is apparent that not every buyer is a cash buyer.

Need a Loan to Buy a Bank Owned San Mateo Home?

You are not alone and it is possible, as the data shows. With some patience and by utilizing a professional agent who knows the San Mateo bank owned real estate market, you can take advantage of affordable housing prices and historically low interest rates. Call us at (650) 655-2500 or email us at info@LivingWellinSanMateo.com to schedule a no obligation consultation today.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

The 4 Biggest Mistakes When Buying Bank Owned Homes in San Mateo County

The San Mateo County real estate market, while not deluged with bank owned homes has had its fair share based upon household income, demographic make-up and employment base. Buying bank owned homes in San Mateo County can be tricky and a unique set of rules apply. Still, profit opportunities exist.

How to Improve Your Chances of Success when Buying Bank Owned Homes in San Mateo County

To improve your chances of success when buying bank owned homes in San Mateo County, pay attention to these four buying blunders.

#1: Not understanding today’s new financing realities.

Financing is the key. Understanding how loans work today – it’s a different world – including where the money is coming from, the differences between FHA, FHA 203k, VA, Conventional, Warehouse lines, Direct Lenders, Mortgage Brokers, Mortgage Bankers, Multi-Platform Lenders, etc., none of this is common knowledge, yet is the key to deal making.

Find a Mortgage Advisor with Access to Several Loan Programs from Different Lenders

Knowing whether the loan conditions are common conditions or uncommon conditions can be a vital benefit to my clients. Sensing if a desperate loan broker is trying to force feed a deal in hopes of getting a commission can make the difference between success and dismal failure. In today’s market, you need to find a reputable mortgage advisor you trust who has access to several loan programs from different lenders.

What Does Our Lender Do?

Our lender, Chris Williamson with Mortgage California, is a multi-platform lender which means he is a direct lender (his company loans their own money), a mortgage broker (he can broker out to other lending institutions who may have better programs for his clients) and a mortgage banker (he has much more control of pricing and timing). Chris does the shopping for our clients to determine which program will best fit their buying needs. His experience cannot be underestimated.

#2: Working with an inexperienced, uninformed real estate agent.

Loans are very difficult, business relationships mean everything now when there are multiple offers on San Mateo County bank owned homes and “highest and best” is an asset manager’s mantra. Buyers more than ever need a Realtor® that knows what to do when everything starts falling apart and even better knowing when to go ask for help when an escrow looks like it is dead.

#3: Ignoring serious property defects.

San Mateo County bank owned homes are in generally poor condition, and consequently much, much more difficult to finance. The prior owners could not afford to make payments and being short of money, regular maintenance and upkeep was often neglected. Knowing they would lose their home, prior owners had no incentive to care for it. Most bank owned homes are laden with deferred maintenance issues and latent defects, since there is no detailed list of items in need of repair. In some cases the prior owners are angry when they leave and they take appliances, light fixtures, carpeting, toilets, sinks…I even saw one home where the air conditioning and heating system was removed.

We Help Our Clients Think Through the Purchase Decision

While I am not qualified to make evaluations and recommend corrections on these kinds of issues, I do help my buyer clients think through – in a business like fashion – the purchase decision. After all, it’s their money, their deal and their satisfaction that is at stake. If the deal doesn’t make sense – both emotionally and financially – just walk away and look for another home.

It’s Not Just About Price

The deal is not just about the purchase price, it’s about the other carrying costs – interest on monies borrowed, fix-up costs, legal bills, and selling expenses – as well. A lot of money can be wasted without a well conceived plan and a strong support team.

#4: Embracing the hype.

I call it eBay Madness. The most successful auctions – and that’s what a multiple offer situation is, a silent auction – occur when the bidders got caught up in hysteria with a “win at all costs attitude”. Relax, slow down, step away, and be prepared to walk away. There will be another, better house down the road at a better price. One strategy of banks who own homes in San Mateo and Santa Clara County is to under price the home to create a bidding war. They know that inventory is thin and there is an unresolved, pent-up demand of buyers who work here and want to live near their jobs and community services. There can be only one winner. You have to decide whether you want a good deal or just win.

In Today’s Market, You Need an Experienced Realtor

A few years ago when homes were selling as fast as a flash flood washes through a desert creek bed, many agents were able to stay in business because lending was easy, deferred maintenance issues did not cause much concern and almost every deal closed escrow. Today is very different; an agent needs experience and knowledge in many areas and an agent needs to be a diligent practitioner and continuously work to hone his/her skills. Please ask yourself who is in your corner and who is putting your interests first.

Considering Buying a Home in San Mateo County?

Visit our Buyer Representation page to learn a little bit about The RayChel Realty Group and how we work. You’ll find our Buyer Representation Program is not about how many awards we’ve won, how much real estate we’ve sold….but it’s All About You!

Call us at (650) 655-2500 or email us at info@LivingWellinSanMateo.com to schedule a no obligation consultation. We’ll help you come up with a strategy to buy right.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

Condition of Bank Owned Homes Eliminates 75% of Buyers

Bank owned foreclosure homes in San Mateo County represent a small subset of the overall housing resale market, and most are in need of rehabilitation. The serious damage to most bank owned homes that often exists pretty much eliminates 75% of all qualified buyers as only very particular financing is available for property of this type.

Most Desirable San Mateo Homes Will Not Suffer Foreclosure

The reality is extremely desirable San Mateo homes will probably not suffer foreclosure; the most desirable homes will sell in any type of market. Homes in a great location with superior features and amenities will sell through the conventional resale market.

Work with a Realtor Who Can Help Pre-Screen Ineligible Properties

The generally poor condition of Bank Owned (REO) foreclosure properties makes financing very problematic. So it’s important for you take the right people with you before writing an offer. More importantly, you need to work with a real estate agent that can help pre-screen these properties for serious, deal killing problems. It makes no sense to tie a property up in escrow only to cancel that escrow after spending time and money on inspections when many of these problems can be identified. And, because lending is very limited for these properties, an inexperienced and ill-informed real estate agent can waste your time with these properties if your financing requirements do not match the property.

Often Times Bank Owned Homes are Genuine Fixer Uppers

Often we see homes trashed and virtually looted. Ranges, ovens, dishwashers, doors, electrical fixtures, bath tubs, furnaces and air conditioners have been stolen. Properties have been vandalized, walls and ceilings marred almost beyond repair, and electrical wiring ripped from walls. That’s called a genuine “fixer-upper.”

Able to Fix Up Homes or Need a Reliable Lender? Call Us!

If you’re an investor with fix up skills, now may be an excellent time to take advantage of this market niche. If you would like to examine the buying opportunities available in this market environment, or if you would like a recommendation to a reliable lender who specializes in re-habilitation loans, give us a call at (650) 655-2500 or send us an email at info@LivingWellinSanMateo.com and we can send you some recommendations.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

The Tale of Two Markets

The local real estate market – any market area – is really the story of two categories of homes.  The first is the traditional, conventional market of homes for sale, and the second is the distress marketplace of homes owned by people in the midst of a financial crisis.  Foreclosure markets move through their cycle at a much faster rate than the traditional real estate market.  A period of intense activity can change abruptly and a period of virtually no activity can suddenly spike to an intense level.  In either event what you believed to be true last month may no longer be factual today.

One Distress Sale Can Force Home Values Down

As I have written in previous blogs, it is the “6 Dreaded D’s” – death, divorce, disease, drugs, denial and da job – that affect foreclosure activity.  It only takes a few distressed sales to force prices lower even in the best neighborhoods.  In a condominium complex this is especially true where 1 or 2 distress sales can significantly suppress values in a complex affecting everyone hoping to sell or refinance.

The Bottom Can Only Be Seen in the Rear View Mirror

Active, pending and sold data from the Multiple Listing Service (MLS) no longer provides a comprehensive view of the local market activity.  Foreclosure sales fill the void in the data spectrum by showing what the other half of the real estate market will pay for comparable property.  Investors armed with cash and the ability to act promptly is seeking immediate cash flow returns.  They are not praying that appreciation turns their purchase into a steal of a deal.   To a buyer looking for a home to live in it is about much more than cash flow, it’s more about finding the right home for the family…and schools…and safety.  Those are two different playing fields with different rules.  Regardless of how deep the foreclosure market falls, the bottom of the market will settle at the point when affordability returns and investors can purchase rentals with a positive cash flow.  For most people, that point will be discovered in the rear view mirror.

Don’t Fall for Infomercials and “Below Market Rate” Schemes

Monitoring foreclosures can provide a preview into the real estate market just ahead.  Foreclosure data is free and abundant; knowing how and when to use that data is not.  Many foreclosure data resources either directly or by implication convey the message that consumers don’t need Realtors in a foreclosure market.  They tout fabulous promises they you can buy a 4 bedroom, 2 bath, single family home in excellent condition for less than your rent payment.  The truth is that if you pay 50 cents on the dollar for a home, it’s probably worth 50 cents.

Leave Buying at Trustee’s Sale to Professionals

Finally, buying at the Trustee’s Sale should be best left to the professionals who have the money, resources and minds-set to navigate in the arcane arena.  Consumers should not buy foreclosures without the guidance of a qualified REALTOR or foreclosure professional.  An opinion learned the hard way.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

Foreclosures Will Always Be a Reality

The prevalence of the “6 Dreaded D’s” – death, divorce, disease, drugs, denial and da job – ensure that foreclosure will always be an element in the lender/borrower relationship.  Foreclosure is a consequence of real people in distress experiencing one of life’s brutal low points.  For the home owner, it never feels like a good choice and often foster feelings of failure.

What Good Does it Do to Post Notice of Defaults in the Newspaper?

Foreclosures – Notice of Default and Notice of Trustee Sale – are recorded and posted for all the public to see at the County Recorder’s Office.  Does any good result in these postings?  I think not.  The borrower knows he or she is in default and can lose their home.  The lender knows since it is the lender who initiated the foreclosure process.  Why should every nosy neighbor, scam artist and hustler have this information readily available to exploit those desperate for hope?

Affordability is More Critical than Appreciation

These people who often say they would rather drop dead than lose their home are truly desperate.  Much of their distress is self-inflicted and compounded by denial to be sure.  It seems that regardless of how long the borrower has been in foreclosure, they are always broke.  If more people would understand that affordability is more critical than appreciation maybe the rate of foreclosures would decline.

Foreclosure Affects Everyone – Rich and Poor

Foreclosure affects the rich and famous as well as the invisible poor.  Foreclosures occur in good neighborhoods and bad ones, in times of economic boom and bust too!  For home owners a short sale is preferable over a foreclosure which is much less damaging than a bankruptcy.   Still recent surveys have shown that almost half of the loan modifications completed 12 or more months ago are already in arrears.  Go figure.

What’s Ahead for San Mateo Real Estate? More Foreclosures!

It’s likely that we will see more foreclosures coming.  A 2nd wave of Adjustable Rate Mortgages (ARM) are scheduled to re-set or re-cast beginning about May, 2010, and a 3rd wave is scheduled for early 2011.  Surely, many of these borrowers unable to make their new, higher mortgage payment will fall into foreclosure.  If home values continue to fall, short sales will become more prevalent.

Tune in next time to learn how markets are affected by foreclosures.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

Beware: Foreclosure Industry is Full of Scammers

As long as humanity has the “6 Dreaded D’s” – death, divorce, disease, drugs, denial and da job – foreclosure will be a part of the lending landscape.  As long as we have people in distress, we will have people willing and eager to take advantage of them.  The foreclosure industry is ripe with hucksters, con-artists, and charlatans pitching their no money, no credit, no job, no problem version of get-rich-quick.  These grifters are equal opportunity exploiters; they prey on the unfortunate in financial distress who has hit one of life’s potholes, and the gullible, naïve dreamers who blindly believe in the visions of wealth portrayed by the scammers.

Buying Foreclosures is Not a Get Rich Quick Scheme

Buying foreclosures is not a quick and rich scheme, and even the most astute foreclosure pros rarely buy at “50% below market” as the seminar experts claim.  In fact, virtually every foreclosure pro will admit to at least one costly mistake.  Yet, the word foreclosure implies a bargain – and all buyers without exception want a bargain – and despite the admonitions to the contrary a great majority of buyers hold to the belief that all foreclosure are bargains.  Given that mind set, most foreclosure buyers -and want-to-be buyers – are speculators gambling on future appreciation.  The true foreclosure professionals are investors who look for cash returns they can realize today.  True foreclosure pros acknowledge that sometimes the best deal is the one they didn’t buy.

Tip: Seek Representation when Buying Foreclosures in All Stages

There are three stages to buy foreclosures, and without question the most dangerous way is also potentially the most profitable.  For the right person, buying on the “court house steps” at the trustee’s sale auction is an excellent place to find a great deal and a bad one as well.  But, buying at the trustee’s sale auction is best left to those who can absorb a mistake and still come back to play again.  However, there is no reason why you cannot team up with a pro.

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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.

Webinar Date/Time: Thursday February 25th at 6:00pm

In addition to our Home Buying Tuesdays monthly home buyer education series, we are also adding a webinar series to our educational programs here at LivingWellinSanMateo.com.

Bank Owned Properties and Foreclosures in San Mateo County

This month we’ll be talking about a very popular subject, What to Know Before Buying Bank Owned Homes and Foreclosures in San Mateo.

What Will We Be Covering?

As you’ve been reading here at LivingWellinSanMateo.com, buying foreclosures in San Mateo is a lot different than buying homes from a traditional seller. By attending our 45 minute webinar, you’ll learn:

• What is a foreclosure?
  
• Where in San Mateo County are these foreclosures located?
  
• How is buying a foreclosure in San Mateo County different from buying another San Mateo County home?
  
• What are the risks associated with buying foreclosures in San Mateo County?
  
• What are the potential rewards associated with buying San Mateo foreclosures?
  
• What can you expect when buying a San Mateo County foreclosure?
  
• Can you really buy a 4 bedroom, 3 bath foreclosure home for $20,000 like the commercial on the radio says?
  
• How much does a San Mateo County foreclosure cost?
  
• What’s the San Mateo County foreclosure market like?
  
• How many foreclosures are for sale in San Mateo County?
  
• How many foreclosures have sold?
  
• How long do foreclosures take to sell in San Mateo County?
  
• What do you need to do to prepare yourself for success when buying a San Mateo foreclosure?
  

There will also be time for attendees to ask any questions they have about buying San Mateo County foreclosures.

When Is This Webinar? Thurs Feb 25th at 6:00pm

This webinar will be presented on Thursday February 25th from 6:00pm.

How Do I Sign Up?

You can sign up for this free webinar by clicking the “Sign Up” tab below.

Sign Up

Want More Info – Watch Our YouTube Video

Considering Buying a Home in San Mateo?