We took our lumps…

from Bend Bulletin 5/26/10

Why am I so bullish on property values in Central Oregon? In a nutshell, because we were one of the most devastated markets in the country. Central Oregon took it’s lumps in this crash, and I feel like there is a good chance we’re done. The larger metros, especially on the west coast, skirted a lot of the devaluation. And, if I were in those markets, I’d be very leery of a potential “double-dip” market. But in many respects, Central Oregon home values were left in smoldering ruins, and I think that puts us in a much better position for recovery. We may not see and price appreciation, but I’m willing to bet the worst is over here.

How to sell your home faster

Given today’s economy, selling your home quickly is more important than ever. With so much uncertainty in the marketplace, time is not your friend. Here are three things you can do to get an offer sooner than the house down the street:

#1 Do not try and sell your house for sale by owner. This is a very appealing way to sell your house for a lot of people because not paying a real estate commission equals less cost, which is always better. This is not 2005 and inventory is abundant. Love ‘em or hate ‘em, the National Association of Realtors spend thousands and thousands of dollars each year conducting housing sale statistics. According to NAR, in 2006, only 7% of all home sales were open market for sale by owners. What the statistics don’t say, is that of the 7%, a broker almost always represented the buyer in the sale. Where I live, home prices dropped and average of 40% from 2007-2009 and the number of houses for sale skyrocketed. I don’t have to drive around and look at unlisted property anymore. Any real estate agent in town can find a list of 10 suitable houses for any buyer in any price range by simply searching their local mls. They know they will get paid and how much before they ever pick up the phone. If you sell your home yourself, you are not on this list.

#2 Stage your home. Staging your home does not entail an interior design degree or rummaging through a million color pallets trying to find a paint that will hypnotize a buyer into purchasing your home. Staging your home can be done at no cost and in a very short amount of time. The most important thing to remember as you are staging your home is this: How we live in a home and how we sell a home are two completely different things.

#3 Make your home easy to show on short notice. I talked to a real estate broker the other day who wanted to show one of my listings. Naturally, I asked how many homes she was showing this buyer. She said 19. Showing 5 homes and arranging the best route and best showing order is a chore. Showing 19 is unimaginable. Not to mention sorting through 50 properties to narrow it down to 19. If your home is similar to another home and all a real estate agent has to do is call you, the owner, and tell you a time or leave a message with the showing time on your voicemail, your home will be 1 of the 19 that gets shown that day. The other 31 homes don’t make the list because they require appointments, 24 hours notice, x hours notice, etc. The more showings, the better chance of an offer, the sooner the offer, the faster your home sells. You get the picture.

What happens to Second Mortgages in a short sale?

Second mortgage loans seem very different from 4-5 years ago.  A second mortgage is a loan on a piece of real estate when there is already a loan in place.  They were widely used to get 100% financing on homes.  Second mortgage rates were typically higher than first mortgages due to the higher risk.  Second mortgages are all but extinct in today’s home purchases.  In the world of short sales and foreclosures, they are the supporting actors.

Any chance anyone has at avoiding foreclosure is often doused when there is a second mortgage loan.  You can work all day long on getting the first mortgage to take less than owed and even if they approve, the second mortgage may not.  The second mortgage will usually settle for fractions less than you owe, but it is usually more than anyone wants to pay them.

So what happens to second mortgage loans in a short sale?  You guessed it.  They need to agree to a short sale also.  Although second mortgage rates are typically higher, the amount owed is usually less.  Here is how it works.  You send the offer and any other required paperwork to the bank who holds the second mortgage.  They review all documentation and come back with an amount they need.  Most of the time, they come back with a number which is too high.  The key to negotiating with second mortgages, is to push as hard as possible and get them to take the smallest amount possible.  A very typical number is between $3000 and $5000 dollars (although every situation is different).  Many second mortgage holders will accept something in this range.  So after 30-60 days of negotiation, you finally get them to agree to accept the short sale.  Phew, glad that is over.  So who in the world is going to pay them this money?

Most of the time, the first mortgage will pay them some money as part of their short sale approval.   Bank of America will typically pay $3000 to the second mortgage and IndyMac (now One West Bank) pays $2,000, to give you two examples.  Simple math tells you that $3000 is less than $5000 and there is still $2000 left.  So now you are down the road 90 days, you have short sale approval from the first mortgage, short sale approval from the second mortgage, and guess what?  You can’t close because no one is willing to pay the extra money to get the second to go away.

Lately, big banks are under scrutiny for trying to get money from Realtors, buyers, etc., to get the amount they want.  The good news is that people are finally paying attention to the poor practices of big banks.  The bad news is that your home still won’t sell and you end up as another tally on the long list of foreclosure victims.