My partner, Dan Hart, and I are currently helping over 40 people search for a new home. They tell us that they constantly hear from the media that there are “lots” of foreclosures and bank owned (REO) properties at cheap prices. Yet, they can’t seem to find much they like, or as soon as they see something they like, it turns out it has already sold. Here is our explanation and some tips for increasing your chances of getting your offer accepted.
When the media says there are lots of foreclosures and REO properties, they mean COMPARED TO IN THE PAST. No doubt, there are a lot “more” of these properties now than historically. So, where are they all and why can’t you find one? Simple, because the total number of these properties actually on the market is still FAR LOWER THAN THE DEMAND FOR THEM. Demand also controls price, which is why “cheap” asking prices may exist, but “cheap” sales prices are rare, at least in the south bay area.
The problem is compounded by the fact that very few “standard” sales are on the market. Most homeowners are either “trapped” as they owe more than their home is worth, or they believe that the market is at a “bottom” and want to hold on until prices go up. In either situation the result is the same – homes are not being put up for sale unless absolutely necessary, and thus relatively few standard home sales are available.
As many of our clients have seen, when an attractive home comes on the market there are usually multiple offers made right away, often above the asking price, and by the time you look at the home and decide to make an offer, it is too late. This is what we call a “tight market” in the lower priced homes.
So, what can you do? Well, if you are serious about buying a home in the south bay you MUST do the following:
- Get your “ducks in order” for your offer ahead of time. Practically every listing now requires 4 things to be included with your offer: a) a preapproval letter for a mortgage in an amount at least equal to the offer price, b) the first page of your credit report showing your FICO scores, c) one or more financial institution statements showing that you have the funds available for the down payment specified in your offer (i.e., “proof of funds”), and d) a check for the amount of the deposit (to be taken seriously it should be for 3% of the offer on conventional financing or 1% on FHA loans). If you are using funds from the sale of a property for the down payment, you can provide the sale information in lieu of the proof of funds. Without these items your offer will be incomplete and will usually not even be considered.
- Be the first to make and offer. Our clients are usually set up to get our Home Alert emails from us with links to lists of homes we have found for them. If you are not getiing these, let us know right away so we can add you to our searching routine and start sending them to you. Every time you get a Home Alert email from us, IMMEDIATELY click the link in it and look at the listings. Of course, you can also search for yourself on web sites such as REALTOR.com, browse your local newspaper’s real estate section, and drive through the neighborhood to spot For Sale signs, but our lists will contain 99% of all home for sale. Whenever you find something you like, IMMEDIATELY call Dan or me to arrange a showing. We are here to help! Often we can show it to you within a few hours. Be ready to see a condo or house as soon as it goes on the market — timing is critical.
- Make a realistic offer promptly. Some homes are overpriced, but many times they are actually listed below market in order to generate interest and induce a “bidding war or frenzy”. We will investigate the home and tell you if you need to offer above the asking price, or if a low offer has a chance. We will discuss with you various strategies we have to get your offer noticed and put maximum pressure on the seller to accept it. We will always do whatever we can to achieve your goal. You need to trust us and our expertise to get you the best deal possible.
Dan and I are always ready and available to help serious and realistic buyers get a new home. But, as you can tell from what I’ve said above, there is no point to looking at homes until you have your “ducks in order”. It is just not realistic in the current real estate market to wait until you find a home you want to buy to get these items, since by the time you get your preapproval letter; the home will likely have been sold. The preapproval letter is free and only takes a brief meeting with a banker or mortgage broker to obtain. If you need any help, just call.
Our goal is to help you find and buy a new home. If takes effort, but if you are willing to work with us, follow our recommendations, and act quickly, we can make it happen, together.