Understanding Temecula Valley

January 10, 2009 by  
Filed under Investing

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Southern California Real Estate
Short sales are becoming a large segment of the Southern California real estate marketplace. The first step in pursuing a short sale is finding a broker willing to invest the time necessary for the job. This is hard, as most brokers dont want to show these for three main reasons: short sales are considerably more work, homebuyers get impatient, and the transaction can be stressful if done wrong.
Short sales are more difficult. Instead of a typical two party negotiation between buyer and seller, you have a four party deal with the buyer, seller and two banks. In this situation, the seller and two banks take very different roles. The current owner is spun around financially, and simply wants the loans off their back. As a seller, its a great opportunity as they dont always want the best price. A downside to this, however, is that the homeowner can sometimes work against the purchase by not allowing any views of the house prior to purchase.

Since banks arent owners, adhering to certain bank rules can be difficult to reach and negotiate with. They often employ aggressive strategies to maximize profit. The first and second loans fight between themselves because one bank may make more than the other bank in terms of money. Getting access to the right people require completed paper work packages from the seller and purchase contract from the buyer before the deal can begin. In the end, an agreement has to be reached between the two banks, the seller and the buyer. By the time all the preparations have been made, a period of 2-3 weeks can pass. Since there are a considerable amount of short sales, many banks are understaffed to handle this increased workload.

Another obstacle often faced is buyer impatience and lack of understanding. Unless a first-time buyer has solid communication with their real estate agent, they are the worst buyers for short sales. Banks will take 10-14 business days to examine and pass any documents a broker has forwarded to them, which is a source of much impatience experienced on the half of the buyer.

Preparing an excited couple to be patient is tough. This is especially true in Menifee and neighboring real estate markets now that there are a large supply of properties to peruse. Many homebuyers today have people around them suggesting they get better prices or more service when purchasing a home. Lack of patience can be the most important variable, and should be discussed before any bank short sales are looked at. If clients keep their patience in check, they may get a fantastic deal. Last month, for example, I promoted a Temecula home short sale deal to a new client of mine. With this deal, they could get a house for over 70k off the real value. The only catch was that they would have to wait a bit for bank approval, which could take up to three weeks. This home was perfect for the prospective buyer and was in turnkey condition. My client responded that they demanded an answer within 48 hours.

I risked my client contact, and told them the opportunity wasnt for them, since the banks dont care about what you want. The employees at the bank work from 8-5 and have no attachment to the property. It would be no one’s loss except that of my client. If you have the patience, I said I was willing to put the time and effort. When we get approved, you will move into the house with significant equity and your business will be secured for next time. After discussing the details, they put in an offer, got an approval and are closing at the end of this month. Clear communication, integrity and lots of patience can get the job done.

Stress is the final big issue regarding short sales. Part of this was discussed when dealing with patience. The stress of the bank transactions, outside voices, and the length of the process may could make you crazy. For brokers, dealing with the other party and banks is difficult. For buyers, it is important that you be patient when dealing with the broker. Tension is reduced by taking time to understand the situation with weekly updates. Dont get upset if you find out the banks havent returned calls.

Despite these three reasons, short sales offer great opportunities to get new homes at significant prices. These homes are in greater shape than most REO houses and often are still being cared for. If looking to negotiate price, these short sales offer great opportunities for that.

Right now, banks are overflowing with foreclosure properties, and dont need another drop in the bucket, especially when there are people willing to buy. Banks want to take the opportunity to sell before the market goes down any further. Deduction from their cache of houses is a gain. Make sure to enlist a good agent, as their goal is to get you the greatest investment possible for today, and earn your business tomorrow.