Wednesday, December 19, 2007

Bank Repo Real Estate - A Buyer's Guide To Bank Owned Properties

What is Bank Owned Real Estate?

Bank owned real estate is known as many things throughout the country. Agents will refer to it as R.E.O for "real estate owned" and consumers most likely know it as "Repo" property. Whatever you want to call it, bank owned real estate can present some excellent opportunities to home buyers and investors alike.

R.E.O. property is real estate that has been foreclosed upon by the lender or bank, brought to public auction where it was not purchased, and now is being sold by the bank through a broker with the consultation of an attorney.

Why Should I Buy R.E.O Real Estate?

Bank owned real estate is usually brought to market at a very attractive price in order to generate a quick response from qualified buyers. Banks do not like to own real estate and are usually looking to unload the properties as quickly as possible in order to mitigate their losses. This presents an excellent opportunity for consumers to capitalize and pick up some fantastic real estate deals.

What Are Some Things To Watch For With Repo Property?

You've got to imagine the mindset of the former owners of the home if you really want to understand one of the downsides of R.E.O. real estate. The previous owners probably did not leave on favorable terms and may have been vindictive toward the lender, the courts, and probably the entire real estate process.

As a result, buyers of bank owned real estate often find that many fixtures are damaged or even missing. The overall condition of the property will probably rate somewhere between fairly good to absolutely disgusting. Repo home buyers should not expect to find a sparkling, newly remodeled home, with all the latest decor. In fact, bank owned homes often only appeal to people with a good ability to see the potential in something. If you lack this foresight and vision, bank owned real estate may not be for you.

What Do I Need To Buy Bank Owned Real Estate?

With R.E.O properties, more so than any other kind of residential real estate, the guidelines for buying them are fairly clear and inflexible. Many banks have a standard Counter Offer that they send to all prospective buyers outlining their parameters. Here are the most notable of these very typical guidelines:

1) Repairs are rarely made to the property and no warranties will be granted.
2) Banks like a larger deposit than in a normal real atransaction.
3) Absolutely no contingencies for the sale of buyers property will be accepted.
4) In most cases, the price will deviate very little from the banks low asking price.
5) The buyer will need to close on a specified date or risk late penalties.
6) Termite reports or natural hazard reports are often purchased by the buyer.

Although most of these conditions are rather self-explanatory, a few have implications that R.E.O home buyers need to understand very clearly.

The first item means that repo buyers need to satisfy themselves with regards to the condition of the property. They still, however, will have a "no harm" period during escrow where they can have a professional inspector look at the property and decide whether or not they like the condition enough to continue. This is all without risk of losing their deposit.

The third item means that if the prospective buyer needs to sell some real estate in order to buy the bank owned property, they need to sell it first before the bank will even consider the offer. This is often a major hurdle but may not be an issue with first time homebuyers or investors.

Where Do I Find Bank Owned Real Estate?

Bank owneed real estate is not for everybody, but for those who enjoy getting a good deal, and are prepared to deal with some probable repairs, the benefits can be priceless! Home buyers in Orange or Los Angeles Counties, who are willing to tell us a little about what they are looking for, will find our Bank Repo real estate finder very helpful. People outside these areas can also contact us if they would like to be directed to a top R.E.O. specialist in their community. Here's to a good deal!

Tuesday, December 11, 2007

Finding The Orange County Home Buyers - Our 10% Theory For Real Estate Sales

Orange County, California home buyers are certainly not as plentiful as they were for the last six or seven years. If anybody has picked up a newspaper recently, they are well aware of the headlines that that would like them to believe that absolutely no homes in Orange County have been sold in the past twelve months! Headlines such as "Record Foreclosures", "Flat Sales", "Prices Falling", have been doing enough damage on their own, to speak nothing of some rather famous pundits and authors adhering to a lazy broad brush generalizations in stating things like "Don't buy any real estate for at least a few more years!" Stating things as blatant as this is not only irresponsible, but it just could not be any further from the truth! Homes are still being sold, and buyers are still actively looking for houses in Orange County. The question is how to find them.

Perceptions Of Real Estate In Orange County

The average Orange County home buyer has certain perceptions of the market and the sellers of the real estate have perceptions as well. People looking at purchasing the Orange County real estate are often told that it is a buyers market, all the sellers are in foreclosure, and that they really should wait more as prices will come down. The owners of Orange County real estate have some perceptions of their own. They usually believe that the buyers have magically disappeared, the ones that do exist are all trying to make low ball offers, and that if they just wait, the prices will come back.

The Reality of Orange County Realty

Obviously, we have some discrepancies of opinion between the two sides! The fact is that real estate continues to sell throughout most of Orange County, albeit at a slower pace than two years ago. Real estate always has been and always will be a local business, and by local we mean zip code, neighborhood, or even street specific. It is completely normal to see a rapidly slipping market on one side of the street, while just on the other side, sales continue to chug along.

While Orange County real estate statistics remains rooted at a local level, there are some general concepts that can be applied across the county. One such concept is what we call the top percentage principle. Our principle states that only a certain number, or percentage, of homes will sell each month within a specific neighborhood, and a house will not sell until it enters into that top percentage of real or perceived "deals." For example, lets say the top percentage in a certain neighborhood is 10%. This means that if a home owner in the area wants to sell their home, they will need to be in the top 10% of real or perceived "deals" within that area in order to get it sold. If they are not, they will need to break into the top 10% of deals for next month or the home will still not sell. The actual percentage number will fluctuate with area and time, but the concept itself will hold steady.

Sales volume is not the only factor that should be measured at a local level. Home prices throughout Orange County are also fluctuating zip code to zip code. Even though its beyond the scope of this post, we can provide home buyers with many examples of areas in the county that are not in a price decline if they'd like to contact us.

What it all means to Orange County home buyers and sellers


For sellers of the local real estate, the most important thing they can do is get into that top percentage of homes that are selling, and get there quickly! This can be done a few ways, but remember first that perceived value is just as important as tangible value. Perceived and tangible value can be created by a combination of the proper marketing, benefits, and competitive pricing. More often than not, home sellers do not mind the first two factors, but find the third to be excruciatingly painful. Despite the pain levels, Orange County real estate owners need to have their Realtors evaluate the market and get their property priced according to what has sold this month. This needs to be done quickly because time is not the cure when new listing are coming up every day making it tougher and tougher each month to get into that top percentage.

As a seller of Orange County real estate, if your saying things like "I can just wait for the right buyer/market", "I don't really need to sell", or "I need xxx dollars despite what the research says" our best advice for the market is to just get out. This truly is not a time for unmotivated sellers to "play the market" and just see if they can get some unjustifiable price. For motivated sellers who really want to sell, careful adherence to our top percentage principle will enable them to find the buyers and ultimately get their Orange County home sold.


Orange County home buyers also need to understand a few things about the current market. Despite what the headlines read, the best deals on the market are selling, and often selling fast. To illustrate this point, we operate a section on our website that we call the Orange County hot property of the week. In it, we post some of the best deals to be found on property in all types of price ranges. As of this date, we are needing to update our section at least every week and a half or our site is outdated as these good deals are just not available. This speaks volumes as to the health of the market!

It is true that there are many properties on the market in Orange County, and as we all know, many of them are still grossly overpriced. Some sellers have gotten ahead of the curve and offered attractive properties at very competitive prices. These are the properties that fit into our top percentage principle. Now then, just because a limited number of homes are actually selling, and some of them may be distress sales, like foreclosures, it does not mean buyers will be able to buy the homes for pennies on the dollar. This concept is best explained in our 6 part write-up on Orange County foreclosure property.

Basically, if Orange County home shoppers want to become Orange County home owners, and do so by finding a good deal, they had better have good help, reasonable expectations, and be able to move quickly. The best way to do this is to let a local real estate team help in finding these good homes, and the best way to do that is to use our home finder service where they just tell us a little about their needs, and we custom build a home search campaign around those needs for free! Best of luck and happy hunting.

Wednesday, November 28, 2007

Whole House Fans - An Energy Efficient Alternative To Home Cooling

Whole House Fans - Summer time in Southern California brings along warm temperatures and large electricity bills. For those of us without the modern convenience of central air conditioning, we have a time of year when tempers flair and households can seem just a little edgy. For those of us with central air, we know very well that installing a central air conditioning system is not only fairly expensive to purchase, but also pricey to operate. To help combat high energy bills or just cool an uncomfortably warm home, we have a great alternative to the normal solutions of window units, room units, and ceiling fans.

This alternative is known as a whole house fan and does almost exactly what the name implies. Instead of circulating or blowing the same warm air as some of the above solutions do, a whole house fan pulls cool air from outside into the home and pushes (actually pulls) the warm air out through the attic vents. The result is that you can quickly cool your home to approximately the same temperature as the outside air. Most of the time, especially evenings when most return from work, this air is considerably cooler than what has been bottled up in the home all day. Of course you could get the same effect on a breezy evening by opening all the windows but it would take considerably longer and the breeze is never guaranteed.

There are a few requirements when you decide to operate a whole house fan. First, you need to have adequate clearance in the attic. Usually you won't need much more than a couple feet. Second, there must be appropriate ventilation in the attic for the warm air to escape. This would be a good time to differentiate one point. A whole house fan IS NOT the same as an attic fan. An attic fan merely pulls hot air out of the attic but does not pull it out of the home nor does it bring the cool air in. The two types of fans are best when used in conjunction with one another.

To use a whole house fan, one must open some windows when in use. Opening one window in a single room will quickly cool that room while opening up the entire home will more gradually cool the whole living space. Both methods have their respective time and places.

Whole house fans come in different sizes with a variety of different features. We have seen models from 24-30 inches in diameter but the actual size is a little larger after adding the vent cover. Multiple speeds and wall switches seem to be some of the more popular features.

We've seen fans costing between $180-250 depending on size, manufacturer, and features. Installation of the fan is extra and can be done in a few hours by a reputable contractor. Currently, Southern California Edison is givin $50 rebates for these fans but one should always check first for current program availability. For the do-it-yourselfers, please note that installation will require careful thought regarding placement as well as some light carpentry and electrical work. We would recommend anybody concerned with their ability to properly install the fan contact a licensed reputable contractor.

Although these fans can be a real blessing during summer heat waves, they are not without their limitations. Whole house fans can only cool the inside temperature to the approximate temperature of the outside air. If the outside air is 100 degrees, the house won't get much cooler than that. So if one has central air conditioning, there are some days when it will just need to be used in order to cool the home. Regardless, many summer mornings, evenings, and nights in Orange and Los Angeles Counties are cool enough to really make the whole house fan a sanity and money saver!

Sunday, November 25, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part VI)

Rule #6 - Prime Your Pump

Link back to Part V

Nothing is more frustrating to potential distressed property buyers then to find the absolute perfect deal and not be able to move quickly enough to purchase it. Because of this, prospective investors need to prepare now for the property they will find tomorrow.

Loan Pre-Qualification - Getting ready means many things, the first of which is to figure out finances. Short sale buyers who do not have enough cash to purchase the entire property need to talk with a reputable real estate lender to not only find out how much they are able to borrow, but also what kind of loan product they would like. There are a variety of products available and going into the details is beyond the scope of this article, but it is important to become familiar with the options before finding that deal of a lifetime.

FICO Scores - FICO Scores are a huge determining factor in whether a buyer will be able to obtain a loan. Read this quick article on
FICO scores to learn more about this relatively mysterious topic that will be key in helping buyers obtain short sale property.

Down Payment & Closing Cost Money - Home buyers will need to figure out if they will be making a down payment to purchase the property. In addition to a down payment, they will also usually need money for closing costs. Real estate transactions take a lot of work from numerous people in order to consummate legally and safely. Each of these people will need to be paid at the close of escrow by the buyer and sellers of the property.

Some examples of parties who may be receiving closing cost money will be the escrow company, mortgage company, tax collector, county recorder, and title insurance companies. Please note that real estate agents are not paid by closing costs and are usually not paid by the buyers of the real estate. The seller (or the bank for short sales) will be the one paying the Realtors.

Also note that in some cases it may be possible for the seller to pay all or some of the closing costs. Regardless of whether they actually end up using it, prospective foreclosure buyers need to communicate with their agent and loan officer the amount of money they have available for down payment and closing costs. The only way to communicate it effectively is to provide bank statements or some other proof of funds for the money they intend on using for purchase. Lenders are not asking to pry into a buyers entire net worth, just for proof of these real estate related funds.

Choice of Lender - There truly are so many choices with regards to mortgage companies that the decision is often overwhelming. Experience has shown that almost everybody promises the world, but few ever deliver. In an effort to save some people future headaches, we've put together a list of preferred vendors for
orange county home loans. We strongly urge consumers to use these vendors as they have saved many loans for our clients who had originally elected to get a loan elsewhere only to have the companies claims prove to be empty promises.

With a little legwork up front, short sale home buyers will go a long way in making sure that they don't miss a rare opportunity. Once they are ready to pounce, they will find our premium
Orange County real estate finder to be priceless in finding that perfect property. Proactive consumers will also find that our interactive Orange County homes for sale map is as helpful as it is exciting. Those who wish to learn more about the area, should see our Orange County real estate guide for insider information and local neighborhood reviews. Happy Hunting!

Saturday, November 10, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part V)

Rule #5 - If You've Got The Right Agent, Show Them Your Commitment

Link back to Part IV

Most people are aware that it will be a good idea to work with a real estate agent that is well versed and experienced in the short sale market, but many people do not realize the commitment they in turn need to show to their real estate agent if they really want to deal effectively with short sale properties.

To understand this, it helps home buyers to see the world from a Realtors perspective. To a real estate agent, a short sale does not necessarily equal a paycheck. Agents do many things for free within the industry, and as much as they understand that the #1 job is to help people buy and sell real estate, they also have bills to pay.

Buyers looking for foreclosure real estate need to understand that many times short sale properties do not pay as well as normal real estate. Many times the difference is very significant, to the tune of a 30-50% reduction in pay! This alone makes pre-foreclosure real estate less attractive to your Realtor.

In addition to being less profitable (for your agent), short sale properties can also be more time consuming. The extra time it takes to research the properties, negotiate with the bank, and write purchase contracts make them even less appealing from an agents perspective. The silver lining is that Realtors, for the most part, do like to help people and will sometimes accept a pay cut if it can greatly help a wide range of people. In the case of a short sale, it helps the buyers find a deal, the seller salvage their credit, and the bank avoid foreclosure. With that being said, pre-foreclosure home buyers need to do a few things to show their agent that they are serious, qualified, and loyal.

To show that they are serious, prospective home buyers need to first be honest with themselves about their goals. Then they need to share these goals with their agent as it will help both parties to determine if the expectations are ones that can realistically be met.

Being qualified is the next hurdle that a prospective home buyer will need to navigate if they want to work with a top short sale professional. This will mean talking with a lender about financing options, credit history, down payment, closing costs, and employment. Once again, much of this info needs to be shared with the Realtor, not only to prove buyer is qualified, but to make sure the buyer is getting a reasonably good deal.

The last step of entering into a buyers agreement will show your real estate professional that you have chosen to work with them, and solely them, in finding a pre-foreclosure home. There is no real advantage to working with multiple agents if a buyer is already working with one of the best. A written buyers agreement will go a long way in solidify this relationship all the way up until the date of the agreements termination.

With the nature of short sale real estate, it is not uncommon to employ a strategy where a prospective buyer will make multiple low ball offers on a wide variety of property in an attempt to find a willing seller. Without getting into the effectiveness of this strategy, we can say that this approach will create a substantial amount of extra work for the real estate agent. In addition to the above steps, prospective short sale buyers looking to use a canvas type approach should expect to provide additional compensation to their agent on a "per offer" or "time" basis out of their own pocket. It may be realistic to have some or all of this compensation refunded to the buyer after the close of escrow on a property sold through the subject agent.

A final note on trust and loyalty deals with the pricing on real estate. Assuming one has followed our steps for hiring the right Realtor, it is a great idea to listen to your agents advice about pricing for the subject home. All too often, home buyers hear their agents price opinion but don't really listen when it comes time to make offers. It should be understood that home buyers are not negotiating against their agent! Real estate is a team sport and it is wise for consumers to take their teammates experts advice very seriously.

While this 5th rule was mostly about protecting the agents time and resources, prospective buyers need to also understand how these acts will benefit them. The principle of reciprosity is in full effect as an agent who knows they have loyal, serious, qualified buyers will be in a much better position to find property and will actually be more likely to bring the good deals to these buyers first. This fact alone can pay big dividends to short sale home buyers.

Link to Part VI

Wednesday, November 7, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part IV)

Rule #4 - Find The Right Real Estate Agent

Link Back To Part III

It should come as no suprise that working with an agent who is qualified to work short sale transactions will be one of an Orange County home buyers biggest assets in finding good properties. But what can a home buyer look for to make sure they are working with the right Realtor.

Proven Track Record - There simply is no substitute for perfection in practice when dealing in real estate transactions. As Vince Lombardi would say, "Practice doesn't make perfect, perfect practice only makes perfect." A good Realtor will have experience at succcessfully conducting transactions from both the buyer and seller sides of short pay sales. They will know what the likelyhood of a sale actually taking place will be and can pass this time saving information onto their clients. Some short sales just will not happen for a variety of reasons (property too encumbered with debt, uncooperative seller, uncooperative lender, etc) so real estate buyers should take the advice to heart when their agent tells them their time will be best spent somewhere else.

Knowledge Of The Market Your Interested In - Local insider knowledge can be all the difference between detecting a good real estate deal and completely missing an opportunity. Short sale home buyers really should concentrate on a geographic area in order focus their efforts and be able to quickly and more effectively evaluate the opportunities. We can't stress this market knowledge enough as it has helped more than a handful of our clients to flag down a deal that others were just missing!

Inventory - Whether an Orange County foreclosure buyer ends up buying one of their agents , or a listing through them listed by somebody else, they really should be working with a Realtor who consistently holds a good share of home listings. If they have numerous listings, chances are they have some pre-foreclosure listings as well as past experience selling them. Because of this, successful listing agents will also have a steady pipeline of prospective home sellers who may be looking to unload a property that a buyer will be interested in purchasing. Listing new inventory is the single hardest part of a real estate salespersons job and will be a definate signal as to the success of your real estate agent. The more listings they have, usually the more successful they have become.

Negotiation Skills - Real estate negotiations may share some similarities but are uniquely different than any other type of negotiation. The 9th rule in our
Orange County Realtor information article makes some great points in regards to real estate negotiations. The bottom line being that if the agent can't negotiate for themselves, how can you expect them to negotiate for you?

So now every prospective pre-foreclosure buyer in the room has the same idea. They're thinking, "I've got it! I'll just contact every agent I can, introduce myself as a real estate investor, and ask them if they have any good properties for me!" Well, they can do that and most likely will get some response out of the inexperienced or unsuccessful agents around town, but this scenario just will not cut it with the true professionals in the business who actually have the ability to help. This next section will explain this in detail as well as give them some better ideas to achieve real estate success.

Link to Part V

Thursday, November 1, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part III)

Rule #3 - You Will Need To Be Patient

Link back to Part II

The absolute hardest part about a short pay sale is the amount of time that goes on without any sort of response or answers from the lender. Even the best offers may not be attended do in an expedient manner simply because the lenders have so many other transactions they are trying to juggle and they just aren't all that excited about taking a loss on any of the properties. Many times they would be better served by moving quickly but unfortunately we aren't the ones who get to make that decision.

This, however, doesn't mean the squeaky wheel won't get the grease! Good real estate agents will need to be proactive in making sure that the bank knows there is a legitimate offer on the table and that the buyer is serious, qualified, and ready to consummate a transaction. We say "legitimate offer" and realize it is a subjective term.

Orange County pre-foreclosure home buyers need to understand that the strength of the offer will have a direct relationship on the banks urgency in getting back to you. Do not be surprised if you never see a counter offer even if the offer you made is completely legitimate. Many lenders have been instructed not to make any counter offers and to either take a deal or leave it! This leads us directly into our next point of interest.

Link to Part IV

Tuesday, October 30, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part II)

Rule #2- Understand That Sellers May Need To Pay The Difference

Link back to Part I

Many short sale transactions go along smoothly and then come to a screeching halt a few days before the scheduled close of escrow. One of the most common problems is that the seller refuses to sign a promisary note to pay back all or some of the debt at some point in the future. Without this note, the bank does not approve the sale and instead decides to continue with foreclosure proceedings leaving the buyer with nothing more than a blank stare.

Why would the seller not sign this note? There are a few reasons but the most common is that they just don't care enough about their credit rating to try and salvage it from the devastation that foreclosure will cause. It is a shame, but in some instances the seller may just be better off walking away from the property. This is one of the areas where a competent real estate agent can help you put together a realistic expectation for the likely success of the subject transaction based on the mindset and financials of the seller.

Can you do anything to get them to sign it? Other than attempt to convince them that it really is in their best interest, the real answer is "No." Of course it would be best to negotiate a deal ahead of time where a promisary note is not necessary for sale but this will not only affect the sales price, but will also be impossible in many instances.

Pre-Foreclosure home buyers need to understand that the success of closing on their new home may rely on some factors beyond their control. For this reason, they need to be careful when negotiating the transaction and exercise a degree of patience and flexibility throughout the process.

Link to Part III

Friday, October 19, 2007

Orange County Real Estate - The Truth About Pre-Foreclosure Short Sales (Part I)

Real estate in Orange County, California can sometimes be eerily repetitive. If we had a nickel for every client, or potential client, who stated that they were interested in foreclosures...well we might not need to be selling Orange County real estate. In all seriousness, distress sale properties (whether bank owned, short sale, or auction) can be excellent opportunities for prospective real estate buyers to acquire property at very good prices if a reasonable approach is taken. Dealing with pre-foreclosure short sale properties specifically, there are some things a prudent Orange County home buyer must understand.

Before we get into these rules, an Orange County foreclosure buyer needs a basic understanding of what a short pay sale means. Basically, the owner of a home owes more money on the house than it is worth, and is attempting to sell it quick in order to avoid foreclosure proceedings. With that basic definition, here are some rules to follow:

Rule #1 - List Price May Not Be The Price You Have To Pay

Ever had somebody tell you a product is one price only to raise the price AFTER you agreed to pay it? Sound like false advertising? Sound frustrating? Well, it is and this is close to what often happens in a short sale.

Why does this happen? It's easy, the price is usually set by the agent and seller who might not care what the house sells for since their won't be any profit to the seller anyway. Therefore, a price is set on the home that is very low in order to attract buyers, but the offers to purchase will have to be approved by the bank. Keep in mind, that in most cases, the bank has not stipulated what will be an acceptable price for the home, and this is ultimately who the buyer will need approval from. In a nutshell, the decision maker has not agreed to the list price, in fact, they may not even be aware what the price is at that particular moment!

We personally think this does a disservice to everybody involved, but the biggest collateral damage is that prospective Orange County home buyers generate misconceptions about property pricing, thinking that homes are selling for much less than they are in reality. This is not a good scenario for anybody involved, including the home buyers!

One solution, from an industry standpoint, is to not allow any listing to specify a price unless there is authorization from the owner, or loan holder on a short sale property. In theory, this would eliminate some of the distance between buyer and seller, but one of the problems with this lies in the fact that during most short sale markets, the lenders do not have time to help price the properties.

While we don't see an immediate solution, the bottom line to Orange County short sale buyers is that they need to be aware that the price you see may not necessarily be the price you get. In fact, you may not be able to get the home for any price! Short sale buyers should be prepared to wait longer periods of time in order to hear on the status of their offers, and not be surprised when it seems as if the bank is not being very cooperative.

Link to Part II