adohomes

I do a lot of online home market evaluations for people all over the Albuquerque Metro Area.  Some of these folks I know and others I have never met.  Many folks who follow the news have an idea that their home may not be worth what they thought it once was.  Others seem to be genuinely shocked and some seem to want to “kill the messenger”.  (All I do is interpret the data folks.)

Some people can afford to sell because at least here in ABQ, we haven’t dipped much below 2006 home values, so if a homeowner purchased before then and didn’t put a second mortgage on the home during the run-up, or refinanced and took significant cash out, we can normally get them clear after all the closing costs.

What it comes down to is your reason for selling.  If you have to sell because you are moving or you want to sell to buy a bigger home, (see my post http://wp.me/p1ByQA-B for good reasons to buy) selling now is unavoidable.  If you can wait maybe that is a good idea, but nobody really knows how long it’ll be before housing prices start back up or how long it will be before your house reaches a price range acceptable to you.  Personally, I think we are about 50% of the way through the foreclosure bubble here in ABQ.  With housing prices for non-distressed homes just starting to be affected by foreclosures and short sales we could still see maybe a 5% drop and that assumes an economic recovery this year.  Say maybe a year of plateauing before things start back up and you are looking at another 24 months at the levels we are at now.  Then you have to look at how long to will take to get back to early 2007 levels and all told it could be ten years before you could feel good about selling.  Do you have ten years to wait?  Then don’t sell now.  And for goodness sakes if you are behind with mortgage payments and really don’t have any hope of renegotiating your mortgage, don’t suffer foreclosure.  A good short sale specialist can advise you on how to avoid foreclosure and at least save your credit (see my post http://wp.me/p1ByQA-1k ).

Don’t think there aren’t buyers out there.  There are buyers in every price range.  Your home just needs to be the “prom queen” in its price range.  There were 7615 buyers out there last year.  Yes 1/3 of them bought distressed properties, but 5085 bought non-distressed properties.

The bottom line is this, if you can’t or don’t want to wait, you don’t have to, but the truth is nobody knows when this market will come back, but almost nobody thinks it’ll be very soon.

It seems like almost every time I meet a new buyer I have to explain how these two types of “distressed sales” are different.  Since distressed sales are probably here in some type of volume for at least the next five years or so, I thought it would be a good idea to lay-out the main differences between the two.

Short Sales are homes that are still owned by the seller, but are either in pre-foreclosure, or are in danger of being in pre-foreclosure.  The seller has some type of hardship that won’t let them make payments on the home, the home is worth less than it can be sold for, and the lender has agreed to take less than is owed on the home.  The advantage to the seller is that a short sale will have much less and sometimes almost no affect on their credit.  It isn’t a “magic bullet” however.  The lender can require the seller to bring cash to the table or require the seller to sign a promissory note.  In some case the lender may pursue a “deficiency judgement” against the seller, although this has been happening less and less lately.  When a buyer wants to make an offer on a short sale, their Realtor submits the offer through the listing agent to the owner, who signs it and then it goes to the lender for approval.  The disadvantage of short sales is that the approval process can take months and during this time the buyer will know very little of how the process is progressing and when or if their closing will take place.  There is very little standardization among banks on processes and it can sometimes seem like the rules change frequently.  Also, lenders will not usually perform any repairs to the property and will deny some of the closing costs usually paid by the seller, putting an extra financial burden on the buyer at closing.  The upside is that buyers can walk into homes and have instant equity, sometimes 10-20% over other homes in the neighborhood.

Bank-owned properties are homes that have been foreclosed on and are owned by the lender.  When these homes come on the market, the buyer’s Realtor negotiates directly through the listing agent with the bank as seller.  Foreclosures used to take a long time, but nowadays buyers can get responses on their offers within two or three days, plus many lenders are painting and replacing flooring to make their foreclosures more attractive to buyers.  Frequently the lender is motivated to get the sale closed quickly in order to get it “off of their books”.  The advantage to purchasing a bank-owned property is, like short sales, instant equity and more certainty of when and if the buyer will be able to close on the house..  Disadvantages are also the “as-is” aspect and additional closing costs to the buyer. Also, since they close more quickly, there is more competition for the bank-owned properties than short sales.

Buyers should also be aware that they are still well protected and even if the home is being sold “as-is” they can still get an inspection and the transaction is contingent on the buyer being satisfied with the results.  As always an experienced Realtor can help you navigate the process.