Clark County WA Real Estate Blog

Baron Rothschild, the oft quoted banking opportunist, is said to have advised  his clients that the best time to buy is when there is “blood in the streets.” I agree.

An investor or home buyer who embraces this axiom starts looking for homes when the newspaper is full of doom and gloom about national home sales.  I guess that would be now.

Most of the news in the paper is about national trends and statistics. The reality is that the Clark County market was never impacted as much as other areas, and there are some really good deals out there. We have a window, for the next 12-18 months, when buyers will be able to take advantage of national market forces, and score some real deals.

I have been working with investors a lot, lately. The smart ones always remind me of the old adage “You make your money when you buy property, not when you sell it”. Which really means if you don’t buy smart, you won’t make any money when you sell it.
So how do you buy smart?
I would suggest investors hook up with a good real estate agent, finding Bank Owned property. Banks don’t really want to own real estate, for them it’s a Non Performing Asset, so they really do want to get them off their books. And, of course, for the right price, you’ll help them out!

The Upside
Bank Owned properties have already been foreclosed on, are usually vacant, and are deeply discounted. They are not under the threat of foreclosure, have clean titles, and can be in any neighborhood. Banks might also be helpful in financing your purchase, as they would be happy to turn a non performing asset into a performing one.

The Downside
There are only a limited number of Bank Owned properties available at any given time, and the really good ones are locked up in a contract in a short time. Be prepared to act quickly, and have your financing in place before making any offers.

How I Work for Investors
I am always looking for Bank Owned properties, and as soon as they come on the market, I email my Investors details about them right away. Often there will be one or two ‘plums’ they will want to look at “right away”. These properties will generate intense interest from other buyers and investors, so experienced investors will want to be first ones in to view them. If they are outstanding values, they will be prepared to write an offer on the spot.

There is a new ‘buyer bonus program’ available through Suntrust Mortgage. This program allows the seller to contribute up to 6% of the loan amount towards the buyers first six months mortgage payments. Here’s an example:

With less than 10% downpayment on a $200,000 loan, the maximum seller contribution is 3% or  $6,000. If you use this weeks interest rate of 5.875% the buyers mortgage payment would be $1183.30. If we divide $6,000 by $1,183.30,  we see that the seller can make up to 5 Buyer Bonus Payments utilizing the Suntrust Mortgage Buyer Bonus program. 

How It Helps Buyers
If you are a buyer with 3% down, this could really give you a helping hand during the first six months, as you are settling into your first home.  Since you can save mortgage payments for the first five months, you now have extra money to spend on household furnishing.

How It Helps Sellers
Anything you can do to increase the pool of buyers in today’s market is a positive.  This program should be especially attractive to first time home buyers, who could us the assistance with their mortgage payments.

First time homebuyers now have another program that they can use to get their first home.  That’s a good thing!

First time homebuyers have a friend in the Nehemiah downpayment assistance program.

What is The Nehemiah Program and how does it work?
The Nehemiah Program provides gift funds for downpayment and closing costs to qualified homebuyers who use an FHA insured mortgage or conventional loan. Gift funds up to 6% of the final contract sales price are available for the purchase of a participating home. These gift funds never have to be repaid. There are no buyer income limitations and no area restrictions. For the buyer to be eligible for the gift, the seller must make a contribution to Nehemiah Corporation of America that is equal to the gift amount, plus pay a small processing fee.

Why would a seller want to help me?
Sellers choose The Nehemiah Program to dramatically increase the number of qualified candidates that would be eligible to purchase their home. The simple factor of “supply and demand” goes to work for participating sellers to help increase their home’s market value.

What are the basic program requirements?

• Both the homebuyer and seller must agree to participate in the Nehemiah Program,
• Homebuyer must use an FHA loan or a conventional loan that allows gifts from charitable organizations
• Homebuyer must purchase a Nehemiah participating home
• Homebuyer must be the primary occupant of the property.

So, if you are a first time homebuyer, and wondering how you are going to come up with the downpayment, now you have an option. 

Once a home has been foreclosed on, and is owned by the bank, it is called REO or Real Estate Owned ‘by the bank’. These properties typically are in need of some repair, and have often been neglected by the previous owner.

Banks are not in the real estate business, and their only concern is getting it off their balance sheet. If you are an investor, or a savy buyer, this can work to you advantage.

Make sure you do your homework, and compare the REO to other sold properties in the neighborhood. I would recommend at least 3 other solds within the last 6 months. Then, take a look at how much you will have to invest in updating, repairs, and carrying costs before putting it back on the market. If you still have a good spread between comps and your costs, a property might be a good investment for you.

A few weeks ago I spent a few hours at a Trustee’s Sale, near the Clark County Courthouse gazebo. I was curious how the final step of the foreclosure process works. 

A few weeks earlier, I read the Notice of Trustee’s Sale in the local paper, and wrote down the addresses. I then went and researched all of the homes listed, noting loan balances,  late payments and fees, as well as what I thought market value was on the homes.

 How the Auction works.
The trustee goes through the list of foreclosed properties, what the opening bid is from the lender, and asks whether there will be any bidders on each property.  If anyone is interested in bidding, they must register with the Trustee, and show Cashiers Checks  greater than the opening bid. If they are the winning bidder, they will have to sign over the checks to the trustee.

 In most cases there were no bidders, as the opening bid was greater than the value of the property and the bank or lender takes possession of the property and it turns into REO, or Real Estate Owned by the bank.

About 10% of the properties at the auction actually had some equity, and there were multiple bidders for them. Although there are some good deals out there, you must be very thorough in your research.  Properties sold through auction might have underlying liens on them, so buyer beware. It is a good idea, before making any bid, to thoroughly research the property and even pay for a title search, to identify possible problems.

My conclusion:
Foreclosures are way overhyped. I think that better deals can be had by buying properties that are in short sale. At least that way you have the protections afforded by a real estate contract.

You open your mail. It looks official, and it’s from your mortgage company.  Accross the top it reads ” Notice of Default”.  Homeowners accross the country are getting these every day, and although it’s scary, there are things that you can do to avoid foreclosure.  Here in Washington, it’s not as commonplace, but it still happens.  Here’s a timeline for the Washington State foreclosure process:

1. 11/01/2007  Homeowner stops making payments, and loan is deliquent.
2. 2/15/2008 Notice of Default letter is sent by lender.
3. 4/05/2008 Lender files Notice of Trustees Sale with Clark County
4. 7/09/2008 Property is auctioned off at Trustee Sale at Court House

So, as you can see, from the time you stop making payments, it will take approximately 8 months until your home is officially foreclosed on.  During this time you have the following options:

• Cure the default by making payments covering missed payments, fees, and penalties.
• Work with a Short Sale Specialist to list your home as a short sale.
• Do nothing and wait for the foreclosure auction at the Court House.

If you decide to sell your home, the first contact with your agent will be very important. Your agent will need to know who your mortgage company is, the loan#,  contact name, authorzation form (to talk to your mortgage company),  loan statements, tax returns, bank statements, pay stubs,  as well as Profit/Loss statement if you have a business.  Your agent will also help you to draft a Hardship letter to the lender,  making your case for a short sale.   Banks are willing to work with homeowners who owe more than the house is worth, but they will require a lot of documentation.  You must be able to prove financial hardship and that your home is worth less than the loan.

If you have the potential of foreclosure in your future, I suggest you be proactive.  Contact a Realtor and discuss how a short sale might work for you. It will cost you nothing to find out your options, and it certainly will reduce the stress level.

In today’s market, it seems everyone needs a bit of a reality check.  

For Sellers

• In a good market, where there is 6 months inventory, 2 in 12 homes are selling every month.In today’s market, it’s 2 in 19 homes selling every month.

• Only motivated sellers are selling their homes.

• If a sellers home is not priced right and in excellent condition- it will have trouble selling.

• Sellers should see their home’s competition before putting their home on the market.

• Home staging  adds  $10,000 to the value of a home

• Yard staging adds $10,000 to the value of a home

• Professional photography adds $10,000 to the value of a home (only cost $150.00)

 For Buyers

• 80% of the SW WA homes on market are covered by the FHA/Conventional loan limits of $418,500

• Interest rates are near historic lows

• There is a great selection of homes on the market and sellers are very motivated

• We are at the beginning of the next 10 year market cycle and historically, prices have always gone up from there. 

• The increase in population and other demographics point to a shortage of housing in the next 20 years, which means that price appreciation is almost a certainty.

• The upswing in the Real Estate market will start with the most affordable homes. 

• The spread between the more affordable and higher end homes will shrink, making higher end homes available to step up buyers.

 So that’s my reality for Clark County.

If you have already filed your taxes before today, congratulations. If not, you’ll be burning the midnight oil tonight, and wondering why you waited so long. There is however, one silver lining in filing your taxes this year. Beginning in May, the IRS will begin issuing Tax Rebate Checks.

Specifically, the IRS will use your 2007 tax return to determine eligibility and calculate the basic amount of the payment. In most cases, the payment will be $600 for individuals  and $1,200 for taxpayers who file a joint return.  So go out and spend that Rebate Check. But make sure you get the most bang for the buck…
Of course, I have some suggestions:

• Pay off credit card debt and improve your credit score
• Go to your local bank and purchase a $1000 CD and spend the rest on something fun
• Buy some energy saving compact fluorescent lights and add insulation to your homes attic and crawl space.
• Replace some of your homes drafty single pane windows with energy efficient ones
• Replace your old wooden front door with an energy efficient foam core door

When I first sit down with Buyers, I always have the same questions. It really makes the whole process quicker and easier, when I know exactly what you need and want in your home.  Here’s my list of first time questions:

• Have you been working with another Real Estate Agent?
• How long have you been looking?
• Do you have a home to sell?
• What is your timeframe?
• Any special needs?
• What price range are you looking in?
• What areas have you been looking in?
• What style of home are you interested in?
• Do you want an older, classic home, or newer?
• How many bedrooms and bathrooms do you need?
• How many square feet would you like?
• How big should the lot be?
• Do you want it fenced?
• What features are most important to you?

It sounds like a whole lot of questions, but once I know the answers to these questions, I can usually find 8 or 10 candidates quickly.  And I don’t waste your time showing you homes that you don’t like or that wouldn’t work for you.