Clark County WA Real Estate Blog

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.

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.

What fuels real estate appreciation?
Real Estate values are controlled by supply and demand. If supply stays constant and demand increases, values will naturally increase.

Washington State Population Growth
Investors and home owners can feel good about today’s report from Washington Realtors Association. Washington State is projected to grown from 6,488,000 in 2008 to 7,742,844 by 2020. That means over the next 12 years, we will see an annual average population increase of 104,570 or 1.6%.

My crystal ball says…
With today’s report, it is clear that pressure on housing inventory will be a long term trend. Additionally, when consumer confidence returns to the market, today’s oversupply will quickly evaporate, and we will once again have a housing shortage. Great news for homeowners, who will see the long term appreciation trends continue. If you are a buyer, don’t wait too long. Todays home prices, and low interest rates will only be with us for a little while. You have a small window of opportunity to take advantage of today’s buyers market.