"Mixed Signals" Short Pays vs. REO Listings/Sales

In today’s real estate market a frequently asked question is, “is it better to buy a short pay or REO property with respect to “where is the best price point obtained”? 12 months ago the real estate hot spot was REO sales and short pays were considered impossible to close with only an estimated 20% of negotiated short pay transactions closing.

Most of the Southern California listing inventory is down 50% from a year ago. The Temecula Valley listing inventory is down by approximately 70% from a year ago.
Approximately 50% of all listings are short pay and the balance is divided between standard sales and REO. Standard and REO sales are the most competitively priced and most difficult to obtain and usually have multiple offers presented. Short pay listings continue to average about a 20% close ratio with accepted offers.

The key in negotiating and successfully closing a short pay offer is to know this information before making an offer:

• Market Survey, knowing current 60 day value of the subject property based on similar, same location properties
• Has the Seller sent financials to the respective mortgage holder
• Has the respective mortgage holder ordered the appraisal of the subject property
• Are there or have there been any offers presented, in process and or accepted by the existing mortgage holder.
…..Once this is obtained there is a considerably better outcome to successfully closing the transaction and usually a better price point verses the REO or standard sale. In addition there is less competition with the short pay purchase, but obviously more investigation upfront.

If you have questions feel free to call us anytime @ 951-302-7996.

Should I mess with a Short Sale?

Market Conditions:

There are 3 types of sales in today’s market, Short Pays (SP), Bank Owned (REO) and Standard Sales (ST).

The Short Pay is owned by the seller, the property is worth less than is the mortgage and the terms of the sale must be approved by the mortgage holder. Typically SP listings are initially priced 10 to as much as 30% below comparable sales from the previous 3 months within the neighborhood of subject property. This to entice and encourage offers to purchase. When price and terms are negotiated then approved by the mortgage holder the sale price is usually close to comparable sales from the previous 3 months. Approximately half of today’s listings are SP listings and can average 30 to 60 days and as much as 120 days to negotiate and close with the seller and the respective lender.

Next… What are the steps to successfully selling a Short Pay home?

1. Objective:
a. Indentify Seller’s wants and needs
b. Create moving cost for Seller
c. Save credit from reflecting “Foreclosure”
d. Seller peace of mind
e. Help Seller be where they want to be
2. Market Survey
3. Broker Price Opinion
4. List property
5. Seller consultation with attorney to determine if a Loan Modification is applicable or recommend the Short Pay avenue
6. Package Seller financials for Lender (Include POA and Letter of Authorization)
7. Sell property and open escrow
8. Provide full list, sell and financial package to Lender
9. Negotiate sale and close escrow with mortgage holder

I am very excited and look forward to providing my professional real estate broker services to you and your family. Please call or email me with any questions.

Regards,

Lloyd Mize - Broker
Member of Pacific Coast Realty Group
951-302-7996 HarvestTeam.com
lloyd@HarvestTeam.com

Weekly Real Estate Round Table-"Short Sales"

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“What’s the impact on purchasing power of a 1% increase in interest rates

All the focus in real estate has been focused on property values, which is definitely important. equally important is the interest rate you receive on your mortgage, but this receives dramatically less attention.

Here's a scenario to be closely considered. On a $300k home purchase, with 20% down, on a 30yr fixed mortgage you end up with $240k. With a 5.00% interest rate the principal and interest payment would be $1,288.37. To get a similar payment with a 6.00%, still assuming 20% down your purchase price would drop to just under $270k ($268,600 to be exact).

The answer to the initial question....an increase of 1% in interest rates equates to a home buyer looking at homes worth 10% less to achieve the same payment. With the threat of increasing inflation and an improving economy it's very likely that rates will be increasing. Now is the time to buy.

Interest Rates....

If the interest rate rises 1% how much does this cut your purchase power??