Trying to evaluate the condition of the property is real tricky with bank owned properties especially in the winter with the properties being winterized. The likelihood of getting the heat turned on by the lenders is not good especially if it's a hot water system. So, you won't know for sure until after you close on the property how much damage there is to the plumbing. Many lenders will not de-winterize the property but many will let you do it as long as you winterize it if you don't buy it. This puts the buyer in the interesting position of doing work on a property that they don't own. Who is liable if the buyer's contractor floods out the house? Beats me.
Some sellers won't make the offer contingent on a home inspection so the buyer has two choices. Buy the property without inspecting it or pay for a home inspection before negotiating further and without a written agreement. Given these two choices I recommend the later.
I had a buyer start negotiating on a property and they wouldn't make it contingent on a home inspection. They also rejected the price and wanted close to asking price which wouldn't have made sense if the house needed many big ticket repairs. But, without the home inspection how do you know the extent of the damage. They also would not de-winterize the house. The buyer went ahead with a home inspection anyway. Even, without the heat, electric, and water running the home inspector uncovered so many other defects in the property that it didn't matter. It turned out that the boiler was rusted through so it wouldn't have fired up anyway and the electrical panel was fried which is why the electric wasn't working. The buyer realized his original bid was too high so we broke off negotiations and the buyer passed on the property.
The sellers of bank owned properties are not making it easy for buyers to properly evaluate the condition of the property. They want to pass their headache onto you with as little work and cost on their part. My feeling on this is that if you are going to take on the added risk of buying a bank owned property the rewards need to be very high otherwise why bother.
Some sellers won't make the offer contingent on a home inspection so the buyer has two choices. Buy the property without inspecting it or pay for a home inspection before negotiating further and without a written agreement. Given these two choices I recommend the later.
I had a buyer start negotiating on a property and they wouldn't make it contingent on a home inspection. They also rejected the price and wanted close to asking price which wouldn't have made sense if the house needed many big ticket repairs. But, without the home inspection how do you know the extent of the damage. They also would not de-winterize the house. The buyer went ahead with a home inspection anyway. Even, without the heat, electric, and water running the home inspector uncovered so many other defects in the property that it didn't matter. It turned out that the boiler was rusted through so it wouldn't have fired up anyway and the electrical panel was fried which is why the electric wasn't working. The buyer realized his original bid was too high so we broke off negotiations and the buyer passed on the property.
The sellers of bank owned properties are not making it easy for buyers to properly evaluate the condition of the property. They want to pass their headache onto you with as little work and cost on their part. My feeling on this is that if you are going to take on the added risk of buying a bank owned property the rewards need to be very high otherwise why bother.
I have a few buyers looking at bank owned property so I have been looking at a lot of bank owned property. We also have been writing offers. Most unsuccessfully. Though yesterday I had a buyer close on one. Even that had glitches occurring right at the closing. During all of this I have come up with some thoughts on what actions by the buyer will help you have a successful outcome. I'll post these thoughts in different posts going forward from today.
The first thing you have to have is a laid back attitude and faith it will work out and that some of the people you are dealing with will do most of what they say they will do. Otherwise, you will drive yourself crazy and the frustration will put you into an early grave. Many of the actions of these lenders/sellers doesn't make sense to a normal, rational person. You just have to keep reminding yourself that these are the same people who caused this mess in first place so why should they act more rationally now.
The paperwork is heavily written in the seller's favor. It seems like they can do whatever they want even though you have a signed contract but if you deviate from the contract they can come down on you. So, my first piece of advice is to make sure the addendum caps your losses to your deposit and they can't come back after you for more money. This is called liquidated damages. Therefore put as little money down as possible. Let, me repeat put as little money down as possible. That way if the people you are dealing with, and there are several layers of bureaucrats between the buyer and seller, end up not doing what they said they would you can pull the plug on the deal and only lose your deposit.
The first thing you have to have is a laid back attitude and faith it will work out and that some of the people you are dealing with will do most of what they say they will do. Otherwise, you will drive yourself crazy and the frustration will put you into an early grave. Many of the actions of these lenders/sellers doesn't make sense to a normal, rational person. You just have to keep reminding yourself that these are the same people who caused this mess in first place so why should they act more rationally now.
The paperwork is heavily written in the seller's favor. It seems like they can do whatever they want even though you have a signed contract but if you deviate from the contract they can come down on you. So, my first piece of advice is to make sure the addendum caps your losses to your deposit and they can't come back after you for more money. This is called liquidated damages. Therefore put as little money down as possible. Let, me repeat put as little money down as possible. That way if the people you are dealing with, and there are several layers of bureaucrats between the buyer and seller, end up not doing what they said they would you can pull the plug on the deal and only lose your deposit.
I've been in a couple of newspaper articles of late. Here are the links:
realtytimes.com/rtpages/20070828_exclusivebuyer.htm - 46k -Cached - Similar pages
www.thesunchronicle.com/business/ - 50k -Cached - Similar pages
Realty Times - Real Estate News and Advice
Paul J. Frank, with Homefinders Real Estate in Foxboro, MA, started with buyer brokerage as a salesperson in 1992. "I was living in a condo complex with my ...realtytimes.com/rtpages/20070828_exclusivebuyer.htm - 46k -
The Sun Chronicle Online - Business
The Ambassador Award was given to Paul Frank from Homefinders Real Estate, who has been an active member of the ambassadors program since 1995 but is ...www.thesunchronicle.com/business/ - 50k -
In a declining market if you don't price your house ahead of the market you will always be overpriced until the market bottoms and comes back up to meet your price or until you price it ahead of the market. Until you get ahead of the market you don't sell.
While I was researching for another property I came across a property that sold recently and it's a great example of a property that trailed the market down.
The property was first listed for $559,900 on 7/14/05. Over the next two years there were price reductions on the property at regular intervals. On 11/8/2007 the price was reduced to $384,000 with the property having an accepted offer on 12/5/07. The property closed on 1/10/08 for $360,000.
Ouch!
In a declining market your home is losing value everyday and if you don't adjust quickly and correctly you will be constantly overpriced even as you reduce your asking price.
While I was researching for another property I came across a property that sold recently and it's a great example of a property that trailed the market down.
The property was first listed for $559,900 on 7/14/05. Over the next two years there were price reductions on the property at regular intervals. On 11/8/2007 the price was reduced to $384,000 with the property having an accepted offer on 12/5/07. The property closed on 1/10/08 for $360,000.
Ouch!
In a declining market your home is losing value everyday and if you don't adjust quickly and correctly you will be constantly overpriced even as you reduce your asking price.
Lately, I have been showing buyers a lot of vacant properties. If you can find the right one you can get yourself a good deal. One of the nice things about looking at vacant properties it's easy to set up the showings. Almost all of them are on lockboxes so all I have to do is call to get the lockbox combination and we are good to go. The listing agent never wants to meet you at the property so you don't have to coordinate schedules. Too bad all showings couldn't be this easy to schedule.
The downside to these properties is that almost all of them have all the utilities shut off. The first time I experienced how cold a building could get in the winter without heat was when I was in construction. To this day, it still amazes me how cold a vacant building can get. It's always colder than the temperature outside especially if you are outside in the sun or up against the sunny side of a building.
Forget looking fashionable. I dress as if I was going to be outside for the whole time. Many layers and warm gloves.
I now equip myself with a emergency flashlight that doesn't need batteries as they would get very cold and lose power quickly. I picked up one of those flashlights that have a handle you wind which charges up the flashlight. A flashlight is a necessity because the basements get very dark even during the day. Also, you can't see a thing in the attic without a light.
The other inconvenience is that you can't go to the bathroom at the house because the water is turned off and the house is winterized against freezing pipes. I don't know about you but after spending hours out in the cold I seem to need to use the bathroom more often than normal so pit stops need to be planned for. Unfortunately, I have been in more than one house where someone used the toilet anyway and boy does that get to smelling bad.
With the price of copper being what it is these days you are finding more properties with the copper piping missing so now I look for that right away. Lot's of time the baseboard heating covers are intact but the copper piping behind it are gone so you have to get right up to it and take a good look. Without the plumbing being intact it's harder for someone who needs financing to buy the place. You can shorten your time in the house by discovering that right away. Most of these properties are in rough shape needing roofs, kitchens, bathrooms, new flooring, electrical and plumbing updates.
I always wonder what happened to the owners of the properties that caused them to lose their home. In one home, on a shelf in the basement the kid's sports trophies were still all lined up in a row. A very sad reminder of things gone wrong.
The downside to these properties is that almost all of them have all the utilities shut off. The first time I experienced how cold a building could get in the winter without heat was when I was in construction. To this day, it still amazes me how cold a vacant building can get. It's always colder than the temperature outside especially if you are outside in the sun or up against the sunny side of a building.
Forget looking fashionable. I dress as if I was going to be outside for the whole time. Many layers and warm gloves.
I now equip myself with a emergency flashlight that doesn't need batteries as they would get very cold and lose power quickly. I picked up one of those flashlights that have a handle you wind which charges up the flashlight. A flashlight is a necessity because the basements get very dark even during the day. Also, you can't see a thing in the attic without a light.
The other inconvenience is that you can't go to the bathroom at the house because the water is turned off and the house is winterized against freezing pipes. I don't know about you but after spending hours out in the cold I seem to need to use the bathroom more often than normal so pit stops need to be planned for. Unfortunately, I have been in more than one house where someone used the toilet anyway and boy does that get to smelling bad.
With the price of copper being what it is these days you are finding more properties with the copper piping missing so now I look for that right away. Lot's of time the baseboard heating covers are intact but the copper piping behind it are gone so you have to get right up to it and take a good look. Without the plumbing being intact it's harder for someone who needs financing to buy the place. You can shorten your time in the house by discovering that right away. Most of these properties are in rough shape needing roofs, kitchens, bathrooms, new flooring, electrical and plumbing updates.
I always wonder what happened to the owners of the properties that caused them to lose their home. In one home, on a shelf in the basement the kid's sports trophies were still all lined up in a row. A very sad reminder of things gone wrong.
As of this morning there are 71 single family homes listed for sale in MLSPIN, the multiple listing service, with an average list price of $534,218 and an average days on market of 162.63. In 2007, 121 single family homes sold with an average list price of $519,082, an average sales price of $503,260 and an average days on market of 151.79.
The absorption rate, which is the amount of months it would take to sell all the properties currently on the market based on the last 12 months sales rate, at this moment for Foxboro is 7.04 months of inventory. Conventional thinking is when you get below 6 months the market favors the seller and over 6 months it favors the buyers. When the market was booming the absorption rate was around 2 months. If this trend holds were are getting very near the bottom of the market. Whether it plateaus at the bottom for a while we will have to watch and see.
If we segment the market into price ranges, let say for first time homebuyers, and look in a range from zero up to 400K which from my experience is the range most first time homebuyers look in, the absorption rate is down to 5.89 months. If this trend holds going forward then the lower end of the market has bottomed for Foxboro. If you're timing the market you should get ready to move soon to catch the bottom and take advantage of the low interest rates.
The absorption rate, which is the amount of months it would take to sell all the properties currently on the market based on the last 12 months sales rate, at this moment for Foxboro is 7.04 months of inventory. Conventional thinking is when you get below 6 months the market favors the seller and over 6 months it favors the buyers. When the market was booming the absorption rate was around 2 months. If this trend holds were are getting very near the bottom of the market. Whether it plateaus at the bottom for a while we will have to watch and see.
If we segment the market into price ranges, let say for first time homebuyers, and look in a range from zero up to 400K which from my experience is the range most first time homebuyers look in, the absorption rate is down to 5.89 months. If this trend holds going forward then the lower end of the market has bottomed for Foxboro. If you're timing the market you should get ready to move soon to catch the bottom and take advantage of the low interest rates.
The gap between the Bay State's home prices and destination area's home prices have started to narrow so it's not as advantageous for Bay Staters to move away. This has caused less people to leave the state and might lead to people coming back.
"Meanwhile, the up-scale states—California, New York, New Jersey, and Massachusetts—are seeing fewer residents leave for a lower cost of living elsewhere. And those states benefiting from the previous flight to affordability—Nevada and Arizona in the west; Florida in the south; and Pennsylvania and New Hampshire in the east—have shown slower migration gains or greater declines." according to Brookings Institution's "Housing Bust Shatters State Migration Patterns".
Stemming the tide of Massachusetts residents leaving the state is good news for those of us who own real estate and are planning on staying here for some time.
"Meanwhile, the up-scale states—California, New York, New Jersey, and Massachusetts—are seeing fewer residents leave for a lower cost of living elsewhere. And those states benefiting from the previous flight to affordability—Nevada and Arizona in the west; Florida in the south; and Pennsylvania and New Hampshire in the east—have shown slower migration gains or greater declines." according to Brookings Institution's "Housing Bust Shatters State Migration Patterns".
Stemming the tide of Massachusetts residents leaving the state is good news for those of us who own real estate and are planning on staying here for some time.
People buy homes emotionally and justify it intellectually. Michael Corbett takes you through the home rehab process from the basics to the "brooches" so you can get top dollar for you home.
The book explains the nuts and bolts of rehabbing a house like most rehab books. How to put your rehab team together, how to find the right property with the right things wrong with it, how to finance the deal, how to write up the offer and how to sell the property.
Where the book excels is in Part Two: Fix it. The author breaks the rehab process into "The Six Levels of Improvements." The six levels are further broken down into the "Fix-It Levels" and the "Profit Levels." The "Fix-It Levels" is made up of Serious but Fixable Problems, System Upgrades, and Fix-It Essentials. Where as the "Profit Levels" is made up of Lifestyle Upgrades, Designed-Flip-Techniques, and Dressed-to-Sell Essentials. By working through the levels the goal is to not only fix up the house but to create a lifestyle that pulls at the heart strings of the buyer. The big money profits occur when the property delights the senses and creates an emotional connection with the buyer.
I've seen too many poorly rehabbed houses where the property was either superficially beautiful but the bones of the building were broken or were the building was structurally solid but the finished product was so cheap and amateurish that the work needed to be ripped out and done again.
If you are in the rehab business or looking to get into the rehab business and you want to get your whole rehab project done correctly so you can maximize your profits this is a must read book.
The book explains the nuts and bolts of rehabbing a house like most rehab books. How to put your rehab team together, how to find the right property with the right things wrong with it, how to finance the deal, how to write up the offer and how to sell the property.
Where the book excels is in Part Two: Fix it. The author breaks the rehab process into "The Six Levels of Improvements." The six levels are further broken down into the "Fix-It Levels" and the "Profit Levels." The "Fix-It Levels" is made up of Serious but Fixable Problems, System Upgrades, and Fix-It Essentials. Where as the "Profit Levels" is made up of Lifestyle Upgrades, Designed-Flip-Techniques, and Dressed-to-Sell Essentials. By working through the levels the goal is to not only fix up the house but to create a lifestyle that pulls at the heart strings of the buyer. The big money profits occur when the property delights the senses and creates an emotional connection with the buyer.
I've seen too many poorly rehabbed houses where the property was either superficially beautiful but the bones of the building were broken or were the building was structurally solid but the finished product was so cheap and amateurish that the work needed to be ripped out and done again.
If you are in the rehab business or looking to get into the rehab business and you want to get your whole rehab project done correctly so you can maximize your profits this is a must read book.
In the Boston Globe Real Estate Blog Rona Fischman tried to explain what good listing agents should do for sellers. Since she only works for buyers and not sellers she really only covered the basics. Below is my comment adapted from my "Seller's Benefit Statement" that she graciously posted to her blog entry. To see what she wrote and the other comments. Click here.
Hey Rona,
You only touched on the basics of what a good listing agent does.
Good listing agents market your property of which advertising is one part of it. Before you promote the property you need to decide what kind of buyer is most likely going to buy this property and then build your marketing plan to attract that type of buyer. A comprehensive marketing plan should have these elements in it:
1. A Competitive Market Analysis to position the property properly.
2. Determine beforehand the best type of financing for the property so the property conforms to that financing.
3.Home Enhancement and Staging
4.Estimated Proceeds the seller will expect from the sale.
5.Determine the "Salability Potential" of a property by preparing a salability checklist
6.Enter the listing in the Multiple Listing Service (MLS) and then have it upload to Realtor.com with an enhanced listing and upload to all the other sites linked to the MLS like Boston.com
7.Prepare Property Information Flyers
8.Put up a yard sign and directional signs
9.Internet exposure
10.Just listed postcards to appropriate people and target areas where your target buyer is living.
11.Office/Broker Promotion
12. Open Houses
13.Local Advertising
14.Progress Reports
15. Review and assist negotiating the purchase offer
16. Relocation Assistance
17. Provide a Sales Guarantee and Easy Out Pledge
Hey Rona,
You only touched on the basics of what a good listing agent does.
Good listing agents market your property of which advertising is one part of it. Before you promote the property you need to decide what kind of buyer is most likely going to buy this property and then build your marketing plan to attract that type of buyer. A comprehensive marketing plan should have these elements in it:
1. A Competitive Market Analysis to position the property properly.
2. Determine beforehand the best type of financing for the property so the property conforms to that financing.
3.Home Enhancement and Staging
4.Estimated Proceeds the seller will expect from the sale.
5.Determine the "Salability Potential" of a property by preparing a salability checklist
6.Enter the listing in the Multiple Listing Service (MLS) and then have it upload to Realtor.com with an enhanced listing and upload to all the other sites linked to the MLS like Boston.com
7.Prepare Property Information Flyers
8.Put up a yard sign and directional signs
9.Internet exposure
10.Just listed postcards to appropriate people and target areas where your target buyer is living.
11.Office/Broker Promotion
12. Open Houses
13.Local Advertising
14.Progress Reports
15. Review and assist negotiating the purchase offer
16. Relocation Assistance
17. Provide a Sales Guarantee and Easy Out Pledge
This is an educational and informative book on fixing up houses for profit. The down to earth realistic approach aligns with my reality of real estate. It's not one of those books where you find a seller and try to assume his mortgage which isn't assumable or talk the seller out of his equity or do some kind of confusing creative financing because you don't have any cash nor the means to get financing. This book explains how "cash is king" and how to get it if you don't have it.
The book goes through all the steps to successfully run a property rehab business. The author explains that if you want to get top dollar you have to add some sizzle items to make your property special. To get top dollar you just can't slap a coat of paint on the walls and put it back on the market. I've seen many poorly done rehabs where this was done. Because of it, the property stayed on the market longer racking up carrying costs and then it sold for less further eating away at the profits. Learn how to make your property special so it stands out in a crowd so it will sell faster and for more money.
I highly recommend this book. It's obvious that the author has hands-on experience and has rehabbed many properties. You will learn from his experience on how to run a successful rehab for profit business and be put on the path with other professionals who actually rehab properties and not just talk about it.
If you want to learn more about the book, rehab techniques, or the author go to his website at http://www.rehabwiz.com/
The book goes through all the steps to successfully run a property rehab business. The author explains that if you want to get top dollar you have to add some sizzle items to make your property special. To get top dollar you just can't slap a coat of paint on the walls and put it back on the market. I've seen many poorly done rehabs where this was done. Because of it, the property stayed on the market longer racking up carrying costs and then it sold for less further eating away at the profits. Learn how to make your property special so it stands out in a crowd so it will sell faster and for more money.
I highly recommend this book. It's obvious that the author has hands-on experience and has rehabbed many properties. You will learn from his experience on how to run a successful rehab for profit business and be put on the path with other professionals who actually rehab properties and not just talk about it.
If you want to learn more about the book, rehab techniques, or the author go to his website at http://www.rehabwiz.com/
