Friday, June 02, 2006

Short Sales Return to the Sacramento Housing Market

News 10 reports on a growing trend in the Sacramento housing market.

Lenders are reporting more home owners are defaulting on their mortgages. But before those defaults turn into foreclosure, some sellers are turning to short sales -- if lenders agree.

Home owner Gloria Romero is in that position now. She bought her three-bedroom home in North Sacramento last year but has to sell it. She has listed the home for $250,000 hoping to cover her mortgage balance. Thursday she received her first offer -- $219,000. That's some $30,000 less than her mortgage.

So, Romero is turning to a short sale instead of letting the bank takeover the house. A short sale is when the lender accepts an offer that is less than the current balance. Not many lenders are accepting these negotiated transactions because it affirms the real estate market has settled from its accelerated growth that drove prices up in the first half of the decade. But for some home owners caught with having to sell their property and negative equity, it's a better alternative than having a foreclosure on their credit record.

Scott L. Williams is a realtor with Re/Max Real Estate. He says his office has gone from no short sales in seven years to nine such transactions in the last few months. "Back in the '90s, I became the short sale guru in Sacramento and did several hundred of them," Williams said.

The realtor says he's working with another home owner in Natomas who has to move and has received an offer of $399,000 for her home. That is about $60,000 less than what she owes on it. Like Romero, the home owner hopes the lender will agree to let the house sell for less than the mortgage balance or will make a counter offer.


peterbob said...

These short sales are actually good news, because they allow the price to fall and transactions to take place. I guess that mortgage lenders are willing to write off a portion of the loan rather than dealing with foreclosure and selling the house.

I wonder what is the max that lenders are willing to forgive? It will depend on how "expensive" it is to foreclose and sell the home. Any ideas?

Happy Renter said...

From what I understand you can't finance an auction purchase.Because of this houses can sell for 60-70% of current market value. I'd assume they'd be willing to accept 80-90% of the owed amount rather than risk more at auction.

Banks also don't want to hold a house in a declining market. Once forclosed on, a house is generally considered a liability.

Happy Renter said...

Now that we are on the subject of foreclosures it's inevitable that we will get to single action law.

California is a single action state. Banks can foreclose but cannot sue the client or go after them in bankruptcy court once they foreclose. The single action law only applys to the primary residence.

If an investment property goes into foreclosure the bank can go after everything! The flippers with a house on the market don't know how #%$^&# they are.

Happy Renter said...

I wonder if foreclosures and bankruptcys will be accepted.
When idiots lost their savings on the dotcoms it was funny but knowone was really shamed because it wasn't that unusual. I wonder if foreclosures will be talked about in the same mater of fact way.

Happy Renter said...

Does anyone have any may numbers yet?

Happy Renter said...

The guys over at the tower blog are celebrating Saca getting the financing for the towers.
It was mentioned that saca has 200 nonrefundable deposits, and 500 refundable deposits on the 800 units. Their estimate for completion is summer of 08'. Units are selling for $600 a sqft.

The funny part is Saca was quoted saying, "A lot of people didn't think that I'd get this done. They said that there isn't a market here for this kind of project," Saca said Thursday. "This proves that I was right. We're creating the market. I'm golden with (Deutsche Bank)."

As of now he has financing and a giant water filled hole in the ground. I wouldn't go celebrating yet.

tom stone said...

if i held the paper on sacramento homes i would be very happy to sell all of the notes at 80 cents on the dollar for firsts,even if the borrowers were current...this is extremely high risk paper and most of the loans made in the last two years will go bad...people are driven by emotion and guided by myths...the downward path will be no more rational than the runup was.

Anonymous said...

How to lowball a seller...

1. Put out lowball offers on multiple homes. If one bites you're ready to start dealing. Chances are if you put in a lowball offer all sellers will return with a number they feel comfortable with. (Which probably won't be close to your price) When they do show them what their neighbor is willing to sell for. There's a good chance when they see the neighbors number they'll try to go lower. This is the reverse of a bidding war. ;-)

2. The second way to lowball a seller requires two buyers working together. The buyer that does not want the house to be lowballed submits a REALLY low offer. What this does is shock the seller into a new realty of what their house is worth. If the seller accepts the offer you "gracefully" try to bow out but, while doing so have buyer number two submit an offer at the same price. The seller will forget about buyer one and sell to buyer two. If the owners don't accept the offer you play with them a little then get out. At this point you "softened" the seller up to accepting a lower offer. This is where buyer two comes in knowing how low the seller will go. ;-)

*The second technique is something only buyers can do together (not agents) and it won't make friends if people find out about what your doing. So don't ever tell people how you got the house for the price you did.

Anonymous said...

Yeah, your close. That scenario happened to me when I sold a house in a similar market. In my case the "buyers RE agent" was behind the attempt to lowball me, and MY RE agent was in on the conspiracy! Thats why I know that Dual agency CAN'T work. I investigated the "offers" and tried "offering" on my house through a friend ( also low-balling) throught the same buyers agent---thats how I learned of the conspiracy...the buyers agent told me(he didn't know that I was the seller). I tried to get out of the listing, and the listing agent wouldn't let me. I asked my agent if it was okay if I promoted the sale of my house. He gave me lots of hokey excuses...blah blah, but bottom line, it was my house. I sold it!~ I got three good, offers in less than 2 days (asking price or greater). I accepted the highest offer 5% above my asking. I was told by my agent that I was 5% - 10% too high on my listing. He is the one who suggested the price? go figure.

Unfortunately my crooked RE agent got more on his commission, but I learned a valuable lesson. I created a bidding "war" from prospective buyers by selling my own house(even though listing went through a Realtor). I learned that most "listing agents" are lazy complainers. Many just never learned how to SELL. They just know buzz words "Show and SELL", "curb appeal", yada yada..pretend salesmen. Most know nothing about sales.

My costs of sale was about $5.00. about 1 hour(to buy the music, tortillas, and balloons) A couple of bright colored balloons, garish looking hand made flyers in another language distributed at a laundromat, and appropriately loud ethnic music(the song "Viva Mexico") played in the house audio system during walk throughs. I got rid of the "chip and dip" on the table and replaced it with tortillas and salsa, opened the empty garage and told my open houses guests it would be a great place to add another "unit".

I sold it to the highest bidder in two days at 5% above listed price. The listing agent asked me how did I learn to do that? I asked why he thought he should get 3 1/2 % commission. He kept his mouth shut.