Archive for September, 2007
Foreclosures, BPO, REO, and Me
September 21, 2007
In case you hadn’t heard, foreclosures are on the rise. For years, buyers have been asking me about foreclosure opportunities, but up until the last couple of years, there really haven’t been a lot of them in Santa Cruz County. This is owing to the fact that there was such a rapid and steep rise in property values. Virtually all owners who found themselves getting behind on their payments could either easily refinance, or sell their home for at least their outstanding loan balance (plus closing costs, such as commission).
But things are certainly different now! I have begun working with a couple of colleagues at Thunderbird Real Estate, and together, we have formed “The MSE Group” (MSE being Mike, Seb and Ed - clever, eh?). The three of us will together be working with sellers who find themselves in foreclosure or who need to do a “short sale” (sell their property for less than the outstanding mortgage balance plus closing costs). If you know anyone who is in this situation, please contact me - we will be glad to be of assistance to them.
Another aspect of the foreclosure market is BPO (Broker Price Opinions) and REO (Real Estate Owned). There are many reasons why a lender may request a licensed Real Estate agent to perform a BPO (essentially, a mini-appraisal) on a home. One big reason is that the home is in the foreclosure process, and the lender wants to know what the property might reasonably be expected to sell for, given its current condition. Lenders pay Realtors a small fee (ranging from $30 to $90 or more) for a BPO.
A property becomes an REO when the lender has taken back title to a property. Usually this happens after a foreclosure auction on the courthouse steps, when no other bidder offers enough to cover the defaulted amount. This happens more and more these days, as the default amount often times exceeds the value of the property. It may also happen when the lender accepts a “deed in lieu of foreclosure” - the homeowner simply hands over the deed to the lender and walks away from the property. Once the property becomes REO, the lender typically does minimal repairs to the property and lists the property for sale on the MLS. There are a handful of agents in our area who regularly get REO listings - it’s a pretty tight-knit club of agents, to say the least.
It is said that a good way to get in the “REO Listing Club” is to do BPO orders for lenders. Towards that end, I have registered with several dozens lenders and “BPO Mills” in the hopes that I will get some REO assignments. Yesterday, I got a BPO assignment from ClearCapital, a “BPO Mill,” for a home way high up in the mountains of Boulder Creek.
I went up there yesterday to look for the property. Even though I have a GPS unit, and know the area fairly well, this property was difficult to locate. Fortunately, I had a contact to call - an agent from “over the hill” who will be listing this property for the lender. She helped me find the property - she told me it took her three times to find the place. She also told me to be careful, as the property had been raided by the police earlier in the summer, and 2,000 marijuana plants had been seized. Nobody was at the property at the time, she said, but they did find a loaded .22 caliber pistol on the premises. Yikes.
Access to the property was behind a locked gate. A few dozen yards before the gate, there was a relatively late-model pickup truck. It could have belonged to a neighbor, but if so, it was parked pretty far from any neighbor’s house. I proceeded with caution on foot, past the gate, and down the dirt and gravel driveway. A hundred yards or so later, the home site opened up, and what to my wondering eyes should appear…
But a junkyard. Every type of vehicle was littering the premises. Cars, trucks, a bulldozer, travel trailers, mobile homes - you name it, it was there. Cars, and garbage. Several outbuildings, with electrical wires running to them, just lying on the ground. The property itself was big - around five acres, and it was just covered in junk.
Up there in the woods, with the gathering dusk, it can sometimes feel kind of spooky - especially knowing a bit about the history of the property, and what with that mysterious white pickup truck parked just outside the locked gate. Was there anyone still on the property? Occasionally I would hear a noise - an animal? The wind in the trees? Was there somebody watching me?
The interior of the house was, likewise, a disaster. Completely trashed. Were there squatters? The pilot light for the water heater was still lit, I could hear the gas hissing and the flame sputtering. Downright eerie. I spent about a half an hour on the property, checking it out, taking pictures - and then I got the heck out of there, sweating lightly in the cooling air of sunset.
I made it out of there, and home, safely. It took about two hours of research and data entry to write up the BPO order. It was hard one - few comparable recent sales, and the enormous job of the “trash out” was hard to guestimate. I’ve had to have a few abandoned vehicles before, but just cars and light trucks - nothing on the scale of this.
All told, I put about four hours into this BPO, what with the drive to Boulder Creek from Capitola and back. All this for a lousy $90. Was it worth it? Of course not! But it sure made for an exciting day.
Technorati Tags: appraisal, foreclosure, BPO, REO
Posted by SantaCruzBroker at 12:29pm
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Santa Cruz Market Update, August 2007
September 15, 2007
Another edition of my Santa Cruz County Real Estate Report is out, with sales data for August of this year. On the surface, the numbers look anywhere between “not so bad” and “good.” The #1 thing that most folks look at is Median Price - the “good” news is, it’s up - in fact, it’s set another record, with the median single-family residence home price hitting $794,200. The average price is considerably higher than that - $890,000. What that tells me is that the mid-and-upper levels of the market are relatively fluid, but the lower-end of the market (where first-time buyers, sub-prime buyers, etc.) are buying is withering on the vine.
There are other interesting items in the report as well: home sales were down 3.5% from July, and down 25.9% from August of 2006. Year to date, home sales are off 12.6% - not too bad, but considerably down from the peak in 2005. But there is some good news for sellers out there: the amount of inventory has dropped down 0.4% from July, and is down 4% from August of 2006.
It’s an interesting market, that’s for sure. There are lots of opportunities for buyers in the lower part of the market (condos, and smaller homes in the rural/mountain areas). If you’re in the market for first-time buyer type properties, and you’ve got a pre-approval lender from a reputable lender, it’s like shooting fish in a barrel out there. If you’re looking at a bigger house or a prime location, be prepared to compete. Well priced, prime properties are still moving relatively quickly - usually at or sometimes even above asking price.
Technorati Tags: market data, sales data
Posted by SantaCruzBroker at 2:51pm
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Septic Blues
September 11, 2007
Did I mention, I put a house into escrow yesterday? Yep, sure did - nice little place down in La Selva Beach. Needs work, being sold “as-is.” Of course, the California Association of Realtors Purchase Agreement is an “as-is” contract anyway, so there’s no reason for sellers to get all huffy about selling “as-is.” Really, it’s purely a marketing and negotiating tactic. I mean, what seller is going to say, “Yeah, hit me up for every nickel-and-dime defect you can find in the place, I’m happy to give you credits!”? Exactly.
So anyway, it looked like we were going to be getting the home for a decent price. Buying any home these days is something of a gamble, what with the uncertainty of the market and all. To induce the sellers to accept a lower price than they were asking for, we offered them a quick release of our physical and financial contingencies. That meant we had to get our inspections done chop-chop, as well as the appraisal. Being the good Realtor that I am, I ordered everything up on Monday. First, Septic, then Home Inspection - and somewhere in there, the appraiser would come out and do his thing.
So today, the good folks at Art Edsberg Drilling and Sanitation (hi, Jasper!) came out. They’d serviced the system a few years back, in 2000 - so they knew right where to find it. The started working right away. About an hour into the process, the bad news came down: the tank was toast. They had told me when I ordered the inspection that it was a concrete tank - hooray, I thought! Often times in an older home, the tank will be redwood, and then for sure, it’ll have to be condemned. However, this tank appeared to be the original poured-in-place tank from when the house was built i n the 1950’s. It was leaking right out of the bottom.
Now, here’s where it gets tricky. The leach field did pass the 30 minute flow test. However, according to the septic company’s records, the system had had problems in the past. Their feeling was that the leach field should be replaced, too - with a pit system. They’re going to work on getting me a bid for repairs - should be around $20,000 to $25,000. The good news here is that they only charged the buyer $525 for the work they did - $75 off the $600 estimate!
Now, the sellers had made no disclosures about there being a problem with the septic system. They had done a termite report, but not a septic report. In fact, I had asked the listing agent about the septic system, what information did he have on it. He said something to the effect that he knew the tank lid had been replaced a few years back. Hmm. Not much of a disclosure, and it kind of lead me to believe that there was nothing too wrong with the septic system.
So now we have a challenge. My buyers, of course, are not going to want to fork over $25K for septic work. We are going to hit the sellers up for this money, naturally. However, we just negotiated a low price, so they may feel they’ve already done as low as they can go. The good news is that we have the report on our side: if they don’t kick down for a new septic system, they will have to pass this information along to the next buyer. Also, the home was in escrow twice before, but fell out “due to no fault of the property.” That’s as may be, but how is it going to look to buyers and their Realtors when they see that it has ping-ponged in and out of escrow three times? It looks bad - and then when they find out the septic system is toast, what might other potential buyers think? Exactly, again. Better to pay for a new septic system and keep my clients as buyers.
But I haven’t seen the report yet - I should get that tomorrow. I’ll let you know how it goes. 
Technorati Tags: seller credits, septic, septic system
Posted by SantaCruzBroker at 7:12pm
1 Comment »
Foreclosure Specialist
September 07, 2007
I spent the last couple of days up in beautiful Milpitas, California attending a seminar called The Foreclosure Specialist. I’ve attended a lot of training sessions, workshops, and seminars about real estate - but I must stay, this was the best one I’ve been to. It was loaded with information about the three stages of the foreclosure process (pre-foreclosure, auction, and the “REO” stage where the lender takes back the property and now has to sell it).
I was sitting in class yesterday morning, waiting for the session to start. I have a Treo 700p (terrible phone, don’t buy one - now maybe that the iPhone has dropped $200 in price, I’ll get one of those), and I can kind-of surf the web on it. One of my favorite sites is the L.A. Times, because they have a good mobile edition. And, sure enough, there on the headline news of the L.A. Time was a story about foreclosures going to record highs:
Sub-prime mortgage woes push new foreclosures to a record high
But that’s yesterday’s news! As I was searching the LA Times web site to find this article, I came across a brand-new article from today’s edition:
Foreclosure notices set record again
It seems that the percentage of homeowners who have received a Notice of Default hit an all-time high in the April-June quarter, rising to 0.65%. Now, that’s just Notices of Default, only a fraction of those (10-20%) will actually end up getting foreclosed on. Even so, it does point to a lot of foreclosures going on.
The Santa Cruz Sentinel, our local rag, has also been chock full o’ foreclosure news, although the most recent article I could find is this one:
No relief for foreclosure wave
Just do a search anywhere - I like using news.google.com - and you will find all kinds of alarming information about foreclosures. Don’t be alarmed, though - it’s all part of the cycle of boom and bust. We’re making our way down towards the bottom of the cycle. In another year or two, we should reach bottom (”they” are saying it will come in 2009) and then we’ll begin working our way back up to the top of the cycle, and, weeee! We’ll do it all over again.
The good news is that the foreclosure boom is creating a lot of opportunities for folks who are interested in investing in real estate that really haven’t existed for a long time locally. After all, the time to buy, really, is when everyone is selling, and the time to sell will be in a few years, when everyone will be buying again.
In the meanwhile, if you have questions about how you can take advantage of this down market, contact me. After my two days of intense training, I don’t feel shy about calling myself the Foreclosure Specialist.
Technorati Tags: foreclosure, short sale
Posted by SantaCruzBroker at 7:58am
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Just Say No - to County Parks?
September 04, 2007
There’s an interesting article that came out in the Santa Cruz Sentinel the other day:
Pleasure Point residents speak out against improvements to Floral Park
We here in Santa Cruz County are very accustomed to NIMBY-ism (Not In My Back Yard) when it comes to things like big-box retailers and high-density housing projects. It was very interesting to read, though, about how there is local opposition to improving a county park (Floral Park) in Pleasure Point.
To me, it’s one thing to fight against putting a Home Depot in the Lower West Side of the city of Santa Cruz. That, I can understand, because traffic down there really is very congested. I’m less certain about the fight against higher-densitty housing: in a society built on never-ending growth, higher density housing is the only logical way forward for Santa Cruz County. We don’t truly have the luxury of burying our heads in the sand and saying “Nope, not gonna do it” - we’ve already tried that, and look where it has gotten us (checked the price of housing in Santa Cruz lately? You see my point).
I am very certain, though, that quality open space is one thing that makes Santa Cruz the great place that it is. To me, it is ludicrous to fight against improving Open Space based on the grounds that more people might actually take advantage of it. I cannot see under what circumstances use of the space would skyrocket to the point where it truly becomes a neighborhood nuisance. What do you think?
The improvements in Floral Park are to be paid for by the County of Santa Cruz Redevelopment agency. They have a lot of improvements for the 2007-2008 fiscal year - looks like some good stuff is coming our way.
Technorati Tags: parks, redevelopment, recreation
Posted by SantaCruzBroker at 5:25pm
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