Opportunity Knocks

There are some desperate sellers out there, but perhaps none so desperate as banks. That's right - banks that own foreclosed properties are anxious to get them off their hands. After all, their business is lending, not property management.

If you are pondering the purchase of such an "REO," or Real Estate Owned property, how do you find one, and then determine if it's the right buy for you? Banks work almost exclusively with real estate professionals, so your best bet is to begin your search at your trusted local agent's office.

Chances are the broker will have a list of REOs to suit your needs and budget. While banks don't usually price these properties much above what they're willing to finally accept, lower offers on these listings stand an excellent chance for consideration.

Look for houses that have been listed for more than 90 days, and offer somewhere between ten to twenty percent below the asking price. However, do be aware of potential hidden costs associated with foreclosed properties.

Owners who vacate a foreclosed home may have left plenty behind in need of repair. Be sure to perform a thorough inspection - with electrical and gas systems operating - and ask your real estate representative to factor repair costs into your offer. If you're smart, it's a real buyer's market, but only if you buy!

Time For a House Call

A real estate professional recently coined the term "Price Denial Syndrome," a troublesome condition that afflicts sellers having a hard time facing the realities of today's markets. Of course it’s difficult to make a pricing concession, but an overpriced home simply will not sell.

Perhaps the sellers argue that they really need the money, but then they have to ask themselves what they'll do for money if the home doesn't sell. Maybe they figure that they can shoot for the moon now and reduce the price later if they must. However, the longer a property remains unsold, the more likely it is that even more price reductions will follow. Then it’s taken even longer to get a sale at a lower price.

Some sellers might suggest trying a higher price just for the first two weeks, but that's when the interest of serious buyers is always greatest. Those buyers usually look within a certain range, and won't even make an offer at all on an overpriced property.

Most importantly, if the sellers need to buy another home, time is of the essence. If the sale takes too long, they'll be buying at a time when prices and interest rates may begin climbing again.

If you're suffering from PDS, pay attention to the news, review your home's Competitive Market Analysis, and call me in the morning!

The New Math

A “new” solution to the "gloom and doom" scenarios is on the horizon, and it's called "cause and effect." Just as home prices have fallen in many markets, buyers are responding strongly to the stimulus.

Like today's stock market provides excellent opportunities for investors in it "for the long haul," so too does today's real estate climate appeal to buyers with long-term expectations. And, the more buyers take advantage of current conditions, the more prices will eventually begin rising again.

That is due to a number of reasons, one being the subsequent drop in inventories, and another being the rising cost of new construction. So, those markets where home prices have dropped the most are experiencing a rise in the level of home sales taking place.

Areas where buyers are entering the fray again are well poised for recovery, and it's possible that the prices are finally bottoming out. The recently enacted housing stimulus bill is helping too, as over two million first-time buyers are predicted to take advantage of the new tax credit.

In 2009, those markets with affordable housing combined with healthy local economies will continue to see growth. Cause and effect is already in action, and you should be, too. Consult with a financial advisor and a local real estate agent to get the best results from this new but age-old formula.