A term used a lot today in real estate is “Short Sale”. What is a Short Sale? Short Sale is a process when you sell your home for less money than what you owe to the bank. The bank ends up getting less money back from you and end up losing money on your home. In a sense the bank is short its money. If you remember when you purchased your home you signed a “Promissory Note” to the bank. You promise by signing a legal document to pay the bank back the money you borrowed from them. Some people have seen the value of their home drop to less than they borrowed to buy it….a lot less! Sometimes as much as 75%! Imagine buying a home and borrowing $500,000 from the bank. Then the real estate market goes down and your home eventually is only worth $250,000. You lost $250,000 on your home and you still owe the money to the bank. (Remember you signed a $500,000 Promissory Note to the bank).
So, what do you do when your home loses value? Some home owners are trying to make ends meet and continue paying their mortgage. They are still employed and financially secure so they live with it and look forward to the market getting better. Others home owners have lost their jobs and can’t afford to pay the monthly mortgage. You can walk away from your home, but we never advise that. If you do walk away, then the bank can foreclose on your property and that will severly hurt your credit, sometimes making your credit far more worse then its at now. I know you may be saying “why would I care about my credit at this point??” You should always care about your credit, even if you have to file fore bankruptcy (which will be a future post). The best way to resolve the loss of value in your home, we advise, is to call the bank and apply for a short sale. Some banks are more willing than others are. It all depends on the financial state of your bank. Once you get prelim approval for the short sale you will need to hire a Realtor to help with the sale of your home. The bank has the final right to approve or deny the sale of your home. The process is long and challenging but ultimately it is worth the effort verus a foreclosure.
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Buying a home is one of the most important purchases you will make in your life. In order to make the right decision the first time you need to be prepared by doing your homework early. Consider the following before starting negotiations:
Be Prepared
Research the housing market in the area you want to buy. Once you have information about the general area, focus on the particular property and seller. Look for answers to questions such as:
- Why is the homeowner selling? Ask the seller directly or ask your agent to find out. Are they selling because of employment? Did they out grow the house? Or is there something wrong with the area?
- How long has the home been on the market? Anything past six months on the market should be questioned. Anything past one year must be questioned! Was it over priced? Has there been a lot of differed maintenance? Is there a large number of homes for sale in the area?
- How much did the seller pay for the home compared to the current asking price? Your agent should be able to find out the answer. Find out how much money the seller is going to make or lose on the deal. Maybe you can convince the seller to act as the lender and hold the note (the promissory note that you will sign) for a lower interest rate than you can get at the bank.
- What is the seller’s time frame for selling and moving? Does it fit within your schedule? Do you have a schedule? Use the sellers schedule to bargain with.
- Are there any defects in the home or problems with the surrounding neighborhood? Make sure you have your property inspection completed in the time frame that is stated in your purchase and sale contract. You can ask the seller to make the necessary repairs or even try to get a discount on the purchase price.
As the potential buyer, you want the advantage. While you want answers to all your questions to the seller, reveal very little about your circumstances. Do not give the seller personal information such as your income, the maximum you are able to pay for a down payment or the home, or when you want to move. Make sure that your agent knows not to reveal any such information to the seller or his/her agent.
Also, do not let the seller see how much you want the property. If you appear desperate or overly enthusiastic, the seller then has the stronger bargaining position. When meeting with the seller or listing agent, keep your emotions in check.
Establish a Timeline
Find out if the seller needs to have the sale closed sooner rather than later. If the seller is feeling pressured to sell, use that to your advantage in negotiating. Even if you, the buyer, are the one with the deadline for purchasing a home, don’t let yourself be rushed into making concessions or a purchase you may regret later.
Walk Away
Always remember that you are looking for the right home for the right price. If you are not able to negotiate with the seller, then always remember you can walk away and continue looking. There are a lot of properties available, with the right agent you will find it.
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After extensive research we have come up with the list of the top ten WORST performing cities for home values in Orange County. The list compares average home price changes over a one year period. Check to see if you zip code is listed as the one of the worst:
CITY ZIP CODE % DROP
Foothill Ranch 92610 -35.30%
Seal Beach 90740 -33.30%
Dana Point 92629 -32.80%
Laguna Woods 92637 -25.30%
Irvine 92606 -24.80%
Newport Beach 92662 -22.20%
Costa Mesa 92627 -22.10%
Fullerton 92831 -20.00%
Rancho Santa Margarita 92688 -11.80%
Orange 92866 -11.40%
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An important question every one is asking: Has Housing come back in Orange County? Have we passed the bottom? Whats going to happen to real estate tomorrow? Well, no one we know can predict tomorrow, but we know where real estate was last year and what the trend is now.
The Great O.C. real estate crash wiped out an average between 40%-60% of the home values. Many have lost their homes, others are still struggling. On average Orange County is up 13% from the bottom (measured by the S&P/Case-Shiller index). Our trend is slightly up, but as we have said before, “at least its up”. As long as we don’t have further erosion of the employment sector, Orange County should hold value and continue its slow growth upwards.
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