In looking at the Tahoe Donner subdivision in Truckee, which comprises the largest percentage of the sales in the overall area, the statistics are similar.  In 2002, there were 302 single family homes sold, with a median price of $495,000.  The highest median market value was reached in 2005, at $765,000.  At the end of 2009, the median price is at $568,500, again, a 25% drop since the high in 2005, yet still a 29% increase from where we were in 2002.  And similar to the picture for the entire area, the number of homes sold in 2009 in Tahoe Donner (225) was up 16.5% from 2008.

During the past year, we’ve seen our share of distressed properties come on the market, although not near as many as many areas of our state and country.  Of the 787 single family homes that sold in 2009, 127 (16%) were foreclosures and 85 (11%) were “short sales”.  We currently have only 23 foreclosure properties active on the market (3% of the total inventory available), and 102 “short sales”, comprising 14%.

As we look towards this new decade, we’re excited about the opportunities in our industry that will hopefully allow many more buyers to realize their dreams of home ownership, be it here in our mountain paradise, or wherever their dreams may take them.

• The extension and expansion of the credit has left some recent buyers wondering why they were in such a big hurry. Meanwhile some would-be buyers are feeling a little less confident. All are worried they will or have paid too much.
• Housing demand is typically created by one or more of the following: Household formation, employment opportunities, attractive financing and the lure of home equity. All of these are lacking in my market.
• I sense that many if not most of the recent first-time buyers would have eventually purchased a home regardless. The looming expiration of the tax credit served to get them of the fence. This created a somewhat false demand.

In short I do think we’ll suffer a bit of a hang-over this next year. As a generality banks are holding a bit firmer to their prices when dealing with fore-closed properties. I do expect interest rates to rise at some point. Short sales are just as mixed up as they ever have been. It will be interesting to see how things turn out for the big auto companies after the “cash for clunkers” revenue stops showing up on their bottom line. Perhaps an indicator for the near future in our housing market.

That said, if you’re in the market for a home now, don’t be too concerned. Your income should be secure. The monthly payment should be conservative in relationship to your income. It needs to be the right house at a fair price. If all those pieces fall in place, I say go for it. Prices will inevitably rise & fall and I think the joy of home ownership has been relatively under-rated lately. Planting a tree or shrub wherever you wish, knocking a hole in the wall to hang the family heirloom or driving down your street to the “best” house on the street; some things are priceless.

Many buyers are still anxiously hoping to close in time for the credit. There are currently about 1890 pending sales in the Reno-Sparks area for stick built, single family homes.  Of this number about 61% are short sales which typically take 60-90 days to close. Buyers will need to consult with their REALTOR if they are concerned about closing in time.

According to Moody’s chief economist mark Zandi, by the time the credit expires it will have been responsible for sales of 400,000 new and existing homes, out of a total of 1.4 million sales.  That is about 28.5%.  Personally 75% of the buyer transactions I have closed so far this year were with buyers who qualified for the tax credit. 

As of today there are only 28 more “escrow closing” days. There are 4 holidays between now and the end of November, and with escrows only recorded Monday through Friday time is definitely of the essence. 

Currently there are over a dozen bills presented to Congress to extend the credit. If you are a buyer waiting to close and concerned that you might not close in time, I would highly recommend that you contact your Representatives in Congress and urge them to extend the credit. The National Association of REALTORS estimates that for every home sold $63,000 is pumped into the economy which is the equivalent of one new job.  This credit is a win-win for both home buyers and the economic recovery. 

A recent Zillow survey found that 70% of prospective first-time buyers said that the tax credit was the primary influence, a significant influence or some influence to their purchase decision.  Zillow stated that if the credit were extended it could account for another 334,000 home sales.  With increasing foreclosure rates, this could be a major factor in whether or not we see a good year next year or one that has continued negative pressure on prices. 

The bottom line is that regardless of whether you have enough time to close before the tax credit expires, conditions are still ideal to purchase a home – low prices and competitive rates.  If you get the tax credit – it’s a great bonus!

Those of you considering buying a home in a competitive market know or may have heard how frustrating the process can be. In certain markets, a buyer can find himself competing against 3-18 other offers for almost any listing that he writes on with many of the offers being similar in terms of price. However there are steps you can take to position yourself well to win a bidding war. And the discipline and thoroughness to do so is well worth the effort given the weeks and months of extra labor involved for you and your buyer’s agent that would come if you just wrote standard offers on listings you found appealing and continually got beat out for the homes you like.

If you’re wondering how you can make your offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms.  Price is probably the biggest factor in trying to compete with a multiple offer situation.  But if there are many offers within the same range, there are definitely things you can do to make your overall offer the best in the mind of the seller.

Price is Most Important – Remember, your offer price is a NET price, which means your offer price less any credits.  So many times buyers don’t understand that.  As an example, if you offer $350,000 with $10,000 credit towards closing costs, your are offering $340,000 for the property, NOT $350,000.

A Complete Package- MAKE YOUR OFFER A COMPLETE PACKAGE – include your Purchase Agreement, and addendums that apply .   Also include your Loan Pre-Approval, Proof of Funds for the down payment, a copy of the deposit check, SRPD Waiver and any other documents specifically requested by the seller/listing agent.

Get the Property History – Ask your buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed or Sheriff’s Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.   Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.

Determine Comparable Sales – In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.

• Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.
• Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.
• Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.

Analyze Listing Agent’s REO Solds- Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.

• Ask your buyer’s agent to look up the listing agent in MLS.
• Run a search using that listing agent’s name to find the last three to six months of that agent’s listings.
• Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.

Ask About Number of Offers – If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.   If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.

Submit Preapproval Letter- It goes without saying that you do not want a prequalification letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.   Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the preapproval letter from this lender, along with the letter from your own lender. Banks don’t trust other lender preapprovals but trust their own departments.

Don’t Ask for Repairs / Inspections – Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted. Shorten your inspection period to (10) days or less – really, it only takes a few days to book an inspection, and even then maybe a few days after that to assess the situation with the property.  The seller, especially if it is bank-owned, will really like a quick inspection period.  Plan on paying for all of your own inspections.

Offer to Split Fees – Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.   Many banks negotiate discount fees for title insurance. If the bank will pay for the owner’s policy, the ALTA policy might cost a bit more. But it’s still a good idea to let the bank choose title if you want your offer accepted.

Large Earnest Money Deposit - Put as much of your down payment down into your earnest money deposit when you write the offer—very aggressive but it makes a REAL good impression. The earnest money is part of your down payment anyway so there is not much difference in putting it down a month early. The seller knows you’re for real and have money based on your earnest money deposit more than your stated down payment on the contract.  If you break the contract you lose your earnest money deposit so a huge earnest money deposit says to the seller you’re for real and there’s no way you are going to lose your earnest money deposit by breaking the contract.

Short Escrow Period - Write as short an escrow period as possible, with respect to the amount your lender will need to close the loan.  Consult with your lender on the type of loan you are using and get their input as to how many days he/she feels they can comfortably close the loan.

Consider the Appraisal Consequences – If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don’t despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing.

Escalation Clauses – Working with your buyer’s agent you can add a clause to your contract which says you are willing to pay an amount in excess of the other bidder’s highest offer.   Make a statement with your over bid increment.  Your bid increment should be in relationship to the sales price.  When you escalate  DO NOT JUST STOP AT EVEN CUT-OFF MARKS LIKE MOST AGENTS DO. Always escalate $1700-2700 above where you think the cut-off mark is going to be. You want to predict where your enemy is going to finish and position yourself ahead of them.

Agent relationships – Believe it or not it comes down to this in many instances of where things are so equal that your buyer agent’s previous experience with the listing agent comes into play.

Write your offer to win.

Short sales allow the cash-strapped seller to repay the mortgage at the price that the home sells for, even though it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.

In the Northern Nevada area, currently it is estimated that close to 1,800 homes are in danger of foreclosing. It is happening in all price ranges. Local experts say that even high-priced homes are not immune.

Dickson’s new CDPE designated agents: (shown)Teri Shields, Jeff Geisler, Tammy Olivas, Claudia Byrne, Chris Barns, Victoria King, Jill Deeter, Dan Rider, Andrea Green, Helen Graham, Beth Nitz, Amy Shocket, Mary Robinson, (not shown) Bonnie Beck, Cindy Henderson, Donna Clark, Ivy Cohen, Cyndi Dawson, Gary Edwards, Pam Eikleberry, Denise Fox, Jan Houston, Jen McDonald, Mandie Jensen, Christy Klinger, Anne Lavoy, Gerry Martin, Margie McIntyre, Dee McNeely, Brenda Mee, CJ Risley, Darlene Sharp, Jan Sluchak, Alison Elder, Norm Nicholls, Lil Schaller, Kane Schaller, Emily Sterling, and Maryann Truitt.

“Our job as REALTORS® has changed over the past several years. In our area, our number one goal is to help homeowners stay in their homes. If we are unable to do that then assisting them in a short sale may be a very viable option. A short sale doesn’t impact a homeowner’s credit as disastrously as a foreclosure does. A short sale usually nets the original lender more money and it does not devastate the neighborhood pricing. However working with lenders in a short sale situation can be very frustrating for sellers, for buyers and for real estate agents. We believe successful short sale closings require specialized training and we were pleased to have had 54 agents in this two-day training.” said Nancy Fennell, president of Dickson Realty. “In addition to this two day training, our firm holds monthly “short sale conversations” at each of our branch offices. We have sent our managers to short sale training around the country and we have pooled that information into our Short Sale Toolkit. Because policies and procedures change daily in this market, we find meeting monthly is a tremendous advantage for our agents. We are proud that our agents believe as we do in training, training and more training.”

Alex Charfen, founder of the Distressed Property Institute in Boca Raton, Fla., said that REALTORS such as these Dickson agents with the CDPE designation have valuable training in short sales that can offer the homeowner much better alternatives to foreclosure, which virtually destroys the credit rating. These experts have a better understanding of market conditions and can help sellers through the emotional experience, he said.

The Distressed Property Institute opened in January 2008 and provides training on-site and online. The CDPE is the premier designation for Realtors helping homeowners in distress and handling short sales.

To find our CDPE agents, visit us online at www.dicksonrealty.com or call any of our local offices: Caughlin Ranch 775.746.7000; Damonte Ranch 775 850.7000; Sparks 775.685.8800; Montreux 775.849.9444, or Truckee 530.587.

Overall, inventory is relatively low with less than two months supply on the market now at this price point.

• In this price range, in some areas we are actually seeing appreciation. It’s not uncommon to see multiple bids and often the price is actually bid up from the list price.
• We may have some challenges with the purchase appraisal.
• The well priced, active inventory is dominated by REO’s & Short Sales

Sans the distressed inventory this is exactly how we counseled buyers when the market was hot (in my market ’03 – ’06). Kind of ironic under the circumstances and one would hope that consumers and real estate professionals proceed with some caution 

The five year ARM’s originated during the boom are beginning to reset now. For many if not most homeowners a lack of equity makes refinancing impossible. Meaningful loan modifications are still pretty rare and short sales still anything but “short”. With this in mind we will undoubtedly see increased foreclosure activity and that will likely create another drop in median value. So how should we proceed?

Fist of all Buyers & Agents should talk about this. Some areas and types of properties are more vulnerable than others. For example smaller, poorly funded condo associations may really struggle if a significant number of homeowners stop paying dues.

Secondly focus on the monthly payment and long term tax benefit rather than the market value of the property. We often see monthly payments equal to or less than monthly rental value. For the moment we shouldn’t consider home equity our nest egg.

Buy conservatively. I know, there are a few ½ priced mansions out there and that can be alluring. I like to recommend that the buyer at least consider the possibility of hard financial times ahead. Contemplate job status, reserves and the length of time the buyer anticipates owning the home. I have a physician client that recently told me for the first time in his career he now has big gaps in his daily appt schedule. It seems that few people are immune from this downturn.

In short I think we all must keep our wits about us and learn from the recent past. Those that ignore history are doomed to repeat it…

PURCHASING A HOME IN THE FUTURE…

• Fannie Mae Insured Loans for Primary Residences - Foreclosure requires a 5 year wait before purchasing again vs. a 2 year wait if you sold through a short sale.
• Fannie Mae Insured Loand for Non-Primary Residences – Foreclosure requires a 7 year wait and short sale again will only require a 2 year wait.
• Future Loan Applications – On any 1003 application the borrower who has a foreclosure will have to mark “YES” to the questions “Have you had a property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”, yet a borrower who has done a short sale will not have to answer yes to this question.

CREDIT HISTORY AND CREDIT SCORE

• Credit scores can be lowered anywhere from 250 to over 300 points with a foreclosure and will typically affect your credit score for over 3 years.  With a short sale only late payments will show and after sale the mortage will be reported as paid or negotiated.  The short sale’s affect can be as little as 50 points and can be as brief as 12 to 18 months.
• Credit history for foreclosure will remain as a public record on your credit history for 10 years or more.  A short sale is not reported on a credit history, typicall it shows the mortgage was “paid in full, settled.”

EMPLOYMENT

• SECURITY CLEARANCE – If you have a security clearance, a foreclosure can result in a revokation of your clearance, where typcially a short sale on its own does not challenge a security clearance.
• Your current employment can be affected if your employer checks your credit regularly.
• Many employers are requiring credit checks when hiring for new positions.  A foreclosure could challenge future employment opportunities.

DEFICIENCY JUDGEMENTS

• In 100% of foreclosures in Nevada the bank has the right to pursue a deficiency judgement.  With a short sale the lender often agrees in writing to give up the right to pursue a deficiency judgement.
• With foreclosure the price the home sells for after the bank gets it back through the foreclosure process is often significantly less then the proceeds they would receive in a short sale.  Thus the deficiency balance is typically much higher with a foreclosure than with a short sale.   

There is a common misconception that foreclosure and shortsale are equal, but as you can see the truth is that the consequences of a short sale can be more favorable for homeowners.

If you or someone you know if facing foreclosure please contact me and I can help you understand the options available to you and give you referrals to others who can help.

Foreclosure crisis over right? I think not! There are some serious issues looming, some are here now:

• Notice of Defaults: Up over 100% when measured against last year in Washoe County. The foreclosure moratorium (Winter ’08 – Spring ’09) put a cork in the bottle for a few months but we’d better brace for the next wave.
• Option ARM’s: This next wave will be different and not just a sub-prime problem anymore. These are often nice, sometimes upscale homes and lenders were often incentivized to get these borrowers as much credit as possible. These borrowers have (or sometimes had) good jobs and great credit. For many “Pick a Payment” sounded like a good idea at the time. The number of units (properties/loans) re-setting is quite similar when compared to the sub-prime mess. The total dollar volume of these loans is significantly greater.
• 5 stages of grief: Many Washoe County neighborhoods have depreciated 50 – 60% from the peak: Often these homeowners, not yet in distress, are either unaware or in some stage of denial. Besides, “Won’t the bank simply modify my loan”? I for one sure hope so but don’t hold much faith. I recently heard that over 70% of those borrowers granted loan modifications fell into default within 10 months.
• HVCC: The Home Valuation Code of Conduct was intended to head off some of the nepotism inherent in the relationship between the banks & appraisers. It worked and loan officers can no longer communicate with the appraisers. We’re now losing 25 – 30% of our transactions over failed appraisals. I can’t blame the appraisers, why not get conservative? This lame attempt to curb favoritism has created an absolute lack of accountability and favors the unskilled.
• Show me the money: China, Russia, Japan & many others are financing our low interest rates with their investment. That investment dropped significantly last month over fears that the US might be spending too much. Ya think??? No doubt they’ll come to the table with more funds in the future. It’s also likely they’ll want a greater return on investment or higher interest rates.

It’s going to be a long winter but I consider myself up to the task. It will likely fall in the laps of local Real Estate Professionals to fix it this time too.

Now the not so good news.  The median sold price for May 2009 was $166,500.  This is down significantly from May 2008 when the median sold price was $245,000.  As we often hear, “real estate is regional” and the Sparks-Spanish Springs area is no exception.  So here is the figures by area.

Sparks (MLS Area 180) – Median sales price $108,000 with an average days on market of 121 days.  61.11% were bank owned, 27.77% were traditional sellers, and 11.11% were short sales.  66.66% of buyers purchased using FHA financing, 16.66% used conventional financing and 16.66% used cash.

East Sparks (MLS Area 181) – Median sales price $154,000 with an average days on market of 119 days.  69.56% were bank owned, 21.73% were traditional sellers, and 8.69% were short sales.  34.78% of buyers purchased using FHA financing, 16.66% used conventional financing,34.78% used cash and 13.04% used VA financing.

Sparks Suburban (MLS Area 182) – Median sales price $209,000 with an average days on market of 129 days.  48% were bank owned, 40% were traditional sellers, and 12% were short sales.  32% of buyers purchased using FHA financing, 56% used conventional financing, 8% used cash and 4% used VA financing.

South Spanish Springs/Wingfield(MLS Area 183) – Median sales price $210,500 with an average days on market of 158 days.  53.33% were bank owned, 20% were traditional sellers, and 23.33% were short sales.  43.33% of buyers purchased using FHA financing, 33.33% used conventional financing, 20% used cash and 3.33% used VA financing.

West Spanish Springs (MLS Area 184) – Median sales price $165,7500 with an average days on market of 97 days.  57.14% were bank owned, 28.57% were traditional sellers, and 14.28% were short sales.  71.42% of buyers purchased using FHA financing, 21.42% used conventional financing,  and 7.14% used cash.

East Spanish Springs (MLS Area 185) – Median sales price $307,500 with an average days on market of 108 days.  80% were bank owned and 20% were short sales.  20% of buyers purchased using FHA financing, 20% used conventional financing,  and 60% used cash.

Sparks Foothills (MLS Area 188) – Median sales price $215,000 with an average days on market of 130 days.  50% were bank owned, 33.33% were traditional sellers, and 16.66% were short sales.  33.33% of buyers purchased using FHA financing, 16.66% used conventional financing,  and 50% used cash.

If you would like specific valuation for your home, please contact me.

I looked at data provided on the UNR Center for Regional Studies website which has foreclosure data going back to January 2007 for single family homes and condos.  As you can see from the graph, foreclosures have been on a steady climb since they started tracking them.  We saw the peak in number of foreclosures in September 2008.  We then saw a little bit of a dip, most likely attributed to the moritorium placed on foreclosures by many banks.  That moritorium has since been lifted so we may see another spike. 

The graph also shows that the market has done a fairly good job of absorbing the foreclosed inventory.  In fact in March we sold more homes than came onto the market via foreclosure here in Sparks.  The increased demand coming from buyers using the $8000 tax credit will continue to help through the end of November.  A rising affordability index has also been a large contributor. 

As of 5/14/2009 there were 99 active “bank owned” listings of single family homes and condos in MLS in Sparks (Area 108) and 137 sales pending.  Given this info I think we could see April’s numbers come in again with more foreclosures sold than new foreclosed properties coming onto the market.

We have also seen a trend with bank owned listings getting multiple offers and bidding up over asking price.  Due to the fact that short sales take such a long time to close, many buyers are focusing on bank owned properties and this creates a large demand for a relatively small number of properties.  Buyers should work with their REALTOR to analyze the comparable sales and make strong offers, especially if in a multiple offer situation.  In some cases buyers may have to write several offers before getting an accepted contract.

It is more important than ever to work with a qualified REALTOR as there is specialized knowledge that will help you be more successful when purchasing a bank owned listing.