What can a rehabber do?

Fixer Upper in Dorena

The Santa Clara County real estate market has heated up so much in the last 2 months.

There have been many properties especially at the lower price range in San Jose that are getting 30+ offers. The resulting sales price might not work now for the “rehab and sell” investor.

Some of the reasons why?

1) First time buyers are usually willing to pay the most for these properties as they will live in them and fix over time. First time buyers are out in droves now. In this segment of buyers 1st time buyers) there is a backlogged demand for homes. After all they, as a group, have not been “in the market” for the last 4-5 years while they wait for the bottom to hit. Well, the bottom was yesterday.

2) The “rent-to-hold” investor is just going in and lightly improving the place, getting a tenant and not trying to resell – they will pay more for the home and the rental figures are making it a smart investment.

Until not that long ago if you compared 3 homes that were the same in all respects but one was a short sale, one was an REO (bank owned home) and one was a regular sale, there was a decent difference in sales price between the groups.  Now, due to many buyers in the market, the difference is getting less and less.

So that makes it more difficult to get the numbers the rehabber (aka FLIPPER) needs to make a profit.

What can a rehabber do?  If you can pare down on profits and also “hope” that the prices will continue to rise, you might be successful in securing a property. But that is “IFFY” and not necessarily a smart business model.

It is an interest problem.  Do you have a comment?

Pat Chadwell, broker
Realty World – Residential Specialists
www.patchadwell.com
408.927.6565 x 11 (direct)

The real estate market has heated up so much in the last 2 months.

There have been many properties especially at the lower price range that are getting 30+ offers.  The resulting sales price might not work now for the “rehab and sell” investor.

Some of the reasons why?

1) First time buyers are usually willing to pay the most for these properties as they will live in them and fix over time.  First time buyers are out in droves now. In this segment of buyers 1st time buyers) there is a backlogged demand for homes.  After all they, as a group, have not been “in the market” for the last 4-5 years while they wait for the bottom to hit.  Well, the bottom was yesterday.

2) The “rent-to-hold” investor is just going in and lightly improving the place, getting a tenant and not trying to resell – they will pay more for the home and the rental figures are making it a smart investment.

Until not that long ago if you compared 3 homes that were the same in all respects but one was a short sale, one was an REO and one was a regular sale, there was a decent difference in sales price between the groups.  Now, due to many buyers in the market, the difference is getting less and less.

So that makes it more difficult to get the numbers the rehabber (aka FLIPPER) needs to make a profit.

What

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Silicon Valley Real Estate is HOT!

Sizzle (album)

As of March 31, 2012 active listings in Santa Clara County are a scant 1671.  That is right just 1671 houses, condos and townhomes in the entire county.  What is the population of that area?  1.7 Million!

The breakdown of that number is – single family homes, 1320 and condo/townhomes, 351. These numbers were down 52% from last year’s figure!

The number of homes and townhome/condos that went into contract over the last 30 days was 2041 (single family – 1476, condo/townhome – 565). This figure was slightly less than last year.

Just a note if we had the inventory we would have sold a lot more homes!  Many areas are seeing multiple offers on properties.  In the low end housing there are up to 30 offers.  Mid-range is seeing 5+ depending on area.  The Peninsula is HOT.

The number of closed sales in March were 1324 (918 were single family homes and 406 were condo/ townhomes). The closed sales are even with last year.

Home prices in the area are close to the lowest they have been and interest rates on mortgages are really low. Now might be your time to check out the Real Estate market.

Make it a great week!

Pat Chadwell, broker
Certified Real Estate Specialist
Realty World – Residential Specialists
408-927-6565 x 11 (direct)
www.patchadwell.com

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How to cut the number of strategic defaults?

How to cut the number of strategic defaults?

FRANKFURT AM MAIN, GERMANY - AUGUST 08:  A man...

DSnews reported – An alarming number of homeowners see strategic default as a viable option should their home continue to depreciate. Almost half of the homeowners participating in an online poll from Housing Predictor say they will walk away from their mortgage obligation if falling home values persist.  See Full Story

I have a theory.  The current model of doing loan modifications for people that are behind is fine.  HOWEVER, the banks are rewarding the people who are NOT making their mortgage payments while the ones that are diligently continuing to pay their mortgage are pretty much getting forgotten or given short shrift.  Homeowners that are current see the inequity of this. They think “To get any help I must give in and go delinquent”.

So the result is MORE people in default.  The situation of defaults only worsens.

Banks should be courting those people whose mortgages are current and who have a high interest rate on their loan(s).  It would be an act of good will and excellent public relations for the banks.  The homeowners who get the refinance into a better mortgage would become more of a loyal customer and they would be saving thousands per year on interest payments.

An example:  Take someone with a $400,000 loan at 6%.  Their payment would be approx $2400/mo.  Now refinance that party into a new 4% loan and they would be saving $500/mo or $6000/yr.

Sure banks might consider principal reductions as well and that is another topic for later.

I recognize that saying this might seem simple and for the banks it is an accounting nightmare BUT the more you reward bad behavior the more you get bad behavior.  The more you reward good actions, the more others will do good actions.

What do you think?

Pat Chadwell, Broker
Certified Distressed Property Expert
Realty World – Residential Specialists
408.927.6565 ext 11
www. patchadwell.com

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Will the real estate market change signal move ups?

Will the change in Real Estate market signal the return of move up sellers?

Since 2007, quite a few past clients, their friends and family had stopped making moves to new homes if they could put it off.

Now 4-5 years later, time has marched on and these clients have further outgrown their homes.

While lending requirements have changed dramatically the need for a real estate change has not.  I am talking to more individuals who are preparing to make a change in the coming year.

This desire to make a change is fueled by the return of more healthy real estate activity in our area, super low interest rates and more employment activity.

Making a move, that will include the sale of one property and the purchase of another, can be tricky to accomplish and it is best to talk with someone knowledgeable to work out the least stressful ways to accomplish the change.   Prior to 2008 a lot of my business was just this type.

Have you plans for a move this coming year?  What is bringing that about?  What are your questions?

Pat Chadwell, broker
Certified Residential Specialist
Realty World – Residential Specialists
San Jose, CA
408-927-6565 x 11
http://www.patchadwell.com

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Santa Clara County Update – distressed vs. traditional sales

Santa Clara County Update

If you look at the amount of regular active listings below and closed sales of Single Family Homes you will see we are running between 60-68% of the sales being non-distressed properties.

Last year at this time the percentage of non-distressed sales were running at 52%. So the traditional/regular sellers are coming back to the market again. REO sales for last year were at 24%, compared to 15% this year.

Pat Chadwell, broker
Certified Distressed Property Expert
Realty World – Residential Specialists
San Jose, CA
408-927-6565 x 11 (direct)
http://www.patchadwell.com

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