Dear Doug: Are you seeing a trend toward people renting rather than buying? – Leslie, Purcellville
I am seeing a strong demand for rentals. Why? Well, you have to ask: Where are the people going who are facing foreclosure and short-selling their houses? They can’t buy, since they’ve either nicked their credit or completely destroyed it. No lender will touch them, so they have to rent. In addition, we see recent college grads looking for housing, and relocating buyers attracted to this area by a fairly strong employment base.
Also, it’s more difficult these days to get mortgages. Banks are being more stringent about qualifying people. Those who would prefer to buy are being forced into the rental market. With this increased rental demand, landlords like myself are seeing a dramatic increase in rental prices, which I really can’t complain about!
So, who is buying, you may ask? Relocating buyers with relocation packages provided by their companies. Also, long-time renters with steady job who are seeing severe price drops over the past 3 years. Some of them can now buy for less than they can rent in some places. For example, a recent client of mine–a relocating government employee–chose an $1800 townhouse to rent. When I showed her that she could buy the townhouse and save a few hundred dollars per month, she was quite surprised! ( Incidentally, she rented anyway because she wasn’t sure she wanted to live there for the next 5 years)
Dear Doug: We have been trying for 2 1/2 years to sell our property. We bought this fixer-upper at the height of the real estate market for $200,000 and sank another $200,000 in renovations to it. Soon after, our income dropped in half and we got behind in payments. The bank has allowed us to make interest-only payments for the last year, which we can barely manage. We have been through 3 realtors in 2 years, and each one has dropped the price on our property. Now, it is priced $100,000 below what we owe on it, but the bank has never “approved” a short sale. Do we need to have a formal agreement with the bank before we move forward? We are broke. If our home does not sell soon, we will have to walk away from it.
Dear Under Water:
My condolences to you on your real estate nightmare. I doubt that it will make you feel any better, but I assure you that there are many people in similar positions.
If you have been in the market for 2.5 years, I assume you were overpriced. Hopefully, your new low price will bring in some offers.
Do you need a formal agreement from the bank to list a short sale? No, you do not. I have sold short sales that were listed low to get the offers rolling, with a “short sale addendum” included in the contract. The addendum says that all the terms are “subject to third party approval,” which is the approval of the note holder. As a Realtor, before I show a short sale, I always call the listing agent and inquire whether that price has been “approved” or not. Unfortunately, this approval usually comes after an offer has been presented.
I am reminded of the seller who had a contract on his condo who was underwater, and got turned down on the “third party approval” part of the deal. The bank told him that since he was able to make payments, and was current on his mortgage, they would not approve the short sale. He was struggling to make his payments, as you are, and trying his best to stay afloat. After his conversation with the bank, he promptly missed the next two scheduled payments. The third party approval came not long after.
I have found that there is no easy, quick answer when it comes to short sales. The rules seem to be changing daily, although the process seems to be a bit more streamlined lately. In my last short sale, I had an offer in October, and waited three months before the bank countered $25,000 higher. In the end,the bank accepted a price that was $22,000 higher than the initial offer,and the bank forgave about $80,000 of the seller’s debt. In the past, there have been many long periods of silence “waiting for third party approval.” Short sales are not for the faint of heart.
Before moving forward, please talk to an attorney and a financial planner so that you are well aware of the repercussions and ramifications on your credit scores and future ability to buy a house. Good luck!
Dear Doug: I have tried unsuccessfully to buy foreclosed property over the last few years. For some reason, my offer is never accepted, even though I have always offered to pay the full sales price. Can you offer me any tips for buying foreclosures?
Dear Unsuccessful Bidder:
Buying foreclosures, and short sales for that matter, can be a stressful endeavor. Asking prices, or “list prices” as they are called, mean nothing. If you have offered only full price, and not escalated your offer up, (especially when the properties are obviously worth more) then I understand why you’ve been unsuccessful. I would suggest working with a Buyer Agent who has experience in buying foreclosures. You have to know the market value of the property in its “as is” shape, and in its “fixed up” state. And it’s imperative to know the values in the neighborhood! Once you establish the value, then you bid accordingly. It has nothing to do with what the asking price is. When I work with a buyer who is ready to bid on a foreclosure with multiple offers, I always instruct them to submit their “highest and best.” I suggest they bid a price at which they would be happy getting the house, but not a dollar higher. When a foreclosure or any well-priced house hits the market, you have to be ready to move fast, and get your offer in quickly. Good luck with your next offer. There really are some great deals out there– it just takes a lot of looking, planning, strategy, and some luck to nail one down!