San Jose Real Estate * REALTOR ® * Richard Gonzalez

Buying a Silicon Valley home in 2010 can be a challenge but if it’s on your list of resolutions then here are a few tips that you should know to prevent you from falling off the wagon during the process.

Short Sales

The buzz of the 2010 real estate industry is Short Sales. I attended a hand full of conferences last year and short sales were the topic of discussion on everyone’s mind including all the major banks and asset managers of REO properties.

In November Bank of America / Countrywide for instance partnered with equator.com a REO management tool used by REALTORS and asset managers to handle the sales of foreclosed properties. The management system is a task based system that helps to speed the processing of REO’s and now short sales beginning with Bank of America.

Equator.com has now begun to reduce B of A’s timeline for short sale approvals from six months to 45 days. Lightning fast by our experience negotiating short sales with Bank of America over the past two years. This trend will continue as investors look for ways to streamline the slow daunting process we have grown accustomed to in a short sale.

TIP: Short sale buyers should always investigate who the note holder is before making an offer. Knowing who the note holder is will help set your expected timeline for a successful close of escrow. Wachovia short sales are lightning fast because they own the loans and have decision makers in every county. Others like WAMU can be a challenge to say the least and are currently taking up to 5 months for a short sale approval once you are in contract.

REO

Inventory levels are very low but there may be a significant influx of REO properties from shadow inventory that banks are apparently holding. Some even continue to speculate that we will have a tsunami of inventory hit the market based on data from the Royal Bank of Scotland that shows over 3 million home owners 90 days past due and half of them are in foreclosure.

The reality is that the Silicon Valley will not likely see a large influx as a result of this inventory. Most of it is centered around the conforming $417,000 and lower price range. Waiting for REO’s to fill the void in Silicon Valley may keep a buyer on the sidelines for most of if not all of 2010.

TIP: A FHA 203k loan is an excellent loan that includes the cost to repair and remodel a REO home. It really is a great product and should be your primary loan option if you are intent on purchasing an REO home. 203k loans are great negotiation tools because the seller only has to repair health and safety issues leaving you room to negotiate while most other buyers are unable to participate.

Presentation of your offer

I recently listed and sold a home in Gilroy and received 40 offers on the home. During the process of evaluating the offers with the sellers I did my best to help the buyers agents in presenting their offers in hopes of giving every buyer an opportunity . What I realized is that merly making an offer is not enough and helped me make important adjustments in the way I submit offers.

Your offer should always have the following additional information:

• Pre-Approval letter – Preferably from a well known financial institution or an approval from your mortgage broker with the lenders name that you intend to use. If possible a conditional approval would be better but some lenders will not provide that unless you are in contract.
• Proof of funds to close – It’s critical to show the seller and the listing agent that you have the financial means to close escrow.
• A cover letter to the sellers – A letter with a picture of your family introducing yourself and telling them how much you love their home and will continue to give it the love they did. Provide details about your appreciation of the sellers upgrades and if possible any similarities that you may have with the sellers(kids, job industry, neighbor relationships, ect.)
• Comparable sales - Have  your REALTOR provide a list of three sold and pending comparables to make your case why your offer should be considered. Firing off low ball or high offers to a seller will most likely put your offer on the rejected pile because you submitted an offer with a purchase price that will not appraise.

TIP: Communication between your REALTOR and the listing agent is essential. Establishing a relationship with the listing agent is critical and can increase your chances of successfully negotiating with a seller.

Most buyers are taking up to a year to get into a home. Don’t be discouraged if you are still looking in September, the persistent buyer always finds a home.

Happy New Year and happy hunting for your home in 2010.

I continue to have more luck getting buyers into Short Sales than REO properties and have now come up with a strategy to increase our buyer’s chances of getting a home in this inventory drought.

One of the key factors of our success rate is due to the packaging of our offers. Buyers who have been at this for months will tell you that frustration begins to set in ultimately creating a routine of hit and run. Make an offer and run to the next listing if your offer was not accepted.

Follow up is everything

Short Sales in past months were challenging to say the least because of the lack of communication with banks and investors who own the loans. The secret is in the follow up.  Our chances of getting our clients into a home increase dramatically if we simply follow up with the listing agent every couple of weeks though the Short Sale process.

You wouldn’t believe how many times Short Sale negotiations fall apart between buyer and seller just when a transaction is at the point of approval from the bank to proceed with a sale. This is where we have to be ready to jump in with our buyers. Having a backup offer can be just as successful as being in first position.

REO Nightmares

REO (Bank Owned) is an attractive option to a buyer especially in the affordable areas but it’s an arena filled with cash buyers and aggressive overbids. I caution buyers who tread into this environment.

There are good deals out there but there is also a huge unknown when buying REO properties. Banks have no knowledge of the property and as such are exempt from providing Transfer Disclosure Statement (TDS). TDS information can make or break a purchase; it discloses anything affecting the desirability of the property including its surroundings. Do you want to buy a property blindly? In REO most people are doing just that.

Short Sale vs. REO

I will always ask our buyers to consider Short Sales over REO simple because there is a higher probability of success when making offers in a highly competitive market.

Homeowners considering walking away from a home or a short sale should do their homework,  and above all please seek the advice of a tax preparer who knows the ins and outs of the debt forgiveness laws.

With so many bills and laws that have passed it almost seems like a full time job keeping up with all the changes. I read a recent article in the SF Gate web site I thought would help to make sense of it all. Here is an except.

10 day approval? Yes that’s what I said and for those homeowners lucky enough to have a Wachovia loan( aka World Savings) a short sale approval is possible within a few weeks time. Wachovia is able to do this mainly because they own the loans vs having to service them for investors.

What makes this more incredible is that each county has a short sale negotiator who is proactive in the approval process.  Wachovia makes its decisions on a case by case hardship a homeowner is facing. The goal is to offer a fast track process to the homeowner once it has been determined that all other options have been exhausted including the possibility of a loan modification.

Requirements for a Wachovia Short Sale Approval

1. Homeowner must have a true hardship (loss of income, job loss, medical, family, etc….). Provide required documentation to support your hardship. Taxes, bank statements, and pay stubs must be submitted to the negotiator.
2. Communication  is key! Most homeowners in this situation are embarrassed at the possibility of facing foreclosure that they stop answering the phone or opening mail. You must be willing to communicate with the lender to help yourself with this situation.
3. Work with a REALTOR who knows how the Wachovia process works. This will help the homeowner reach a timely agreement with Wachovia and help facilitate an open channel of communication with the short sale negotiator.

Wachovia’s short sale fast track is incredibly fast in comparison to the other banks and servicers who can take up to 90 days to approve a short sale. Talk to a Loss Mitigation Representative  to find out more and to explore your options.

(866) 642-8608

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Real Estate Relationships are Key in a Hot Market

Buyers experiencing a HOT market in our area continue to deal with one frustration after another as they wage a bidding war on the low inventory we are currently experiencing.

Within all of this chaos I have developed a relationship building approach both as a listing agent and with other listing agents. I have to know that the other REALTOR is willing to work as hard as I am prior to reviewing or submitting an offer.

For example; say you want to make an offer and there are multiple offers involved. The strategy I tend to take is to make sure I package the offer in such a way that the listing agent can see that I understand the way a Bank Asset manager or a Short Sale Negotiator prefers to see an offer.

The key is to understand the inner workings of the submission process to a Bank and as such covey to the decision maker that I am well versed in this process. Its not surprising to have a listing agent pass on a offer because of the way it was presented.

I have had more success by focusing on how I have package an offer and communicated with the other agent.