Bonnie Jessee

Buying an REO is similar to buying a short sale except the property is already owned by the lender. The property has already gone thru the foreclosure process and the bank typically lists the property with a qualified real estate agent. Hopefully the agent and the lender have open lines of communication to enhance a smooth sales and purchase

Sometimes the lenders will sell foreclosure homes for less than the past loan balance. Most lenders have ‘guidelines' for the amount they will accept. In our Truckee and Lake Tahoe areas most lenders are looking for a number within 5% to 8% of the amount currently owed.

Bank owned properties (land or homes or apartments) are called REOs, meaning real estate owned by the lender.

Banks might end up owning the property when no offers come in at the public auction bid enough to cover the amount owed against the property. REO homes are often considered the best way to buy a distressed property because the seller is already out of the picture. At this point you are dealing with the investor's agent, the bank and the bank's agent who are negotiating the transaction. Some REOs can be purchased directly from the lender.

For more information, seek the advice of a real estate lawyer, and work with a competent buyers' agent.

You are already settled into the perfect primary home. Your family vacations in Truckee and Lake Tahoe at least three times a year and you are tired of leasing or staying at hotels. You have been ‘watching' the local market...Whatever the reason, you want to buy that second home and obtain the family lifestyle you so desire.

Similarly as to when you bought your primary home it is time evaluate your situation and run the calculations to see if it's the right time and place for you to purchase. Merely ‘wanting' a second home in Truckee or Lake Tahoe doesn't mean it makes sense for you to buy now.

Decide What Your Goals Are

If you're considering a second home, you must have disposable income. Do you really want to invest your extra money in real estate? Take a good hard look at your life and goals and decide if buying a vacation home or investment property will best achieve them.

What do you want and need in a second home? A place where you can retire? Write down everything and create a wish list for your second home. Use this as a framework for what houses to look at.

Ask yourself these questions:

How long will it take you get to your second home here in Truckee or Lake Tahoe? Will the location suit your family's future lifestyle?

How often will you go?

How will you get financing?

Will you need rental income to offset the monthly mortgage payment?

Can you afford the maintenance and insurance?

How will it affect your taxes?

How is the property appreciation rate in your desired location?

Choose a location that meets the criteria on your wish list, or you may decide to hold off on buying. For instance, if you want a vacation getaway but don't expect to use it for more than a week each year, it doesn't make financial sense to buy. Consider fractional ownership or a timeshare.

Consider sharing ownership of a second home. Consider researching co-ownership options, such as a joint tenancy or tenants in common as an ownership position. If you don't feel comfortable dealing with strangers, perhaps consider buying with family or friends.

Let me help you with the answers to many of these questions! As a local for many, many years and a full time professional Realtor, I know the market, understand the areas and I am here to assist you from point A to settling into that perfect second home your family deserves.

Home with Views ~ Homes with a panoramic of the mountains and lakes always sell at a premium above similar homes without the view here in the Sierras. However, if a view is important to you buy it mostly for your own pleasure and not as an investment. You may place a considerable dollar value on the view and future buyers will also.

The Lot ~ Even though most real estate value is usually concentrated in the building, the lot is important as well. It should be as level as possible, considering the winter weather we endure. Assuming the property is in a typical neighborhood, such as Tahoe Donner the lot should be easy to access both in winter and summer.

Do not purchase an extensively landscaped property unless that is exactly what you desire. You would normally pay a premium for that maybe which you ought to be able to recover when you sell. You can always improve the landscaping during your ownership by improving the grass and adding native plants.

Home Size Matters ~ In each residential neighborhood in the Sierras, houses will vary in size and rooms, as many of the homes are custom. If resale value is an important consideration you might consider not buying the largest in the neighborhood. When determining market value, the homes nearest to yours are most important. If most of the nearby houses are smaller than your house, they can act as a pull on appreciation.

On the other hand if you buy a medium house for the area the larger homes can help push up your value. Buying what you require in a more prestigious neighborhood may provide more financial reward than getting what you desire in a less desirable neighborhood.

Bedrooms ~ Three and four bedroom houses are the most popular among homebuyers and if you can stay in that array you will have more potential buyers when it comes time to resell.

There should always be at least two bathrooms in a house, preferably at least two and a half. One bathroom with a place to wash up for day-to-day visitors, one for the master bedroom, and at least one to be shared by the other bedrooms.

Kitchen ~ Family activity centers on the kitchen so this can be the most important room of the house. Open concept living is especially important to most buyers in our area - everyone wants to be ‘together'. The dining area should be located adjacent to the kitchen.

There should be easy access to the back yard and deck areas as there will be occasions for barbecues and outdoor entertaining. Also consider that it should be a short walk between the garages to the kitchen so hauling groceries in from the car does not become a horrendous chore.

Fireplaces ~ The only room where you absolutely have to have a fireplace is the family room. A fireplace in the other rooms may be nice and you pay extra for it and this is a good investment in this area.

The way it used to be: Meet a new buyer client and when I asked them what they wanted in a home, they would say something like, "3 bedrooms, 2 baths, and a 2 car garage". Things have assuredly changed. Most times these days my homebuyers say something like, "I want to buy a foreclosure." These comments mean I need go the extra mile to determine the reasoning - and help them thru the process with as little aggravation as possible.

The New Client ~ when a new client recently insisted that he absolutely only wanted to see bank-owned homes because he didn't want to pay what the current market was demanding in ‘standard sales' I was anxious to expand his sphere of properties by dealing directly into this issue. While discussing the desire to buy a foreclosure or bank owned property, it was readily determined my buyer wanted the best bang for this money.

We should all note that primarily there is nothing intrinsic about a foreclosure that means that it's a great deal or otherwise more desirable than a standard sale. Banks are just as likely to price their properties unrealistically as individual sellers, and individuals can be easier to negotiate with. Some of the homes on the market in his price range are bank-owned homes, so we do need to be prepared for what those transactions will look like and for you to be well qualified and ‘show' well to a bank-seller.

The Getting Started Phase ~ I started briefing my client on what to expect if he went the foreclosure route, which about 50 percent of my current clients do, looking for that great deal. I informed him not be outraged if he encountered multiple offers, long delays in responses from the bank, and a somewhat sketchy escrow due to the fact the bank insisted on using their own escrow company, rather than one as a local I am familiar with. His thoughts are that the banks can't wait to unload these ‘toxic assets'.

Next Step ~ A most important aspect of buying a home from the bank is to immediately understand that this is not a logical individual you are dealing with. This is an institution and each decision runs through an inefficient administration and involves people whose motivations are not as logical or obvious as with an individual seller.

So consider that there are five houses for sale in one neighborhood - three are bank owned and two are private sellers. Due to the fact the bank owned homes are in the same area and for sale, the private sellers are going to price their properties accordingly. When the time comes for potential repairs to be done and requests the repairs, do you really expect the bank to do as much as the private seller?

And in order to keep things clear, out in the open, we again discussed the potential to purchase a bank owned or a private sale property. After my coaching and his new understanding, the market became much more attractive to my buyers as he now would consider ALL homes for sale ~ not just foreclosures/bank owned properties.

Thinking of Moving Your Money From the Market to Real Estate?

Now may be the time. With overall markets losing on a daily basis, watching your portfolio dwindle can be frustrating to say the least. It's not your fault, you made good investments at the time, but with things changing so rapidly it's a difficult situation to deal with.

Is there a safer alternative to invest your monies? With real estate prices at all time lows, interest rates holding at the current lows, now may be the time to get out of the market and into real property for many.

Currently I am working with a buyer who intends to do just that. Unfortunately, the bank has been slow in responding to her all cash offer and during a one week period, her portfolio dropped in value by a whopping 4%. Her situation could change tomorrow if the bank continues to wait to respond to a great offer. Common sense would tell us that cash for property is better for the bank being in the property holding mode.

So let's look back at history...here in the Greater Truckee area, the past few years have seen close to 18% in price fall off. Not such great news for those who just entered the housing market during or purchased during the highs of the 2005 and 2006 years and need to sell now. Those, however, who purchased earlier or are purchasing now with a long term hold are in good financial positions.

The Why and How of it: interest rates are down from those years and those able to qualify can refinance into lower rates. Those that don't have to sell know that historically property values have always increased in eventuality.

Your personal goal, like many, was to leave a legacy for your family thru wise investments. Property legacies have been the alternative for many wise investors over the years - rather than those stocks and bonds that are losing value all too rapidly. The family vacation home and lifestyle might just be the perfect option for you to pass on to your family.

Give me a call and we can discuss your thoughts while I can provide you with detailed insight into our current market. As a relatively stable housing market has provided many with family legacy trusts - it just might be the best option for you to consider.

Always your best in mind! Bonnie Jessee 530 412 3984