How can I get the best deal on a home? Where do I start? Part 6
If you are still with me at this point-and still awake-you are doing
well. Home financing is not the most exciting topic, but it is very
important to those who are about to make a long term commitment.
It is very confusing. If you are lost, join the crowd. Find a loan
consultant that you trust and ask lots of questions.
At this point you should be aware of the type of loan that will work
best for you and after your consultation with your loan consultant
you will know what price range you can afford.
It is a good time to select an agent to help you identify the perfect
home and help you complete the purchase. Note that a licensed
agent in California does no have to be a Realtor®. I Realtor® is
a licensed agent who is a member of the National, California and a local
associations of Realtors®. They subscribe to a strict code of ethics
and are committed to providing the highest standard of representation for
their clients. I recommend that you select a Realtor®.
Another important aspect real estate law is a concept known as agency.
To put it into simple terms, an agent can represent a buyer, they can
represent a seller AND they can represent a buyer and seller in the same
transaction.
Most properties are entered into the local MLS (Realtor's® Multiple
Listing Service) in order to gain the most exposure. When the listing
agent enters the property into the MLS they also commit to pay a
commission to the agent who brings a ready, willing and able buyer
to the negotiating table and completed the purchase transaction.
In simple terms, the seller pays the commission.
So, it costs the buyer nothing to have professional representation!
Sales commissions are usually split in half, 50% to the listing
broker and 50% to the selling broker (the broker representing
the buyer).
Some buyers assume that if they find a property and agree to let
the listing agent represent them in the purchase that they are going
to save money. NOT SO! When a listing agent represents a buyer
that broker gets 100% of the sales commission. The process is
legal and happened every day.
If you are about to make the largest purchase of your life, would you
feel more comfortable being represented by an agent who already
has a contractual obligation to represent the seller? Or would you
feel more confident being represented by an agent who is dedicated
to representing you with 100% of their skill and knowledge?
I know which choice I would make. Let's see now, 100% effort
for ZERO out of pocket...
Stay tuned for the next Blog in this series.
This post continues my study of REO (Bank Owned) home sales in El Dorado Hills and Folsom, CA. This time we will look at September 2008 sales.
The number of REO properties sold in the study area went back up to 40. (In July 45 REO properties sold and in August that number dipped to 25.)
The average days on market dropped to 51. Although there were two homes sold that had been on the market for over 200 days and another three that were active for over 100 days, a full 35% of the REO homes sold were on the market for 14 days or less. Obviously, REO properties are moving rapidly and some of the "stale" listings are clearing off the market as well.
Of the 100 homes sold in September, 40 were REO proerties. 36.4% if the total.
A full 47.5% of the REO properties sold for more than the final asking price, one for 114.08% of the asking price. One home sold for 86.68% of the final asking price.
The cost per square foot for all homes sold dropped to $ 190.00, the second month in a row that number was below $ 200.00. The cost per square foot of REO sold properties was $ 173.00, 91.1% of average price. REO properties remain an excellent buy.
Specific data follows.
| Folsom/El Dorado Hills Sold REO Properties September 2008 | ||||||||
| DOM | Original Listing Price | Listing Price at Time of Offer | Sold Price | SP as % Original Price | SP as % Final Price | |||
| 1 | Fol | 27 | $ 198,900.00 | $ 192,900.00 | $ 185,000.00 | 93.01% | 95.90% | |
| 2 | Fol | 128 | $ 266,000.00 | $ 219,900.00 | $ 219,900.00 | 82.67% | 100.00% | |
| 3 | Fol | 0 | $ 299,900.00 | $ 299,900.00 | $ 299,900.00 | 100.00% | 100.00% | |
| 4 | Fol | 18 | $ 279,900.00 | $ 279,900.00 | $ 300,000.00 | 107.18% | 107.18% | |
| 5 | Fol | 1 | $ 299,900.00 | $ 299,900.00 | $ 304,000.00 | 101.37% | 101.37% | |
| 6 | Fol | 10 | $ 305,900.00 | $ 305,900.00 | $ 316,000.00 | 103.30% | 103.30% | |
| 7 | Fol | 21 | $ 299,900.00 | $ 299,900.00 | $ 325,000.00 | 108.37% | 108.37% | |
| 8 | EDH | 12 | $ 284,900.00 | $ 284,900.00 | $ 325,000.00 | 114.08% | 114.08% | |
| 9 | Fol | 12 | $ 314,900.00 | $ 314,900.00 | $ 330,000.00 | 104.80% | 104.80% | |
| 10 | Fol | 9 | $ 335,000.00 | $ 335,000.00 | $ 336,000.00 | 100.30% | 100.30% | |
| 11 | Fol | 225 | $ 350,000.00 | $ 350,000.00 | $ 337,500.00 | 96.43% | 96.43% | |
| 12 | EDH | 32 | $ 349,900.00 | $ 349,900.00 | $ 347,900.00 | 99.43% | 99.43% | |
| 13 | EDH | 32 | $ 359,000.00 | $ 359,000.00 | $ 350,000.00 | 97.49% | 97.49% | |
| 14 | EDH | 96 | $ 391,900.00 | $ 368,900.00 | $ 360,000.00 | 91.86% | 97.59% | |
| 15 | Fol | 10 | $ 359,900.00 | $ 359,900.00 | $ 365,000.00 | 101.42% | 101.42% | |
| 16 | FOl | 54 | $ 419,900.00 | $ 399,900.00 | $ 370,000.00 | 88.12% | 92.52% | * |
| 17 | EDH | 20 | $ 389,900.00 | $ 389,900.00 | $ 389,000.00 | 99.77% | 99.77% | |
| 18 | EDH | 12 | $ 391,400.00 | $ 391,400.00 | $ 400,000.00 | 102.20% | 102.20% | |
| 19 | EDH | 40 | $ 401,000.00 | $ 401,000.00 | $ 401,000.00 | 100.00% | 100.00% | |
| 20 | EDH | 47 | $ 429,899.00 | $ 409,499.00 | $ 405,000.00 | 94.21% | 98.90% | |
| 21 | EDH | 208 | $ 499,900.00 | $ 457,900.00 | $ 415,000.00 | 83.02% | 90.63% | |
| 22 | EDH | 10 | $ 389,900.00 | $ 389,900.00 | $ 418,000.00 | 107.21% | 107.21% | |
| 23 | EDH | 149 | $ 569,900.00 | $ 459,900.00 | $ 420,000.00 | 73.70% | 91.32% | * |
| 24 | EDH | 9 | $ 399,000.00 | $ 399,900.00 | $ 420,000.00 | 105.26% | 105.03% | |
| 25 | EDH | 88 | $ 529,000.00 | $ 475,000.00 | $ 430,000.00 | 81.29% | 90.53% | |
| 26 | Fol | 63 | $ 475,000.00 | $ 429,900.00 | $ 434,900.00 | 91.56% | 101.16% | |
| 27 | EDH | 32 | $ 449,000.00 | $ 449,000.00 | $ 439,000.00 | 97.77% | 97.77% | |
| 28 | EDH | 79 | $ 529,900.00 | $ 478,234.00 | $ 450,000.00 | 84.92% | 94.10% | |
| 29 | EDH | 35 | $ 469,900.00 | $ 459,900.00 | $ 461,000.00 | 98.11% | 100.24% | |
| 30 | EDH | 45 | $ 527,900.00 | $ 482,900.00 | $ 485,000.00 | 91.87% | 100.43% | |
| 31 | EDH | 78 | $ 479,000.00 | $ 479,000.00 | $ 486,000.00 | 101.46% | 101.46% | |
| 32 | EDH | 5 | $ 499,000.00 | $ 499,000.00 | $ 500,000.00 | 100.20% | 100.20% | |
| 33 | Fol | 14 | $ 529,900.00 | $ 529,900.00 | $ 550,000.00 | 103.79% | 103.79% | |
| 34 | Fol | 94 | $ 719,000.00 | $ 629,000.00 | $ 565,000.00 | 78.58% | 89.83% | |
| 35 | EDH | 122 | $ 654,900.00 | $ 569,000.00 | $ 576,500.00 | 88.03% | 101.32% | * |
| 36 | Fol | 12 | $ 588,000.00 | $ 588,000.00 | $ 630,000.00 | 107.14% | 107.14% | |
| 37 | Fol | 68 | $ 695,000.00 | $ 695,000.00 | $ 649,000.00 | 93.38% | 93.38% | |
| 38 | Fol | 95 | $ 749,900.00 | $ 749,900.00 | $ 650,000.00 | 86.68% | 86.68% | |
| 39 | EDH | 13 | $ 635,000.00 | $ 635,000.00 | $ 655,000.00 | 103.15% | 103.15% | |
| 40 | EDH | 16 | $ 719,900.00 | $ 719,900.00 | $ 731,000.00 | 101.54% | 101.54% | |
| AVE. | 51 | 94.1% | 97.2% | |||||
| REO Sold Cost Per Square Foot: | $ 173.00 | 91.1% | ||||||
| Total Sold Cost Per Square Foot: | $ 190.00 | |||||||
| Total Number of REO Homes Sold in November for area: 45 | 40 | 36.4% | ||||||
| Total Number of Homes Sold: 136 | 110 | |||||||
How do I get the best deal on a home? Where do I start? Part 5
At this point you have decided that you want to purchase a home. You are tired of paying rent that only makes your land lord richer.
You have communicated with a loan consultant and narrowed your selection to a loan package that you can live with-NO UNPLEASANT SURPRISES. NO PREPAYMENT PENALTIES.
You should have a fairly good idea what your payments are going to look like and, although you are not excited about having to pay so much, you can live with the payment. You will have a good idea of what price range you should be looking in. You will be able to obtain a pre-qualification letter from your loan consultant.
(A pre-approval is better. That means that your financial
information has been verified and there are no skeletons
in your financial closet.)
Armed with the knowledge about what you can afford, it is time to start looking for THE HOME.
Remember the old adage, location, location, location. If you buy in the very best area that you can afford, your property will tend to maintain it's value and appreciate more over time. A smaller, older home in a better area is a better selection than a new home in a questionable area.
Almost everyone starts looking on the Internet. There are thousands of real estate related sites out there. Select one that you feel comfortable using. Naturally, I recommend two web sites,
and
They are both my web sites and provide access to EVERY property
available on the Realtor's MLS in our seven county area. They also
provide information about our local area as well as information about the real estate buying and financing process.
While you are performing your property search, try changing your search criteria just a little in one or two categories. You will be amazed at the difference in your search results.
Note that most property search sites require that you enter your name and e-mail address. Mine are no exception. However, the worst that you can expect is the occasional e-mail with real estate related information that you may find useful.
Stay tuned for Part 6 Enjoy your search!
This post continues my year long plus study of REO (Bank Owned Home) sales in El Dorado Hills and Folsom, CA. This post covers August 2008 REO sales.
In August the number of REO properties sold in the selected market areas dropped signicficantly from 45 in July to 25 in August. This represents more than the normal seasonal end-of-summer activity decline.
The Days-On-Market number increased considerably from 72 in July to 105 in August. A full 40% of the homes sold in August were on the market for over 100 days. Another significent statistic remains applicable. A full 28% of the REO homes sold were on the market for fourteen days or less. We seem to have heavy representation from both ends of the spectrum with respect to the length of time the sold homes were on the market. However, the market has cleared six homes off the active list that were on the market for over 200 days, one for 411 days.
Another interesting statistic is the drop in cost per square foot the both REO properties and the cost per square foot of all homes in the area. The is the first time that the cost per square foot for REO properties dropped below $ 180. It is also the first time that the cost per square foot for all homes sold has dropped below $ 200.
The trend that REO properties are consistently sold for about ten percent lower than the general population of homes sold in the area continues. However, the REO properties represent only 21.7% of all homes sold. That has been just over 25% for the past year.
THe specific data follows.
| Folsom/El Dorado Hills Sold REO Properties August 2008 | ||||||||
| DOM | Original Listing Price | Listing Price at Time of Offer | Sold Price | SP as % Original Price | SP as % Final Price | |||
| 1 | Fol | 87 | $ 383,900.00 | $ 336,900.00 | $ 310,300.00 | 80.83% | 92.10% | |
| 2 | Fol | 37 | $ 338,000.00 | $ 327,900.00 | $ 315,500.00 | 93.34% | 96.22% | |
| 3 | Fol | 33 | $ 353,000.00 | $ 340,000.00 | $ 330,000.00 | 93.48% | 97.06% | |
| 4 | Fol | 303 | $ 324,900.00 | $ 324,900.00 | $ 335,000.00 | 103.11% | 103.11% | |
| 5 | Fol | 10 | $ 339,000.00 | $ 339,000.00 | $ 344,150.00 | 101.52% | 101.52% | |
| 6 | EDH | 202 | $ 315,000.00 | $ 315,000.00 | $ 345,000.00 | 109.52% | 109.52% | |
| 7 | EDH | 183 | $ 363,000.00 | $ 363,000.00 | $ 348,000.00 | 95.87% | 95.87% | |
| 8 | EDH | 205 | $ 483,000.00 | $ 369,900.00 | $ 404,000.00 | 83.64% | 109.22% | |
| 9 | EDH | 6 | $ 391,900.00 | $ 391,900.00 | $ 404,260.00 | 103.15% | 103.15% | |
| 10 | EDH | 18 | $ 399,900.00 | $ 399,900.00 | $ 420,000.00 | 105.03% | 105.03% | |
| 11 | EDH | 1 | $ 391,875.00 | $ 391,875.00 | $ 425,000.00 | 108.45% | 108.45% | |
| 12 | EDH | 5 | $ 394,900.00 | $ 430,900.00 | $ 430,000.00 | 108.89% | 99.79% | |
| 13 | EDH | 177 | $ 579,000.00 | $ 449,900.00 | $ 449,900.00 | 77.70% | 100.00% | |
| 14 | EDH | 6 | $ 429,000.00 | $ 429,000.00 | $ 450,000.00 | 104.90% | 104.90% | |
| 15 | EDH | 205 | $ 464,900.00 | $ 464,900.00 | $ 470,000.00 | 101.10% | 101.10% | |
| 16 | EDH | 99 | $ 514,900.00 | $ 489,900.00 | $ 478,000.00 | 92.83% | 97.57% | |
| 17 | Fol | 6 | $ 475,000.00 | $ 475,000.00 | $ 488,000.00 | 102.74% | 102.74% | |
| 18 | Fol | 23 | $ 529,500.00 | $ 529,500.00 | $ 490,000.00 | 92.54% | 92.54% | |
| 19 | EDH | 1 | $ 499,900.00 | $ 499,900.00 | $ 510,000.00 | 102.02% | 102.02% | |
| 20 | EDH | 51 | $ 640,000.00 | $ 599,000.00 | $ 551,000.00 | 86.09% | 91.99% | |
| 21 | EDH | 15 | $ 585,900.00 | $ 585,900.00 | $ 595,000.00 | 101.55% | 101.55% | |
| 22 | Fol | 411 | $ 608,000.00 | $ 608,000.00 | $ 615,000.00 | 101.15% | 101.15% | |
| 23 | EDH | 180 | $ 679,900.00 | $ 659,900.00 | $ 635,000.00 | 93.40% | 96.23% | |
| 24 | Fol | 143 | $ 949,900.00 | $ 774,900.00 | $ 681,000.00 | 71.69% | 87.88% | |
| 25 | EDH | 215 | $ 899,900.00 | $ 812,159.00 | $ 780,000.00 | 86.68% | 96.04% | |
| AVE. | 105 | 96.0% | 99.9% | |||||
| REO Sold Cost Per Square Foot: | $ 177.00 | 90.8% | ||||||
| Total Sold Cost Per Square Foot: | $ 195.00 | |||||||
| Total Number of REO Homes Sold in August: | 25 | 21.7% | ||||||
| Total Number of Homes Sold: | 115 | |||||||
How can I get the best deal on a home? Where do I start? Part IV
It is essential that you understand some of the pitfalls of mortgage loans when making
the determination as to which is the best loan for you. You should be very familiar with
each loan program you are considering. 
In the rather lengthy Part 3 we discussed several loans, how they work and some
of the pitfalls related to each. Naturally, you should discuss these loans with your loan
consultant in detail. Make sure you are completely comfortable before making the decision.
The last loan that will be discussed is the "Pick-A-Pay" or the "Pay-Option-Arm." This
type of loan offers the greatest number of options for the borrower. Each month they
can decide to:
1) Pay the fully amortized (paying principal and interest) payment
for a 15 year payment period. (The highest dollar payment.)
2) Pay the fully amortized (paying principal and interest) payment
for a 30 year payment period. (The Gold Standard for loans.)
3) Pay the interest only (the original principal remains the same)
payment. (A lower monthly payment.)
4) Pay a "teaser" interest payment, far below the market interest
rate which will not even cover the monthly interest for the loan
principal. With this option, the difference between this "teaser"
payment and what you actually owe is added to the outstanding
loan balance EACH MONTH. This phenomenon is known as
negative amortization.
Depending on the lender, once the principal balance reaches 110% to 125% of the
original loan balance, the loan recasts. That means that all the rules change and
your payment takes a giant leap upward.
Another issue is that the interest rates are adjustable and tied to a financial index.
The borrower has no idea what is going to happen to their interest rate. There are
caps involved but the caps allow interest rates that result in frighteningly high
payments.
If we go back to our $ 250,000 loan amount used in Part 3 and maintain the 6%
interest rate, the four payments would look like this:
1) 15 year fully amortized payment........$ 2109.64
2) 30 year fully amortized payment.........$ 1498.99
3) 30 year Interest only payment.............$ 1250.00
(remember with this one you are NOT paying down the principal!)
4) 2% Teaser Rate payment......................$ 416.67
(The difference between this payment and the $ 1498.99 above is
added to your loan total EACH MONTH.)
After two years of this payment history your principal would be
$ 275,975.68, over 110% of the original loan! When the loan recasts
an interest rate of 11% is not unlikely. At that rate your new payment
would be $ 2628.18! That is 175% of the original 30 year fully amortized
loan payment.
We are sure that many people in 2004 - 2006 committed to this kind of a loan package
knowing that their home value was increasing at astronomical rates and certain that they
could always sell and get out from under that loan obligation if necessary. Unfortunately,
for far too many in this position, property values dropped. Thus the foreclosure boom.
Experience teaches us that risky loans can produce disastrous results. Negative amortization
was attractive bait created by investors to increase their yield. However, it backfired
on both those who committed to those kinds of loans and well as the investors who were trying
to take advantage of the market.
Caveat Emptor (let the buyer beware) really applies to this category of loan!
Stay tuned for the next Blog in this series.
Experienced Realtor, e-PRO, Senior Loan Consultant & Photographer serving buyers, sellers and borrowers in El Dorado, Sacramento and Placer Counties. SERVICE, INTEGRITY, RESULTS Put Mike on YOUR TEAM
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