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You may have called on a home for sale on the Monterey Peninsula by now and been told it is a “Short Sale” or a REO property or a Foreclosure.  Well, a short sale is a home where the current owner owes more on the loan than he/she can sell it for in the current market. Rather than let the home go into foreclosure, they try to negotiate with the bank to take less than the full amount of the loan.

You may wonder why the heck would the bank agree to this?  The bank does not want the property back. They may already have a number of foreclosed homes.  Agreeing to a short sale may be better for them financially than taking the home back thru the foreclosure process.  If the home is listed, the agent will try to negotiate with the bank on the sellers behalf. In some cases (more often now) a third party will negotiate with the bank.  This person may have experience negotiating with the bank so getting a short sale approved is then more likely.

If you are looking to buy - short sales can be frustrating, but they can also be an opportunity.  Look for short sales where there is a professional negotiator handling the process.  And look for properties that already have approval for a short sale from the bank. 

An REO property in many cases can be easier than a short sale.  REO means Real Estate Owned - as in owned by the bank. The property has already gone thru the foreclosure process.  The banks want to sell these properties as fast as possible.  In Monterey County the highest number of foreclosure, or Bank owned properties are in Salinas and Seaside, CA.  There will be more paper work involved in the process, but buying an REO property can be a good investment.

I love it when the buyer/flipper tells you their budget.  It looks like they pick the amount they want to spend.  Take for instance the one with the “Not So Silent Partner”.  They decided they should/would spend $25,000.  First huge mistake they did not get a pest control & Structural report.  They bought a foreclosed property owned by bank and bought it “as is”.  Well buying it “as is” doesn’t mean you close your eyes and just hope everything is ok! Hey if there are more problems you can use that to help you get a better price.

They ran into a mold problem among other things. This would have been noted on an inspection.  Just walk thru yourself and look carefully and they should have seen the mold.  Next if you see a significant amount of mold, wear a mask or other breathing apparatus.  Open the windows, bring in an air purifier.  This buyer/flipper got sick and lost a number of days work.

There are better things to use than a solution of bleach.  Go to a hardware store and get something specifically for mildew removal.  The mildew came back, the future buyers didn’t!

Get estimates of all major repairs and renovations.  Then it is not a big surprise to find out your new flooring is going to cost you $13,000!!  That’s a big clue you won’t be able to stay within a $25,000 budget.  Get estimates for appliances.  Get estimates for all major building materials.  Total it all up - including labor and that’s the start of your budget. I would then immediately add on at least another 10% for unexpected expenses.  Do the same with your estimate of time. If you think it’s going to take 60 days, add another 10% or 6 more days to your time line.

The guy had it half right when he said he was going to “turn & burn”.  I’m sure the investor is still feeling that burn.  I feel alot of sympathy for that investor!  Mr. Flipper turned down a less than full price offer.  He has time invested but the investor has money and is probably the one making the payments each month it isn’t sold.

At the close of this show, the home had been on the market several months with no other offers.  Mr. Flipper started another house flip.   Sure feel sorry for that investor - the previous one and the new one! 

An REO is a property that has gone thru the foreclosure process, that means property owned by a bank.  There are a number of properties in Seaside, California that are bank owned properties.  Some (but not all) of the banks want to sell these properties quickly.  There are now houses that sold for say $650,000 a few years ago that are now listed for less than $400,000.  Some of these properties need a great deal of work, some only need minor repairs and improvements. 

The nicer of these homes are going into escrow at a pretty fast rate now.  When the price on these foreclosure properties dips under the $400,000 mark then they start selling.  It’s scary to buy a home when all the news is negative.  The cover of Business Week features a house melting - “the Real Estate Meltdown”!  Your family and friends may tell you that you are crazy to think about buying now and try to talk you out of it. 

But if you want a house because you want to own your own home, if you are going to stay put for at least 3 yrs and preferably 5 yrs then now may be the time to start looking!  Many people gave up all hope of owning a home on the Monterey Peninsula.  But a small part of the market has turned back the clock on prices.  Check out the affordable homes page of my web site and think about it.

I have to confess to a dark, secret, guilty pleasure - I have started watching several of the TV “reality shows” where people flip that house!  But sometimes I feel like I am watching comedy central instead! I owned a Property Management Company on the Monterey Peninsula so we handled alot of remodels, house maintenance, repairs, etc.  It was not an easy process. But since we paid very quickly and were a source of continuing business we got the best of the contractors! 

I have been in the Real Estate Industry for over 25 yrs. now. I shake my head in frustration when I see one of the TV flippers buying a house without bothering to get a structural pest control report.  I also groan or sometimes laugh aloud at some of the budgets they just pluck out of the air.  A guesstimate is not an estimate.  Most older homes are going to need new plumbing, new electrical and a new heater.

One of my pet peeves in regards to these shows is that until recently they did not even mention selling costs!  In the current challenging market in most areas, you are going to need to figure in a Real Estate commission.  There are other costs such as Title Insurance which the seller pays in the Monterey area.  A rough estimate for Selling costs aside from any Real Estate Commissions is 2% of the selling price. 

My other pet peeve is that all the houses are beautifully staged and there is no charge!  Well, I guess if you are on tv, there are stagers who will do it for free. But for those sellers not lucky enough to be featured the cost to stage a vacant home is staggering.  I just finished taking the ASP (Accreditated Staging Professional) course from Barb Schwarz.  Renting furniture starts at about $1,000 per month - and that’s only a small amount of furniture.  Then there is the cost for the staging professional.

Buying a home - to live in, at the right price - if you are going to live in it at least 3 yrs and 5 yrs is better, can still be a good investment!  I think “flipping” is now a flop and a thing of the past, and I’m glad. 

Good credit makes a major difference in your ability to buy a home and how much your monthly payments will be.  In most cases it takes 7 yrs for negative information to be deleted from your credit report.  Bankrupty takes even longer - 10 years.  What things affect your credit score?  Your bill paying history is very important.  If possible sign up for a minimum payment to be paid on your card automatically.  Credit cards give you very little time to make your payment these days and love to charge those late fees.  This can drop your score considerably.

Also important is how many credit cards you have and what kind, how long you have had the credit. Too high a balance can affect your score. And of course collections will lower your score considerably.

If you are getting ready to buy a home it is best to postpone any major purchases such as buying a car.  Avoid any large purchases on your credit cards also.  And it’s good to check your credit in advance for any inaccuracies. It is best to challenge they thru the credit reporting agency rather than the specific company.

Selling your home in a more challenging market is more of an art, you have to set the stage.  The first step is to declutter.  Declutter every room in the house. You may need to rent storage space to store larger objects such as excess furniture. Decluttering includes your closets and garages also.  Next make sure your home is spotless. This means clean walls, floors, counters, refrigerator, everything! 

You may need to touch up or repaint some of the rooms.  Any deferred maintenance should be completed now.  You want your home to look new and inviting.  Be sure and open curtains and turn on lights right before an agent comes by to show your home. Also make sure your home smells fresh.

Good credit is crucial if you are thinking about buying a home or refinancing.  Here are some good videos that explain some of things affecting your credit score.  Here is a link to information provided by the government on facts for consumers regarding your credit.  If you are getting ready to buy a home or to refinance then it is best if you not make any major purchases as this can affect your credit score. 

If you are just establishing your credit here is a good article on “How to Establish Credit”.

And if you want to check your credit you can get a free credit report once a year from each of the three main credit reporting agencies.  Read the Credit Report Section of our web site for links to these agencies.  While you can verify the accuracy and what is in your report for free, you may have to pay a small fee to get your actual credit score.

Have you tried zillow.com yet? This is a free website that lets you get a zestimate which is an automated estimate of value of your home.  You can try this from here on our web site.  You  simply type in your address and instant gratification.  It’s a nice tool but  frequently not very accurate. It does allow you to see other properties around you that have sold.

A “zestimate” would be more useful in areas with big subdivisions of similar homes or in a condo complex.  It’s not going to know and adjust for such things as a great ocean view, or upgrades to your home.

This can be a good tool for buyers also if you are interested in a specific neighborhood.

“Staging” does not always mean hiring a professional stager to re-do your home.  There are a number of things you or your Real Estate Agent can do yourselves.  Start with the outside as curb appeal is major in any kind of market.  Drive by your home, walk across the street to look at it and then pull up to the curb and pretend you are a buyer.  What do you see? 

Such things as a new welcome mat, new address numbers, the porch light and of course the front door are very important to make your home appealing. Is the paint in good condition?  Are the bushes trimmed and tidy and the front yard and other landscaping green and in good condition.  Make sure bushes are trimmed away from the windows to allow light inside.

Put away garbage cans, toys, sports equipment and anything else that doesn’t belong there or that doesn’t help enhance your home.   Is there enough color around the front door and front exterior of your home. Consider adding a pot of colorful flowers by the front door.

These sound like small things, but can considerably enhance the look of your home. Read my section on tips for Sellers for other ideas.

The first thing to do if you are thinking of buying a home in Monterey County is to get prequalified with a good lender.  This puts you in a stronger position when you make an offer on a property and helps you determine what you can afford.  Do your homework to help you decide what areas you want to consider.  You can do a great deal of research using the Internet and visiting open houses. 

Especially important though is finding a real estate agent who is willing to work hard on your behalf.   A Real Estate Agent has access to information such as how long the home has been on the market, what price reductions have been made previously and if the property is an “REO” property, meaning it is owned by the bank.  These things can help guide you when making an offer.

If you are looking for an especially good “deal”, then don’t set your sights on just one house.  If you are willing to consider a number of different homes it will help your search.  If you are good at fixing things, and/or willing to  work with contractors to remodel there are opportunities out there.   When the Real Estate market in Monterey County was really “hot”, properties that needed work still sold for top dollar amounts.  Now with more listings available, properties that need work are discounted much more heavily.  You may want to try out some of our calculators to help you determine your mortage payments, an estimate of your tax deduction, etc.