Q. Tom, I don’t know whether to sell my home now or hold onto it for a couple years. When will we see measurable appreciation across the board in home values here in the Diablo Valley?
A. Good question. Many ‘industry experts’ these days predict a housing recovery around 2013 or 2014 but a generalization of that nature may be inaccurate; past prognostications are an indicator that nobody can really predict with certainty (remember David Lereah, the chief economist of the California Association of Realtors, assuredly titling his 2006 book, Why The Real Estate Boom Will Not Bust). The reality is that a housing rebound is dependent on a growing economy and a robust job market which currently are tentative at best. Having said that, buyer demand for homes is also directly related to the availability of affordable mortgage money. Keep in mind that most homebuyers make a purchasing decision based on the amount of their monthly payment and not on the overall mortgage balance. So, when will the demand for homes exceed the supply? I’m not sure but it does appear that we are at or near the bottom of the market now regarding values but it will take quite some time to kick back into a higher gear. In answer to your question – if you have to sell, do it now because significant price appreciation remains on a distant horizon; if you don’t have to sell, consider waiting. If you want to buy or trade-up, again consider doing it now because the combination of drastically lower prices and attractive interest rates work tremendously in your favor. BUT do your homework and hire a trained professional to negotiate every detail of the transaction.
Q. Tom, what is the difference between a ‘short sale’, a REO and a bank-owned home?
A. REO (real estate owned) and bank-owned homes is the same thing – both are owned by the banking institution and are eventually sold at auction. The previous owners were foreclosed and are out of the home. A short sale is when the owner lives in the home and maintains control but is typically in default on the monthly payments. In the short sale, the mortgage amount on the home exceeds the homes current market value. The job of persuading a lender to approve a home sale by accepting less money than the outstanding mortgage mortgage balance is a daunting task in any market. In today’s market, short sale homes dominate the available inventory; it is not unusual for short sales to make up over 50% of the pending sales – all of which require a long negotiating process with the bank(s) holding the mortgages. My experience is that banks are not all that forgiving or even approachable; in fact, 60+% of all short sales never close escrow and eventually the bank forecloses on the current owner. The sheer time frame alone waiting for the bank to respond to a qualified offer is frustrating; on one of my last transactions, it took the bank nearly 6 months on a $1.3M offer to come back with a request for a measly $200 more. So, whether you’re a short sale seller or buyer, be prepared for a wild ride that may or may not meet your expectations. And always seek the best advice possible in the marketplace.
