I hate that I love watching House Hunters, Property Virgins, My First Place, and the like. I like watching other people as they look for their dream home like we have done, and I get excited when I know they have found "the one." But, I really cannot stand the fact that HGTV has seemingly lost touch with the realities of today's real estate market, and it has frustrated me to a point where I hate watching these shows and really don't like HGTV in general very much at all anymore. Here's why:
- When you submit an offer on a house and the sellers accept the offer (short sale or otherwise) you have NOT bought that house! Every single episode of one of these shows portrays the process this way, and it is 1000% unrealistic...yes...one-thousand percent (since we're exaggerating things anyway). You do not have an offer accepted and then magically move in 30 days later and everything is perfect. Why not have more follow-up shows?
- Why not have more shows about short sales and bank-owned properties and the headaches involved? I've seen a couple shows where the buyers have looked at short sales, submitted offers and walked away due to frustration and loss of patience. THAT is realistic, but HGTV doesn't show that often enough. Two shows is a small ratio.
- Why not show stories of people who stick it out through the process like we have with our short sale? You should provide tips on resources and how-tos for purchasing short sale properties. Show people that it does take a very long time to get through the process.
- The ratio of short sales and bank-owned properties far exceeds traditional sales like those portrayed on your shows. I'll bet prospective buyers in this market would find those stats interesting. (And more so about the differences between the two.)
Kudos to you HGTV for trying to spin things into a positive light, but you are giving homebuyers a false impression of the market today. And I mean first-time buyers as well as people who have bought before. Recently, I spoke to someone involved in real estate and he said he was dealing with a couple who were buying a second home. They thought it would be easy because they've done it before. But, he said he told them that unless they've purchased a home within the last 6 months things have changed dramatically,a nd they have a lot to learn about the market. Even if you've purchased a home within a year...things have changed!
HGTV, you have an opportunity to shed light on the new reality of purchasing a home. I think you should seize the opportunity to educate people. HGTV...GET REAL!
Monday, January 31, 2011
Sunday, January 30, 2011
Would you rather buy a short sale or have a root canal?
I had a root canal yesterday, and I was just asking myself this very question.
Root canal, by a long shot. :)
At least with a root canal I knew when it would be over. In fact I knew it would be over at some point, period. (The unknown is the hardest part of the short sale process.) The best part? The novocaine. Oh, and the valium before hand so I wouldn't be as nervous about the novocaine (fear of needles). Stuff to help with needle and pain anxiety and stuff to prevent me from feeling anything while he drilled my tooth.
Yes, root canals are much less painful than buying short sale homes. You heard it here first.
Root canal, by a long shot. :)
At least with a root canal I knew when it would be over. In fact I knew it would be over at some point, period. (The unknown is the hardest part of the short sale process.) The best part? The novocaine. Oh, and the valium before hand so I wouldn't be as nervous about the novocaine (fear of needles). Stuff to help with needle and pain anxiety and stuff to prevent me from feeling anything while he drilled my tooth.
Yes, root canals are much less painful than buying short sale homes. You heard it here first.
Is it really a buyer's market?
My answer here is a resounding "NO." Not in my experience, anyway. Talking heads have called today's market a "buyer's market" because interest rates are at historic lows, and the prices of homes have dropped.
Side notes:
- Interest rates were at 4.5% in Nov 2010. As of today, they are back up to 5%. Still low, but not "the lowest in history" any longer...and rising.
- Values of homes are dropping along with their prices. Consider the neighborhood you're buying in, or considering buying in. Will the value of that neighborhood recover and the value of the house you're looking at increase? In 2006, I was looking at buying when the market was booming (before the bubble burst), and my dad gave me this advice: "Today's real eastate market will not be tomorrow's real estate market." It was great advice, and thank god I didn't buy...but that advice still holds true for today's market. You may buy a home that appears to have "instant equity" because it has appraised for more than what you're paying for it...but things are still evolving and "Settling" with the real estate market, and with the economy. Invest in the future of the market, not in today's market. And, in the meantime, don't assume tomorrow's market will be better.
Back to the original question of the "buyer's market." It also depends on what kind of buyer you are. We lost a house to a cash buyer who paid about $40k more than what the house would have appraised for. What do you care what the hosue is really worth when you have $190k in cash to sink into a house? Did that buyer care that the house needed work? That the window in the master bedroom had a leak and there was water damage to the wall? My guess is "obviously not." If you're a cash-buyer, and have more money in the bank than the price of the home to make repairs, I'd say go for it! Good for you. (A word of caution at the end of this post though...keep reading.)
Even if you're financing...Can you afford to pay all closing costs? We've also encountered sellers who would not pay any closing costs because they can't afford it, and they need the full asking price so they don't lose money. This is a situation where they would normally be short-selling, but are hoping they can find a buyer to pay full price (or above) and all closing costs so they dont' have to short sale. Generally speaking, it's considered a courtesy that the sellers assist the buyers with closing costs...but if you can afford all that...go for it!
This "buyer's market" also calls for patient buyers. I know what you're saying "I can be patient." And, to that I say "you have NO idea what patience is until you have tried to buy in today's real estate market!" It will drive you mad. Short sale or not, but especially with short sales. Expect to play a game called "hurry up and wait" and expect to play it for awhile, and often. See my very first post to this blog for more info on that. Traditional sales require less patience, but you should expect to have to be patient because there may be multiple offers on a traditional sale, because they are few, and far between so everyone (including your realtor) wants that situation if they can find it.
In summary, this is really a buyer's market for those people who have lots of cash, an abundance of savings, and/or an insane amount of patience. But remember, don't wrap up all your savings into the purchase of the house! Keep a nest-egg for when Murphy knocks on your new door...in the form of broken A/C, broken fridge, hot water heater, roof leak, and other misc unexpected home repairs or upgrades that inspection didn't catch. If it can happen, it probably will!
Side notes:
- Interest rates were at 4.5% in Nov 2010. As of today, they are back up to 5%. Still low, but not "the lowest in history" any longer...and rising.
- Values of homes are dropping along with their prices. Consider the neighborhood you're buying in, or considering buying in. Will the value of that neighborhood recover and the value of the house you're looking at increase? In 2006, I was looking at buying when the market was booming (before the bubble burst), and my dad gave me this advice: "Today's real eastate market will not be tomorrow's real estate market." It was great advice, and thank god I didn't buy...but that advice still holds true for today's market. You may buy a home that appears to have "instant equity" because it has appraised for more than what you're paying for it...but things are still evolving and "Settling" with the real estate market, and with the economy. Invest in the future of the market, not in today's market. And, in the meantime, don't assume tomorrow's market will be better.
Back to the original question of the "buyer's market." It also depends on what kind of buyer you are. We lost a house to a cash buyer who paid about $40k more than what the house would have appraised for. What do you care what the hosue is really worth when you have $190k in cash to sink into a house? Did that buyer care that the house needed work? That the window in the master bedroom had a leak and there was water damage to the wall? My guess is "obviously not." If you're a cash-buyer, and have more money in the bank than the price of the home to make repairs, I'd say go for it! Good for you. (A word of caution at the end of this post though...keep reading.)
Even if you're financing...Can you afford to pay all closing costs? We've also encountered sellers who would not pay any closing costs because they can't afford it, and they need the full asking price so they don't lose money. This is a situation where they would normally be short-selling, but are hoping they can find a buyer to pay full price (or above) and all closing costs so they dont' have to short sale. Generally speaking, it's considered a courtesy that the sellers assist the buyers with closing costs...but if you can afford all that...go for it!
This "buyer's market" also calls for patient buyers. I know what you're saying "I can be patient." And, to that I say "you have NO idea what patience is until you have tried to buy in today's real estate market!" It will drive you mad. Short sale or not, but especially with short sales. Expect to play a game called "hurry up and wait" and expect to play it for awhile, and often. See my very first post to this blog for more info on that. Traditional sales require less patience, but you should expect to have to be patient because there may be multiple offers on a traditional sale, because they are few, and far between so everyone (including your realtor) wants that situation if they can find it.
In summary, this is really a buyer's market for those people who have lots of cash, an abundance of savings, and/or an insane amount of patience. But remember, don't wrap up all your savings into the purchase of the house! Keep a nest-egg for when Murphy knocks on your new door...in the form of broken A/C, broken fridge, hot water heater, roof leak, and other misc unexpected home repairs or upgrades that inspection didn't catch. If it can happen, it probably will!
FAQ: Why don't we just look for another house?
The answer here is simple: We have looked for other houses, and we continue to do so.
I scour the MLS everyday looking for new listings that suit our needs, and haven't found anything that strikes me.
We have submitted offers on two houses since offering on the short sale. One of those homes was a short sale and the seller didn't accept our offer (now that home is re-listed for far less than what we offerd for it, ironically, with another one of those "Approval letters" on hand) and another home with sellers who were not realistic about today's market...the second time we encountered that. It seems sellers are in denial that their asking prices are too high, because their homes will not appraise for what they need/want out of the sale of the home.
The fact is, we as buyers can be picky in a market like this one. (more on this "buyer's market" in the next post) There are more houses than there are buyers. And, until we find a house that is as good or better than this one, we want this one. Or, we will walk away from buying all together...because we're not willing to settle, and you shouldn't be willing to do that, either. Make a list of what you want in a home, decide what onthat list is a "must-have" and what on the list is "nice-to-have." Then, don't budge. Realtors will try to tell you that house isn't out there, or that it's located in a different county, etc.
It's a lot like dating. Stick to your guns. Don't lower your standards. The difference between dating and buying a house: We're talking about an investment of hundreds of thousands of dollars...don't settle for anything less than exactly (or nearly exactly) what you want.
I scour the MLS everyday looking for new listings that suit our needs, and haven't found anything that strikes me.
We have submitted offers on two houses since offering on the short sale. One of those homes was a short sale and the seller didn't accept our offer (now that home is re-listed for far less than what we offerd for it, ironically, with another one of those "Approval letters" on hand) and another home with sellers who were not realistic about today's market...the second time we encountered that. It seems sellers are in denial that their asking prices are too high, because their homes will not appraise for what they need/want out of the sale of the home.
The fact is, we as buyers can be picky in a market like this one. (more on this "buyer's market" in the next post) There are more houses than there are buyers. And, until we find a house that is as good or better than this one, we want this one. Or, we will walk away from buying all together...because we're not willing to settle, and you shouldn't be willing to do that, either. Make a list of what you want in a home, decide what onthat list is a "must-have" and what on the list is "nice-to-have." Then, don't budge. Realtors will try to tell you that house isn't out there, or that it's located in a different county, etc.
It's a lot like dating. Stick to your guns. Don't lower your standards. The difference between dating and buying a house: We're talking about an investment of hundreds of thousands of dollars...don't settle for anything less than exactly (or nearly exactly) what you want.
Short Sale vs. Bank Owned
We wondered what the difference was between short sale and bank owned, and recently we learned a few things. I'm open to any correction here because we got this info from someone involved in real estate.
- Bank owned sales sometimes move faster because the negotiation is only between you and the bank, like a traditional where it's just between buyer and seller. Short sales go through many more hands (buyer, seller, realtors, lawyers, negotiators, title agency, etc. etc. etc. depending on the situation of the home)
- Bank owned homes may not have clear titles
- Both are usually great deals
- Bank owned sales sometimes move faster because the negotiation is only between you and the bank, like a traditional where it's just between buyer and seller. Short sales go through many more hands (buyer, seller, realtors, lawyers, negotiators, title agency, etc. etc. etc. depending on the situation of the home)
- Bank owned homes may not have clear titles
- Both are usually great deals
Why this blog?
The reason I started this blog was to help provide a real story and a more realistic perception of the short sale process than what the realtors or the mortgage brokers will provide us as buyers. Here's a little of our story (thus far). I'll update this blog as we move along, and I would love (and welcome) your thoughts and experiences as well. For example, anyone know a good real estate lawyer who would be able to provide some insight?)
Here's our story:
My fiance and I decided to buy a home back in May/June 2010. We offered on a few homes and they fell through for one reason or another (cash only, sellers non-negotiable or unrealistic in this market, etc.). We found a house that suits all of our needs and satisfies a majority of our wants...the only thing "wrong" with it is that it's a short sale.
We decided to move forward and submit an offer because it was listed as "Short sale. Approved. Letter on Hand. Close in 30 days." This was supposed to mean that this house was short sale, but it was ahead of the game in some respects because the listing price was bank-approved. The story behind it was that there were two other offers by two other parties and both of those people walked away. One guy gave up and the other lost his job. But, the bank approved one of their offers, so this was supposed to be "easy" relative to other non-approved short sales. Oh boy, was that ever poor advice from our realtor.
The timeline looks like this so far:
Mid-JULY 2010: We submit our offer (full asking price plus a percentage of closing)
A couple days later: Sellers accept our offer, and it moves to the bank for review (SUNTRUST BANK, more specifically)
A week later: SUNTRUST Bank counters the closing costs, but agrees to the price of the home, and we're told the approval letter should be on the way within a week. (we thought we were all in agreement and the house was ours)
OCTOBER 2010: After 3 months of waiting on our approval letter and no word from the sellers or the bank, or the negotiator, we find out that the house is about to go into foreclosure. This means the right hand wasn't talking to the left at SUNTRUST. This probably would have also meant that we lose the house if it does go into foreclosure. The judge agreed to extend the foreclosure date because we had on offer on it. Again, we're told the approval letter should come within the week. Signed an addendum for a closing date of Nov 15, 2010.
Nov 16, 2010: Call from our agent. The sellers have declared bankruptcy. Lawyers now involved. They need 30 days for their paperwork. I spoke to the title agent, and she said the lawyers will need 30 days and then she will need 15 days, each to process their paperwork for our approval to go through. We signed ANOTHER ADDENDUM for a closing date of DEC 30, 2010, and (of course) should have the approval letter within a week.
DECEMBER 31, 2010: Still no approval letter. Happy New Year. Our nightmare continues.
JANUARY 2011: Our real eastate agent quits our case, and assigns us to the owner of the agency she works for who has more experience with short sales and the red tape involved. We also find out (by driving by the house) that it is now re-listed. The house was officially off the market back in July 2010 when sellers accepted our offer. (I suggest you insist that this verbiage be in your offer if you're looking to buy a short sale, btw. It takes the house off the market so you don't become involved in a bidding war. Especially helpful because you'll already be at war with whatever bank is involved on the sellers' side...you'll see what I mean. Keep reading.) We call the listing agent, and without revealing who we are or anything he tells us all the details on the house and that it was for sale. Not true. We have an offer on it that takes it off the market...as of JULY 2010! Six months previously!
A few days later: Our new agent tells us SUNTRUST has raised the asking price of the home, and we have X number of days to accept the new terms. At this point, we're wondering how this is possible because we thought we were all in agreement, and we were told the only thing we were missing was the approval letter which was hung up in red tape...because the banks have lots of these going on. Lessons here: The banks can do this, and don't listen when you're told "this is typical in these short sale situations" because NOTHING is "typical." The banks don't have it figured out, and they get away with WAY too much because there are no regulations...no checks and balances so they're not held to any rules except their own...and those are ever-changing.
A week later: Although we're pissed at the change of the rules mid-game after we came to an agreement, we accepted the new terms. We signed a new addendum with a closing date on or before Feb 28. We were told (again) that we should have the approval letter within a few days.
Jan. 30, 2010: Here we are three weeks after that promise and going on seven months since our original offer...that has since been raised in price by SUNTRUST, and still no approval letter.
Using this blog, I will update things as they progress. Like I said, I hope to provide a real story of a short sale that seemed like it was going to be "simpler" than others because of the approval letter on hand. I also think this blog will provide me an outlet for my frustrations, and maybe others can share in them because I know we're not the only ones going through this nightmare called "buying a short sale."
If you're asking "why don't you just walk away?" The answer is that I have looked all over the MLS since this process began and I have found nothing that suits our needs as well as this house. Read the next few posts for more insight there. This one is too long already. :)
Here's our story:
My fiance and I decided to buy a home back in May/June 2010. We offered on a few homes and they fell through for one reason or another (cash only, sellers non-negotiable or unrealistic in this market, etc.). We found a house that suits all of our needs and satisfies a majority of our wants...the only thing "wrong" with it is that it's a short sale.
We decided to move forward and submit an offer because it was listed as "Short sale. Approved. Letter on Hand. Close in 30 days." This was supposed to mean that this house was short sale, but it was ahead of the game in some respects because the listing price was bank-approved. The story behind it was that there were two other offers by two other parties and both of those people walked away. One guy gave up and the other lost his job. But, the bank approved one of their offers, so this was supposed to be "easy" relative to other non-approved short sales. Oh boy, was that ever poor advice from our realtor.
The timeline looks like this so far:
Mid-JULY 2010: We submit our offer (full asking price plus a percentage of closing)
A couple days later: Sellers accept our offer, and it moves to the bank for review (SUNTRUST BANK, more specifically)
A week later: SUNTRUST Bank counters the closing costs, but agrees to the price of the home, and we're told the approval letter should be on the way within a week. (we thought we were all in agreement and the house was ours)
OCTOBER 2010: After 3 months of waiting on our approval letter and no word from the sellers or the bank, or the negotiator, we find out that the house is about to go into foreclosure. This means the right hand wasn't talking to the left at SUNTRUST. This probably would have also meant that we lose the house if it does go into foreclosure. The judge agreed to extend the foreclosure date because we had on offer on it. Again, we're told the approval letter should come within the week. Signed an addendum for a closing date of Nov 15, 2010.
Nov 16, 2010: Call from our agent. The sellers have declared bankruptcy. Lawyers now involved. They need 30 days for their paperwork. I spoke to the title agent, and she said the lawyers will need 30 days and then she will need 15 days, each to process their paperwork for our approval to go through. We signed ANOTHER ADDENDUM for a closing date of DEC 30, 2010, and (of course) should have the approval letter within a week.
DECEMBER 31, 2010: Still no approval letter. Happy New Year. Our nightmare continues.
JANUARY 2011: Our real eastate agent quits our case, and assigns us to the owner of the agency she works for who has more experience with short sales and the red tape involved. We also find out (by driving by the house) that it is now re-listed. The house was officially off the market back in July 2010 when sellers accepted our offer. (I suggest you insist that this verbiage be in your offer if you're looking to buy a short sale, btw. It takes the house off the market so you don't become involved in a bidding war. Especially helpful because you'll already be at war with whatever bank is involved on the sellers' side...you'll see what I mean. Keep reading.) We call the listing agent, and without revealing who we are or anything he tells us all the details on the house and that it was for sale. Not true. We have an offer on it that takes it off the market...as of JULY 2010! Six months previously!
A few days later: Our new agent tells us SUNTRUST has raised the asking price of the home, and we have X number of days to accept the new terms. At this point, we're wondering how this is possible because we thought we were all in agreement, and we were told the only thing we were missing was the approval letter which was hung up in red tape...because the banks have lots of these going on. Lessons here: The banks can do this, and don't listen when you're told "this is typical in these short sale situations" because NOTHING is "typical." The banks don't have it figured out, and they get away with WAY too much because there are no regulations...no checks and balances so they're not held to any rules except their own...and those are ever-changing.
A week later: Although we're pissed at the change of the rules mid-game after we came to an agreement, we accepted the new terms. We signed a new addendum with a closing date on or before Feb 28. We were told (again) that we should have the approval letter within a few days.
Jan. 30, 2010: Here we are three weeks after that promise and going on seven months since our original offer...that has since been raised in price by SUNTRUST, and still no approval letter.
Using this blog, I will update things as they progress. Like I said, I hope to provide a real story of a short sale that seemed like it was going to be "simpler" than others because of the approval letter on hand. I also think this blog will provide me an outlet for my frustrations, and maybe others can share in them because I know we're not the only ones going through this nightmare called "buying a short sale."
If you're asking "why don't you just walk away?" The answer is that I have looked all over the MLS since this process began and I have found nothing that suits our needs as well as this house. Read the next few posts for more insight there. This one is too long already. :)
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