At a recent birthday party I was asked the following question:
"I keep hearing about short sales. What exactly are they"
A short sale is simply a property that when all the seller's closing cost, outstanding loans and property taxes are totaled, they exceed the amount of the offer from the buyer.
The seller then has two choices.
They can write a check for the difference, or they can petition their lender to take less money.
The seller writing a check would seem to be an unlikely option, however in a recent MSN article, a borrower's FICO score can drop by over 100 points when a debt settlement takes place. This will, of course, have significant impact on the seller's ability to borrow again in the future and possibly alter the terms of other existing credit right now.
Petitioning the lender for a reduction in the payoff of the mortgage, is the most common approach.
These transactions take much more time than a normal sale, because after the seller approves the offer, the lender must agree to the discounted payoff, and credits or repairs that the buyer is asking for, and other terms and conditions. This process often takes 3-6 months, and many buyers are not willing to wait for the lender's answers, which is often times, NO!
This has been a section of the market that has continued to increase, as property values have continued to decrease. About 12% of Marin County's closed transactions completed in 2009, were short sales.
This is all can be good news for the purchaser, who is not in a hurry. Since many buyers will not consider a home that is a short sale, due to their many uncertainties, the prices on thees properties are usually less than their, non-short sale competitors. Getting a better price on their purchase, is frequently higher up on the priority list, than it was a few years ago.
The short sale dilemma is on the conditions that exist in most real estate markets, that is preventing values from recovering from the decreases they experienced over the past 4 years
Wednesday, February 17, 2010
Thursday, February 4, 2010
Is now a good time to buy rental property?
A prospective buyer asked me last week, "is now a good time to buy rental property?" He told me his household budget is pretty tight, but he does have $50,000 from an inheritance. "Is now a good time to buy rental property, and do I have enough money to get into something?" The answer is Yes! Now is a good time. Prices are down and interest rates are low.
The next question you need to answer is, does your real estate investment need to be here in Marin, or can it be else where? If you don't mind managing an out of the area property, or hiring a management company, (an expense of about 8% of your rental income), your options are numerous.
In Sonoma County there are over 50 Duplex's for sale under $500,000. In Marin County, there are only 2 duplexes available under $500,000. This means that you would be looking at a condo, or small house.
Most lenders require that you put 25% or more down if you are not going to occupy your purchase. This restricts the range that you can look into to about $200,000. This is possible in parts of Marin, if you are buying a condominium.
Another option, if you are a renter, is to buy a multi-unit building, and occupy one of the units yourself. If you "owner occupy" your purchase, you might be able to obtain an FHA loan, which would allow for a much smaller down payment 3.5%.
It costs about $750 per month for your loan/taxes and insurance on every $100,000 that you purchase and finance.
If you found a 3 unit building for $700,000, and put your $50,000 down, (7%), your monthly payment might be about $5,000. Renting the other 2 units out, for perhaps $1,500 each, would leave you needing only $2,000 to complete the payment. This might be comparable to the rent you're paying someone else now!
Now you get to build your own empire! When the time comes that you can afford more, you can move out, and buy something else, and keep the tri-plex. It could prove to be the best retirement account you will ever have!
The next question you need to answer is, does your real estate investment need to be here in Marin, or can it be else where? If you don't mind managing an out of the area property, or hiring a management company, (an expense of about 8% of your rental income), your options are numerous.
In Sonoma County there are over 50 Duplex's for sale under $500,000. In Marin County, there are only 2 duplexes available under $500,000. This means that you would be looking at a condo, or small house.
Most lenders require that you put 25% or more down if you are not going to occupy your purchase. This restricts the range that you can look into to about $200,000. This is possible in parts of Marin, if you are buying a condominium.
Another option, if you are a renter, is to buy a multi-unit building, and occupy one of the units yourself. If you "owner occupy" your purchase, you might be able to obtain an FHA loan, which would allow for a much smaller down payment 3.5%.
It costs about $750 per month for your loan/taxes and insurance on every $100,000 that you purchase and finance.
If you found a 3 unit building for $700,000, and put your $50,000 down, (7%), your monthly payment might be about $5,000. Renting the other 2 units out, for perhaps $1,500 each, would leave you needing only $2,000 to complete the payment. This might be comparable to the rent you're paying someone else now!
Now you get to build your own empire! When the time comes that you can afford more, you can move out, and buy something else, and keep the tri-plex. It could prove to be the best retirement account you will ever have!
Please call me at 415-328-2158 or vist me at http://www.cloneyrealestate.com
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