In the past few weeks, I’ve heard from more potential buyers for 2012 than I had during 2011. New families relocating from San Francisco to raise kids in the ‘burbs; first-time buyers who have been watching the market for two years; and one couple who went through a short sale a few years ago.
That got me to thinking. The first offer I wrote for a short sale was in 2007. It seems like “just the other day” so I had to go to the MLS to look it up — that house sold in Dec. 2007. My first short sale listing was the same year: It went on the market in Oct. 2007.
Four years ago — how time flies. That was the year we started hearing about short sales, and pretty soon they were common-place. Nearly 15 percent of the homes currently on the market across the San Ramon Valley (San Ramon through Alamo) are short sales. For the most part, the sellers of those homes become renters, and we’ve seen our rental market get stronger and stronger over the past four years.
But now it’s been over four years for some of these short sale sellers, and they may be ready to come back into the market to buy a home. The lending rules are different for FHA and conventional loans, but in either case the underwriters will be fussy about credit patterns and looking for the short sale to have been part of an isolated incident.
In the case of a short sale and no bankruptcy, borrows can be eligible for a loan in as little as two years later (or three for FHA). If there is a Chapter 7 bankruptcy, then four years. If the borrower went through a foreclosure, then the timeframe is seven years.
If buyers are ready to come off the fence, and if the buyers who have recovered from a short sale join the market, 2012 could be a great year for our local real estate market.
Buyers are understandable very cautious, and will be looking for quality and the best guarantee against sliding value. The age-old “location, location, location” is always good advice, but what does it really mean?
Schools are a big part of location. Pay attention to the schools, whether or not you have children. Research all the schools a home is zoned for, K through 12.
Neighborhood is important, and a desirable neighborhood will have some locations better than others. A home tucked in the end of a cul-de-sac is in a far better location than one on a through street, even if they are a block apart.
You can check in with the police department to inquire about crime patterns in an effort to select a safe location.
If the home has a large lot, that’s another hedge against sliding value. Land is the one thing they aren’t making any more of.
Homes that need a bit of cosmetic work can often be the best value. Not everyone has the imagination or the energy to give a facelift to a kitchen or bathroom. I had my eyes opened to this most vividly when I listed a condo that had been on the market with another agent for almost a year. It desperately needed carpet and paint. I coordinated the work ($5,000) for the out-of-area seller, and put the property on the market for $10,000 more — we received multiple offers and sold it for over-asking in less than a week. What amazed me most was the realtors that came through during broker’s tour saying, “Wow, I saw this place before and it was awful—what did you do? It looks great now.”
Buyers who plan to make cosmetic improvements will benefit from instant equity. Of course, if a place needs work, you’ll want to make sure that it is strictly cosmetic. A thorough structural inspection will need to take place after you are in escrow as part of your due diligence, but visually inspect the home before you place an offer for cracks, sloping floors, and water damage.
Your inspection period is for you use in any way that helps solidify your decision, not just formal inspections. Don’t be shy about this! I once had a buyer don his swim suit and spend time in the pool of the home he was in escrow to buy. He was worried about freeway noise, and wanted to spend time in the backyard to get a sense of it.
The inspection period is a good time to get estimates for any improvements you want to make. You may have made the offer expecting to spend $10,000 to update the flooring, but learn that it will cost closer to $30,000. This is important information for your decision process.
At the top of the market, buyers made offers on homes after seeing them only once, in a frantic rush to be first, or in a frenzy as one of ten offers. Now, in a more common-sense market, buyers can (and should) visit the home many times before making a decision about making an offer.
Visit the home at night as well as day, on the weekends as well as weekdays. The traffic patterns will be different, and the noises will differ. So many of our neighborhoods in the San Ramon Valley have freeway noise (hooray for the paving project, but I can still hear it). If you are sensitive to freeway noise, you’ll notice it at night in places that you’d never hear it during the day.
If you’re thinking that 2012 may be the year to buy a home, start now by looking online. My website is one of many you can search the MLS from: www.Lauren4Homes.com. Watch the market virtually before you plunge in.
Then consider that your best hedges against sliding value are location (schools, neighborhood, quiet street), lot size, and quality improvements (especially those that you can do yourself).