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Short Sale Questions May 26, 2009

Posted by W. Keoki McCarthy in Bank owned home, Foreclosure, houses, Invest, investing, Investor, real estate, real estate investing, REO, Seattle Real Estate.
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A client asked me some questions about short sales.  I thought the answers I gave them may interest you.  The red writing below is from my client and my answers are in black.

What happens to this home if the bank (underlying lienholder) makes  a move? 

If the bank takes it’s next step it will give them a notice of default for which they will need to cure their arrears or go to auction.  This could take another 3 months to over a year depending on how aggressive the lienholder is and how well the seller works with the bank.  If it gets all the way to auction the bank may set the minimum bid to the amount owed.  However, they may also set it at a value that they think it is worth to try to unload it at auction.  Most of the time the bank sets it pretty near what is owed as they don’t want to leave money on the table.  Once it is an REO (real estate owned in bank lingo) they will hire an agent to list the property for a price they determine through some internal metric.  They will have an appraisal and a couple of broker price opinions to help with that process.  It will probably be listed near market value but they tend to start on the higher side in the beginning. 

 When would they agree to best price??  Before or after foreclosure sale? 

Almost certainly before auction as a short sale or after auction as an REO.  It is doubtful it will be priced well at auction.  Right now it is a short sale.  As I mentioned before we can negotiate pretty aggressively as a short sale because there is less competition.  At this point we would send in an offer and paint a bleak picture.  If we can scare the bank into not wanting to get it as an REO and give the VP of loss mitigation enough to cover his butt when his/her boss asks why they lost so much we can probably get a pretty good deal. 

If we don’t get them to give us a reasonable deal at short sale we can wait until it becomes an REO.  At that time they will slowly lower the price until it sells.  The one downside is that we would have more competition at that point because there are more buyers for non-shortsale properties as they are more of a sure thing.  75% of buyers do not make offers on short sales because they don’t have the luxury of waiting months to know if they win or not. 

We could write up an offer, take it to the current sellers and have them agree to the terms subject to the approval of the underlying lienholders.  Once the offer is accepted, we put a package together to send to the bank explaining the pitfalls of the property and why they should just unload it to us (help the VP justify our offer to the higher ups). 

Remember I wrote this about a specific property so it is not always like this.  However, this is a pretty good explanation of what we do when trying to help people buy shortsales.


Statistics for King County March 7, 2009

Posted by W. Keoki McCarthy in Invest, investing, Investor, market conditions, Northwest, real estate, real estate investing, Seattle.
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I received these statistics today from a title company.  They are for February 2009 vs February 2008

King County:

Total Active Listings          2009 / 9,525        2008 / 9,875               

    % change vs 1 year ago    -3.54%

 Median Price         2009 / $375,000       2008 / $429,900 

    % change vs 1 year ago     -12.77% 

 Total Sales         2009 / 661        2008 / 1,148

    % change vs 1 year ago     -42.5% 

The fact that the median price dropped 12.77% doesn’t surprise me nearly as much as the fact that we closed 42.5% less units.  That is a huge decrease.  I am curious if it is a sign of a worse year or if it’s because everyone was waiting to find out what would happen after the stimulus package goes into effect.  If March is down as well then I’ll assume it’s the former.  On an anecdotal note, I’ve seen a pick up in business for our company so I am hoping that we just had a lot of people on the fence last month.

Phase I and Phase II Environmental Reviews July 5, 2008

Posted by W. Keoki McCarthy in Invest, investing, Investor, Podcasts, real estate, real estate investing, Seattle, Seattle Real Estate, Transactions.

In this episode I interview Paul Riley of the Riley Group. The Riley Group, Inc. is a Pacific Northwest based firm providing environmental, geotechnical engineering, wetland consulting and contractor services since 1996.  Their clientele include retail, mixed-use developers, dry cleaners, plating and other manufacturing facilities, gasoline service station owners, financial lending institutions, municipal governments, realtors, and public utilities.

Riley specializes in assisting clients in the development and/or assessment of commercial and industrial property including  geotechnical investigations, wetlands, contaminated site characterization, risk assessment and remedial design.  You can contact him by going to http://www.riley-group.com/