* Affordable Homes Still Getting Multiple Offers along the Wasatch Front

 It seems that all we hear about anymore is how bad the housing market is.  Unless of course you’re talking to a real estate agent.  And asking a real estate agent if it’s a good time to buy is like…, well…, it’s like asking a real estate agent if it’s a good time to buy…ha, ha.

Jokes aside, there’s no question that real estate has softened here in Northern Utah.  The numbers speak for themselves (see September statistics).  Additionally, short sales and bank foreclosures continue to flood our market daily. 

So you would think that this is the perfect recipe to snag a screaming deal, right? …maybe.  This may be the case if you’re looking to buy a higher end or luxury home.  But if you want in on a well priced home under $250k, you might find yourself fighting for it.

That’s been the case for 3 different buyers that I’ve been helping over the last few weeks.  One looking for a condo within driving distance to Salt Lake and the other two are house-buyers in Weber County. 

You know, it’s tough enough just finding the right place for you and your family to call home.  But when you discover that there are multiple offers on the home that you want, it can turn an already emotional experience into a minor nervous breakdown. 

Ok, that might be a little dramatic, but all in all it’s frustrating to say the least.  And not just for the buyers.

The buyers agent wants to help secure the property for their clients.  The trick is to determine the right offer price.  Not too high, not too low.  It’s not always easy, but often I’ll coach my clients with notes that I wrote on an earlier post about how to determine the right offer price.

The seller’s agent wants to net the seller as much money as possible.  However, they must handle the multiple offer process in a way that doesn’t upset the competing buyers to the point that they lose a sale all together.

The seller wants the buyers to create a bidding war which typically drives the price upward, however, if for whatever reason the sale fails to close, it’s unlikely that the other buyer will still be around.

Anyway, in short, there still seems to be a pretty decent demand along the Wasatch Front for homes that don’t break the bank.  Last month, home sales under $250,000 made up 68% of all homes sold in Davis County and 74% in Weber County.

In contrast, the upper end market is hardly seeing offers at all.  There were only 14 out of 245 sales over $400,000 in Davis County for the month of September.  Similarly, Weber County had only 8 out of 237 sales over the $400k mark. 

This news may be a little disheartening if you’re trying to sell your home on the hill.  But if you’re a buyer that wants to trade in that starter home for something bigger and a bit more lavish, the tide has turned in your favor and you should take advantage of the opportunity at hand.

* Are HUD Homes Making a Comeback?

HUD Homes are government foreclosures.  Basically, if a home was purchased with a federally insured loan (FHA) and it foreclosed, then the Department of Housing and Urban Development (HUD) takes over the property.  They then assign the foreclosure to an asset management company to coordinate the sale.

Famous for offering affordable housing opportunities, HUD uses a bidding process to liquidate their inventory.  Similar to a silent auction, they place properties up for sale with a bid deadline.  Typically a 5-7 day window.  During this time, buyers are invited to inspect the listing with a real estate agent and submit offers electonically via the internet.

In most cases, the properties are offered first to “Owner-Occupants”, persons seeking to buy the home as their primary residence.  If after the initial round of bidding, the home is not awarded to an owner-occupant, then investors are welcomed to bid.

Over the past couple of years HUD Homes have been somewhat tough to come by.  The trend is mostly attributed to 3 key factors. 

• First, during the Utah housing boom, prices inflated making it easier for distressd property owners to unload their homes before the bank foreclosed.
• Next, FHA loans which are known for their looser qualifying and down payment requirements, became second favorite to 100% Conventional financing options during the housing boom.  Conventional loans at the time offered enticing variable interest rates with virtually no money out of pocket.  Additionally, many conventional lenders would allow buyers to “state” their income without further verification.  Ultimately, the number of FHA loans plummeted.
• Lastly, if a homeowner falls behind on payments, it’s likely that they at some point would be contacted by a real estate investor.  Someone familiar with negotiating short sales.  A short sale is the selling of a property for less than what is currently owed on the mortgage.  Often banks will choose to accept less than a full payoff to avoid a long and costly foreclosure process.

Now that the days of liberal lending are virtually over, FHA loans are making a strong comeback.  Already this year, the number of FHA loans has skyrocketed.  And Actually, in an attempt to bolster the housing sector, HUD has recently increased their maximum loan limits considerably.

Nonetheless, more FHA loans means more FHA foreclosures or HUD Homes.

New HUD Homes come out every Friday morning.  You can search Utah listings by city here. 

Click Here for more information about any particular listing, the bidding process, or to schedule a preview appointment.

* Down Payment Assistance Programs Die a Sudden Death

Nathan and Trisha are one of the last couples to purchase a home using the “Nehemiah Program“.  A non-profit organization that “gifts” buyers down payment money.  Sound too good to be true?  It is now. 

Recently the federal government passed the Housing and Economic Recovery Act, a new law which prohibits third parties from assisting homebuyers with down payment funds.  Officially in effect as of October 1st, 2008 the new legislation will undoubtedly have a major impact on Utah home sales, particularly in housing markets under $350,000.

Many believe that down payment assistance programs (DPAs) are a major contributer to the current housing crisis.  They argue that buyers who have no “skin” in the transaction are more likely to walk away from a mortgage when times get tough.  Ultimately resulting in a higher number of foreclosures.

Others however insist that DPAs create homeownership opportunities for working class, lower income and female head of household families that wouldn’t otherwise be able to buy.

Nathan and Trisha contacted me just over a month ago and asked if I could help them find a home, and quick.  I recall the eagerness in Nathan’s voice, “I’m already pre-qualified, but I’ve got to find a home ASAP and close by September 30th, can you help”

We did our homework, looked at a few houses and in just a couple of days we found exactly what he wanted.  Luckily, the seller was just as eager to sell and agreed to participate in the Nehemiah program.  However, it was not over yet. 

In fact, several issues arose after putting the ranch style home in Roy in escrow.  Starting with the inspection and then the appraisal.  First, the inspection highlighted a couple of issues that if not corrected, would kill the deal.  Once brought to the attention of the seller however, he willingly agreed to make the repairs. 

Next, there was the problem with the appraisal.  Despite the fact that the home had appraised much higher earlier this year, the appraisal came in $5,000 short!  And naturally, the bank will not lend more than the home is worth.

By this time it was too late to try and find my buyers another home and close by September 30th.  If we didn’t make this work, Nathan and Trisha would possibly have to wait another year or two so they could save up the money they would need for a down payment.

Ultimately, everyone came together for a solution.  The seller, the seller’s agent, the lender, the buyers and myself.  Between all of us, we were able to make up the differnce so that everyone could benefit in the end.

The last hurdle would be meeting all of the lenders conditions in time to close.  This in most cases would be the easy part, except in this case.  Due to the fact that September 30th @ 5:00 was the deadline for all DPAs, the lender was bombarded with loans.  It would take 3 times as long to get final approval because they were swamped with loans that needed to close by the end of the month.

Well, after a hair greying 3 days before the deadline, we barely closed in time.  Now, Nathan and Trish are ecstatic to have their own piece of American Pie.  They plan on living in their new home for quite a few years to come and feel very fortunate that they were able to buy a home at a time when so many people are losing theirs.

As for new buyers entering the market with little or no money to put down, the options have now dwindled.  There are still however City Grants and Federal Housing programs that may assist in buying a home, particularly for first time home-buyers.

If you would like more information on these types of programs, send a request here.

* Buyers find “Steals” at Last Night’s Real Estate Auction

There was standing room only in the Elegant ballroom on the 23rd Floor of the Wells Fargo Tower last night.  Another real estate auction creates a frenzy of Utah home-buyers seeking “deals”.

Last night Eric Nelson and his ENAuction team unloaded some 58 properties in just a matter of hours.  Find a list at www.enauction.com.   Similar to the bank foreclosure auction conducted earlier this summer, buyers had to register in advance and deposit a refundable $10,000 cashiers check to participate.

ENAuction at Wells Fargo Tower on June 12th, 2008

All properties seemed to sell for significantly less than their “estimated values”.  In fact, some properties went for a mere 25% of what they were noted to be worth.  All sales however, are ”subject to approval”.  Basically, the seller reserves the right to reject any or all of the high bids from last nights auction.

Some argue that the auction is merely a gimmick to generate interest and bring buyers to the negotiating table.  Several bidders from the previous auction expressed deep disappointment when they discovered that the bank had rejected their high bids.  Based on the auction conducted in June, approximately 40% of the properties did not get approval to sell for the auctioned prices.  Nonetheless, that means that roughly 60% of the high bidders did walk away with a property, and at their price.

If you attended either last nights auction, or June 12′s auction, feel free to post a comment.  I’d like to hear your perspectives, especially if you were a participant.

* To receive updates on upcoming Real Estate Auctions, submit your request here.

* Seller Financing Alternatives Sure to Gain Popularity as Lenders Tighten Up

All eyes are on Washington as they finalize a plan to bail out Wall St. this weekend.  And we may stave off an economic apocolypse in the short term, but our troubles are still far from over.

Unemployment is projected to rise significantly, the dollar is losing value, and analysts predict that foreclosure filings won’t hit thier peak until sometime late next year.

Banks may gain some breathing room after the bailout, but new credit for consumers will undoubtedly come with even stricter conditions.  Especially as it relates to real estate.  Lenders have already tightened up their definitions of “good credit”, they’ve significantly increased down payment requirements, and many have gone as far as redlining specific areas based on market performance.

As I mentioned in an earlier post, government intervention is the first real start in the housing recovery.  However, expect the journey to be lengthy and sluggish.  Currently, home sales are down substantially in most areas of Northern Utah.  This is not however due to a lack of desire to buy.  Instead, its the product of skepticism, fear of the unknown, and the inability to qualify.  Not to mention the fact that home prices are not completely in line with income in our state.  But that’s a topic for another post.

So if Utahn’s still want to buy and sellers really want to sell, they’ll find a way.  Much like they did in the midst of a rocky economy in the 1980s when interest rates rose to a mind-blowing 15%. 

One alternative to a conventional loan is Seller Financing

In brief, seller financing is where the seller agrees to act as the bank for the buyer.  Typically, a down payment is required and the balance of the purchase price is then amortized at an agreed upon interest rate for 15-30 years.  In most cases, the seller will require a “balloon payment”, a deadline by which the loan must be paid in full. 

In 1984 my parents relocated to Brigham City, Utah after my dad got a job transfer.  Interest rates were declining, but 12.5% was still very steep.  After previewing several homes with their real estate agent, they came accross one where the seller was offering to “seller finance” at only 11% interest.  They would have to put down 10% and agree to a “balloon payment” that matured in 5 years.  Ecstatic about the home’s location, amenities and rediculously low interest rate, they rushed back to the Realtor’s office and sent the seller a full price offer of $65,000.  Just after 4 years, my parents refinanced their home, the new loan paid off the seller and they got a new interest rate of 9%.  They still live in the same home today and it’s valued at about $140,000.

This method of buying or selling a home can be a good solution to both the buyer and the seller.  Nonetheless, as with any contract it should be drawn up by an attorney or real estate agent and all the details should be fully understood by the parties involved.

Already this year we’ve seen a notable jump in these types of transactions.  And as our market braces for a turbulant ride, creative financing will predictably make a comeback.