Housing Deals Are Plentiful

Here is an article that was on today's front page of the South Bend Tribune where I was one of the Realtors that was interviewed for the story:

How to find bargains in today's distressed real estate market.

By KIM KILBRIDETribune Staff Writer

When Zach Quiett returned from serving in Iraq with the Army National Guard in May 2008, one of his top priorities was to become a homeowner.

Quiett hooked up with David Bodine, a Realtor with Coldwell Banker Anchor Real Estate, and planned a marathon outing during which they'd look at a couple dozen properties in a single day.

Some of them, Quiett said, he was able to quickly scratch off his list of potentials. But the last house the pair looked at seemed perfect.

It was a historic three-bedroom in the Leeper Park area of South Bend.

And it was a foreclosure.

Quiett paid $45,000 for the house. It appraised at closing for nearly $60,000. Fixed up, his Realtor says, it likely will appraise for more than $80,000.

Because of the high number of distressed homes available for sale, local real estate experts say, there are plenty of deals to be had these days.

But buyers must be patient, educated about the market and willing to be aggressive when a bargain pops up.

Short sales

Homeowners who have fallen behind on their mortgage payments and are facing foreclosure likely will consider requesting a loan modification from their lender.

But if a modification isn't an option or if the terms can't be hammered out, a short sale is sometimes considered.

"Usually, the bank is the one saying, 'Let's do a short sale,'" said Barry Skalski, a broker associate with Prudential One Realty who specializes in short sales.

In a short sale, the lender will often agree to accept less for the property than the seller owes on it, he said.

The downside, he said, is it's a much more complicated process than a conventional real estate transaction.

"Once an offer has been submitted to the bank, you have a whole short sale package that has to be filled out," Skalski said.

Most of those items are documentation of the seller's hardship.

The process can take about 45 days, he said.

For a patient buyer, however, the process can pay off with a savings of some 25 percent to 30 percent on a home.

Last week, Skalski showed a Tribune reporter and photographer a home he has listed as a short sale in Royal Oak Estates on the south side of South Bend.

The owner, who has been relocated and no longer lives in this area, owes more on the property than it's worth, Skalski said.

In 2005, the owner bought the four-bedroom, waterfront two-story home new for $220,000.

Late last week, Skalski had it listed for $189,900 and was considering lowering the asking price.

"This is a great offer where someone could make a $170,000 to $175,000 offer and get a heck of a deal on a house," Skalski said of the home that is nearly 2,300 square feet and move-in ready.

If Skalski can sell the home and the bank agrees to take a loss, the homeowner's credit score will be negatively affected by the short sale for about two years.

If not, the home will likely be foreclosed on and the homeowner's credit will potentially suffer to some extent for seven years.

"This is a market like none we've come across before," Skalski said.

If a homeowner doesn't sell in time, his lender's next step could be scheduling the home for a foreclosure auction, giving anyone with the cash an opportunity to bid on the property.

Skalski warned, however, that potential buyers cannot inspect a home before it goes up for auction. They also inherit any liens on the property and are required to pay in full on the day of the purchase.

Bank-owned homes, aka REOs

Often, lenders will send representatives to foreclosure auctions to buy back their own properties. After that, they ask real estate agents they partner with to prep the homes and get them on the Multiple Listing Service.

That's where David and Amy Bodine with Coldwell Banker come in. The couple specialize in repossessions.

It's often David Bodine's job to give homeowners — if they're still occupying the property — final notification of the foreclosure.

Often, he said, lenders will allow him to offer the inhabitants of foreclosed homes — even if they aren't the owners — a check for cleaning up the property and leaving it in decent condition.

Then, he coordinates with the bank to have any items left behind cleared out, as well as to have the property winterized, if necessary, before putting it on the market.

The bank-owned homes he lists, he said, are priced to sell within two months.

That often means they're undervalued, he said.

A home the couple just last week sold in Forest Hills in Granger is a perfect example.

Listed at $111,750, the five-bedroom ranch features a vaulted living room and wooded lot. It does need cosmetic work, however, such as new carpet and paint and some drywall repairs.

The day after the Bodines showed it to two Tribune staffers, an offer was accepted on the bank-owned property.

The seller was able to get a loan called a 203K that will allow him to finance the needed repairs.

David Bodine said he couldn't divulge the price the home sold at because the sale had not closed.

But even at $111,750, it seemingly was a deal in a neighborhood of homes valued at $130,000 to $250,000.

Before it sold, David Bodine said the bank was potentially looking for about $100,000 for the home. In his opinion, it required about $15,000 to $20,000 in repairs and updating. Fixed up, he said, it would likely be worth $150,000 to $160,000.

The average number of days a decently priced foreclosure stays on the market here is 30 to 65 days.

"Their goal," he said of lenders who buy back properties, "is to move the property in 60 days.

"About tips for finding good deals on foreclosures, David Bodine said, "The key is finding homes that are priced well."

Don't be overly concerned about cosmetic defaults, he said, but ensure that the "big ticket" items, such as the roof, heating and air conditioning systems, foundation, and well and septic systems are sound.

And when you see a deal, be ready to make an offer.

Being realistic

Skalski, meanwhile, said the local real estate market certainly is a buyer's one right now, but it's not as depressed as some may think.

Generally, you won't pick up a $100,000 home for $50,000.

"Unfortunately," he said, "there are buyers out there who think they'll get 50, 75 percent off. This market is not like that. ... Maybe Vegas, but this (real estate) bubble was not that big.

"Instead, he said, expect to save about 25 percent to 30 percent compared to the value of other homes in the neighborhood when you buy a distressed home.

He advised buyers to always consider what they'll have to pay for a property and then start adding back in what it will cost to make it move-in ready.

"Not every foreclosure is a good deal," he said.

"Don't expect (to be able to make) a huge profit (on the home) right away," he said. "Expect to have to put a lot of work into the home. Just because you've watched a couple of HGTV shows doesn't mean you're going to be able to flip this house."