In Anaheim Hills, the surrounding communities, and throughout the State of California, there are still thousands of distressed properties held by banks that need to be sold, and thousands more properties that are becoming distressed. Four-plus years of drain on homeowners’ reserves, high unemployment, and the multitude that owe more on their home than it is worth will continue to contribute to an overall dampened market for at least another year.
For Buyers in Anaheim Hills & Surrounding Communities
Foreclosed properties will continue to sell for 20% – 30% less than the average seller-owned home. The inventory will remain constrained due to the banks’ slow release of these properties for sale. Demand will remain very high for these homes. So be prepared to come in with a sizable down payment (at least 20% to 25%) to compete with investors offering all cash or significant cash deals.
Be aware, too, that many of these homes need serious repairs, and you may not have an opportunity to check them out before bidding. If you can’t get a thorough inspection, you should move on.
The condition of these properties may affect your ability to finance them, particularly if you are using FHA insured financing.
Also, don’t focus on short sales if you need to move quickly. In the last couple of years, these transactions often took six more months to complete, and while some banks are trying to streamline the process, you can’t count on a speedy close of escrow, if it can be closed at all.
The good news is that the steady stream of foreclosed and short sale properties being placed on the market will create an artificial pricing cap on seller-owned homes. This will work in your favor. But be careful, you cannot expect to have a seller take your offer seriously if they are priced fairly and you offer 20% below what is often an artificially deflated price. However, you can expect the property to be in as turn key a condition as possible. If the property isn’t turn key, then it is realistic to expect that you can negotiate to offset the cost necessary to bring the home in line with a similar turnkey home.
For Sellers in Anaheim Hills & Surrounding Communities
Work with your real estate professional to create a comprehensive strategic selling plan.
A strategic selling plan, in addition to supporting your goals and the marketing of the property, will address preparation of the house for sale, objective review and pricing, pre-positioning to support the buyer’s financing efforts, and peace of mind for you and the buyer.
Foreclosed properties are typically selling for 20% – 30% below market value, depending on their location and condition. Short sales often sell for closer to market value, but with discounts to compensate for deferred maintenance, liens, etc.
Don’t try to compete with repossessed properties on price. Instead, play up your home’s advantages. Namely: Move-in condition, possibility of a quick deal, and priced to finance. Underpin your home’s move-in condition with high-coverage warranties.
Have your home professionally inspected, and make the necessary repairs.
Have a qualified general home inspector conduct a thorough inspection of your home and property. Make the necessary repairs and as many of the “nice to have repairs” as is feasible within your strategic selling plan.
As well, it is wise to have your home inspected for wood-destroying pest and moisture damage. Make all necessary section 1 repairs (removal of infestations, repairing of leaks and repairing of damage caused by these infestations or moisture), and consider making any section 2 repairs (preventive maintenance) that can be accommodated in your strategic plan. If you find that tenting of your home is necessary, Plan the tenting for after you move, and before the new owner takes possession. This will make it easier on you, and give the buyer piece of mind in the knowledge that the home has been freshly treated.
Stage the property correctly.
Interior and exterior staging is paramount to receiving top dollar for your property. Spruce up the landscaping and the hardscaping. Freshly paint inside and out, where necessary. Fully clean and deodorize. Clean the windows. De-personalize and marginalize the decor. Remember that your home is where you are, and you are moving. Relegate the energy used by your instincts to maintain and protect your home to contemplating and planning on how to find and make a new home. The house that you have made your home in must now be considered just that: A house. Forget your personal taste, and view your home as a store front window. Keep it generic enough to attract the most buyers possible. Only include enough focal points as is necessary to point out appealing features, and to subtly capture the essence of the lifestyle one can reasonably expect to live in your community. Your real estate professional can provide valuable advice in this area. There are also professional “stagers” that can be employed.
How to set the price:
Once you have made your repairs and staged your store front window (house), obtain an appraisal by a qualified appraiser that knows your area, and have the appraiser do the appraisal as if they are presenting it to a lending institution. Your real estate professional can reasonably predict what your home is worth on the market at the time you sell, though it is you who will set the price. As with any product being made available to sell, the marketing research must include how to market the product to all product perceptions. Today it is the banks that will have the greatest influence on the outcome of most transactions. Buyers are not only looking for the best deal, they are looking for the most financeable deal. Banks will rely on an appraisal of the home, including an opinion of its condition, to decide the extent of the level of financing it will make available to the buyer. The bank is not just looking at market value; they are also considering any likely cash “gotchas” the buyer may face during the first couple of years they own the home. All good market plans include non-biased opinions of its effectiveness before it is put into action. A good appraisal is your non-biased opinion. An appraisal will also help to eliminate some of the stress along the way for you and the buyer. It will help you set your initial asking price realistically for your situation and help avoid nitpicking by potential buyers. Don’t be afraid to share the appraisal with the buyer. Then you and they will know the base objective value, and the rest is subjective. It will also help you and your potential buyers avoid the not inconsequential anxiety experienced when waiting to see if the appraisal requested by the buyer’s bank will seal or kill your deal. Give the appraisal obtained by you to the appraiser sent at the request of the buyer’s bank. Most often they will be grateful for your helping them to reduce footwork, and they will know that you are in a position to dispute any glaring differences between the two appraisals.
Tie it all up with a bow!
Provide for a fully-paid home warranty, including appealing bells and whistles. If it can fit within your strategic selling plan, it is a good idea to offer it for 2 years. You might also consider obtaining a roof certification and warranty if your roof is more than 7 years old, or has ever leaked. These warranties are relatively inexpensive, and offer significant peace of mind to your buyer.
At the end of the day…
At the end of the day, if your home is worth $500K, a foreclosed property may sell for $100K + less than your home is worth. You must weight this factor against the full cost of your strategic selling plan. Without creation and execution of this plan, you will likely have to absorb an even more significant portion of the price differential between your home and a similar foreclosed property.
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