Foreclosures and REO's [that means bank owned]

I came across a great article in the San Francisco Chronicle about foreclosures and bank owned properties.
I am often asked about these types of property by clients looking for a good deal, and let's be honest, we're all looking for a good deal. But like anything that might appear great on paper there are trade-offs. These two categories, foreclosures and REO's [real estate owned by the bank] are very different from short sales because in these cases the homes are owned by the bank.</form>

If you want info on foreclosures let me know - the title companies all publish the NOD [notice of default] lists that I'm happy to share with you. Foreclosed homes are sold at auction and in my experience you need to pay cash that day. You get no inspections, no preliminary title report and all due diligence needs to be done upfront.

REO's are sold on the market just like normal homes except that there might be longer turn around times for offers and you will get no disclosures. Banks also will likely have a lengthy disclaimer that basically says buyer-beware, and the bank knows nothing about the property.

Is it a good deal?

That's a hard question to answer but in Portland I just don't see it being a great deal yet. The main reason is that we just don't have enough defaults in the area to create the inventory needed for big discounts. If the banks only own a relatively small amount of homes they don't have the motivation to sell them quickly which means they go for close to market value.

Popularity: 1% [?]

State of Oregon Economic Forecast

Last week I attended the monthly CCIM Commercial brokers marketing session and the luncheon speaker was the State of Oregon economist.

My take on the report was that Nationally we are in a recession but in Oregon the majority of our business sectors are still in year over year and quarter over quarter growth. As a state there is an expectation that housing prices will go down 5-10%... BUT.... The Case/Shiller Index shows the metro market rebounding already over the last 3 months. Areas like Bend and the outerlying areas will likely fall more and Portland metro, especially the inner areas will stay strong. Timing any market is mostly good luck and guessing but keep in mind if you're on the fence that we are experiencing very real inflation and that will likely trigger rate increases [which we are already seeing]. A small rate increase can completely remove any benefit of buying at a lower price. See this great article about cost vs. rates [paragraph #9 has the math for you]

Read the Executive Summary here

oldpdx.com featuring the best Old-PDX homes now live

My years long obsession with Old PDX homes finally has a home! I have been working for the last few months to put together a great website devoted to this wonderful and much loved style of home. Many thanks to Yvonne Legrice and Eugene Design Pro for helping make this dream a reality.

OldPDX.com

I will shortly be adding a section on Available homes that will be updated regularly.

Also soon to be added is a section interviewing architects, home restoration experts, and historians about what makes the Old PDX style home unique and special.

If you have a favorite Old PDX home send me a photo and I'll add it to the tour of my favorites.

Nick Krautter

Principal Broker in Oregon

Keller Williams - Portland Central

503.901.8100

oldpdx.com

Portland Metro Inventory = 9 months; How to win in this Market

I love numbers just as much as the next guy but numbers are empty without context. So today I am going to try and put a feel to the current Metro inventory statistic of 9 months. What does a 9 month inventory mean to you if you are a buyer or seller? How do you win in this market? Here are my tips for Buyers and Sellers for todays' market.

Sellers:
Right now there are more sellers than buyers in the metro area. This doesn't mean you have to have your house on the market forever to sell it, in fact you don't want your house on the market forever. Average time on market is still under 3 months. Here is the plan for sellers:
1. Pretend your home is going to be on the cover of Better Homes and Gardens , your house and yard should look this clean and uncluttered. If there are any eyesores like an old fridge or a shed falling into the ground get rid of them. Also for most houses I've seen, you should have 1/2 to 1/3 of the stuff in the home. It helps to have a professional stager take a look at your house, even if they just re-arrange some furniture.
2. Price your house to the market. Now is not the time to price high and see what happens. I can tell you right now what will happen - you will sit on the market, likely not getting any offers and when you finally get down to the market price someone will want to push even further down and be more demanding during inspections. It's always better as the seller to get an offer quickly.
3. Make your house easy to show. Don't put an "appointment only" unless you absolutely have to.
4. If the market price isn't what you want then stay off the market and live in the home or rent it out until you can get what you want.

Buyers:
Even though the numbers are on your side some neighborhoods are still in the seller's favor. Here are my tips for finding a great home.
1. Decide clearly what you want: size, area, style, finish level, yard.... Get this as focused as possible.
2. Get to know the possibilities for your target home, area and price range. Drive the areas and keep a favorites list and track it.
3. Pick your Top 5 and tour them with your Realtor. This will show you what your options really are.
4. Make an offer - you never know what will happen until you put an offer in the seller's hands.
5. Negotiate - Don't be shy if the price isn't where you need it but keep in mind that you have to step back in the negotiation process and see where you stack up at your negotiated price with the market - don't negotiate yourself out of the house if you really want it.

The $20,000 Letter

The $20,000 letter isn't an antique written by a president or famous author. But it is one that you should write whenever you are buying a home. One of my clients recently sent me an interesting article from the NY Times. While this article has a template that focuses on the national trends in the market I think something simple and heartfelt will work better. So here are my tips to buyers about writing a letter with your offer:

1. Use the seller's first name
2. Keep it short and be honest
3. Use the word "home" not "house" - Home is a feeling, a house is a place.
4. It should be 3 paragraphs as follows:
A. "I/We toured your home recently and we...."[explain how the house made you feel and what you like about it]
B. "I/We are....[tell the seller who you are, what you do, any unique hobbies, and any thing you plan on doing once you move in]
C. End with, "Thank you for considering our offer"
5. Include a picture

The whole idea of writing the letter is to help make a connection with the seller. Selling a home is a very emotional process, especially if someone has lived in the home for a long time they'll have many memories associated with the home. Just like giving away a puppy from a new litter sellers want to make sure their home has a wonderful new owner.

What's really going on in your Neighborhood?

Back by popular demand is my second installment of inventories by zipcode. This shows which parts of town and which types of property are selling and which ones are sitting. Inventory is figured in months with 6 months being balanced, less than 6 months favoring sellers and more than six months favoring buyers. If I missed your area just let me know and I'll add it in.

Detached Homes:
97214 - 2.9 months
97217 - 2.9 months
97212 - 5.2 months
97203 - 5.2 months
97202 - 6.0 months
97232 - 6.5 months
97210 - 9.2 months
97227 - 9.5 months
97201 - 18 months

Condos

97232 - 5.0 months
97214 - 7.8 months
97210 - 8.9 months
97202 - 11 months
97209 - 11 months
97203 - 15 months
97212 - 19.3 months
97217 - 29 months

New Portland Report

Spring 2008 Portland Report is now available. We'll be throwing a party soon to celebrate so stay tuned

Spring 2008 Portland Report

Inventory goes back up in April

News came out that the April inventory of homes in Portland actually went back up to February levels at 10.3 months. I had predicted, based on the activity levels in my office and among my clients that the inventory would continue to trend down. I will be taking a look at how detached homes close-in are faring because my experience in this arena feels more balanced than the metro inventory would suggest.

For example: I have a client looking in the $300k range. We identified 15 possible properties on Wednesday to look at that weekend and by Friday 5 of them were pending. Well priced homes that are staged or show very well are still going fast, many of them with multiple offers.

Look for another detached home update by zipcode this next week.

The Next Hot Neighborhoods in Portland

I am often asked the question, "What are the next hot neighborhoods in Portland." I like answering this question because I feel I have a good take on what makes a great neighborhood. Also, as a Broker that handles commercial real estate, I know many of the developers in town and where they are planning new projects.

What makes a great neighborhood? In one word: Lifestyle = Parks, Transit, Restaurants, Bars, Entertainment

North Portland: Kenton
I love this place. Close it I-5 and Interstate MAX line. Denver has new cafes and shops openning up and Kenton Park is great all summer.

NE Portland: Hollywood
When you're competing with Alameda and Irvington it's hard to stand out but for buyers looking to walk their neighborhood this is the place. Close to Sandy which is changing to a more upscale corridor and more affordable than it's surrounding neighborhoods.

SE Portland: Clinton
Two blocks south of the rapidly changed Division St. you can walk to all Division has to offer with a much quieter feel. Home of one of the best new sushi places [Bara], a theater, and great bars. Centered around 26th Ave to 21st Ave.

SW Portland: Multnomah Village
This is not a secret but I think this area will continue to build as the quaint small town center of SW Portland.

NW Portland: Downtown North of NW Thurman St.
Just above the Pearl District this area has a ton of new development slated for the next few years. A great place to buy an old warehouse and make some real lofts or try to find a rare old house in amongst the industrial neighbors.

Making sense of the subprime mess

I was forwarded a wonderful graphic by a friend that shows where all the subprime messes really are:
Map with Subprime Graph

You can see by looking at this graph that it looks like most of the problem areas are centered around metro areas where the increase of buyers from the availability of subprime mortgages fueled a huge rush of new construction. Once the speculation and overbuilding collided with the start of foreclosures it snowballed into actual problems where people couldn't hold on through the downturn.

There was also a fundamental shift in thinking about real estate from a long term conservative investment into a short term - get rich quick with no money down scheme. If everyone was theoretically able to hold out in the long run I don't think we'd be having nearly the problems we are. The panic has made this worse and I'm betting that late this year or at the latest in 2009 things will start to look better.