Real Estate Information

Teri Pacitto, Broker Associate, Aviara Real Estate, Offers a Helping Hand to Local Homeowners Headed Toward Foreclosure

distressed property expert urges homeowners struggling with mortgage payments to pursue lower-impact alternatives

Ventura County, CA  October 2011 – “Nationwide, 10.9 million or 22.5 percent of all homeowners with a mortgage owe more on their property than it’s worth in the current market, and another 6.3 million are in some stage of foreclosure,” noted Teri Pacitto of Aviara Real Estate.

A Certified distressed Property Expert (CDPE), Pacitto pointed out that the long-term implications of foreclosure cannot be underestimated, and has developed a report entitled, “Need a Helping Hand?” This report can be accessed from our short sale website.

“Too often, the anxiety associated with missed mortgage payments and the fear of putting trust into the wrong hands, causes homeowners who are heading toward foreclosure to avoid seeking help or pursuing a short sale,” Pacitto said.

A short sale occurs when the current market value of a home is worth less than what is owed on a mortgage and a real estate Agent negotiates with the lender on behalf a financially strapped homeowner to accept a loan payoff that is less than the amount owed. “While lenders were once reluctant to negotiate short sales, the current glut of foreclosed properties on their books has prompted an aggressive push to mitigate losses, and some  are even paying homeowners significant cash incentives to make a fresh start on their lives after the close of the short sale,” Pacitto explained.

Real estate agents who have received the Certified distressed Property Expert (CDPE) designation have proactively sought out the real estate industry’s best training for serving clients within the complicated and highly charged distressed property arena. CDPE agents are required to complete two days of intensive training and are held to a high standard of expertise, efficiency and ethics.

Check out our Short Sale information site. 

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1. Appeal to the “herd mentality”

Given the high stakes of real estate, a buyer doesn’t want to be the only one interested in a house. By pricing your property on the lower end of the value range, you could stimulate interest among more than one buyer and create a herd mentality. Also, if you’re under the gun to sell quickly, this would be a good option.

2. Price it to be found in real estate searches

Most buyers tell their Agent they want a three-bedroom home in a certain neighborhood under $500K (or some other dollar amount). Their real estate agent may then set up an automated buyer search in their local database for properties under $500K. But if a home is listed at $510K, that buyer will miss it. So, if your list price is higher out of the gates, you may miss a segment of buyers.

While this scenario happens frequently, many savvy agents will set up search parameters for their buyers to include properties listed a little bit more above their price ceiling. Knowing how flexible home prices can be, buyers should be made aware of properties that could be a good match for them, even if those homes are above — but within reasonable range of — what they want to pay. Often times the buyer can offer under the list price, or the property will get reduced.

3. Don’t get ‘creative’ with your asking price.

Sometimes, sellers want to get creative with their asking price. I had a seller whose home was valued between $750K and $800K, and they wanted to ask $787,777. Say what?

Such an oddly specific figure calls attention to itself for no good reason, like a house painted purple. buyers will often wonder why the seller chose that figure. From there, they get curious about who the seller is, and so on. In my experience, it’s best to keep the seller far in the background, if not entirely invisible. That’s why we have sellers remove all their personal stuff (such as photos, diplomas, and such) from their homes and decorate in neutral colors. The goal is to showcase the property, not the seller, and to appeal to as wide an audience as possible. Getting quirky with your asking price counteracts this tried-and-true strategy.

4. Work out a pricing contingency plan before you put your home on the market

Sometimes, sellers have high expectations about their property’s appeal and they want to ask top dollar for it, even if their Agent doesn’t believe they’ll get it. Or perhaps another agent they talked to planted a high price tag in their mind. Whatever the reason, as a listing agent, I’ll agree to try and sell the home at the higher price. But before the “For Sale” sign goes up, I always try to work out a contingency plan with the seller, in case the property doesn’t go for the desired price. By having everything on the table from the get-go, we’ll have a plan B should the first plan fail. This saves time and helps set the appropriate expectations in the seller’s mind, so there are no unpleasant surprises down the road.

5. Pricing is an ongoing discussion

Ultimately, listen carefully to your Agent’s pricing strategy. It’s their job to know what works and doesn’t. And as with any strategy, be prepared to have an ongoing discussion about pricing with your real estate agent. Pricing a home isn’t a “set-and-forget” procedure. A lot of factors can come into play when selling or buying a home, and not all of them can be anticipated. If you can be flexible and react quickly to changing market conditions or new information, you’re more likely to get the best price with the least aggravation.

Brendon DeSimone is a Realtor and real estate expert based in San Francisco and New York. He is a contributor to Zillow Blog, has collaborated on multiple real estate books and is often quoted by major media outlets.

If your house is not being shown, it means agents think our price is too high for that neighborhood. Recommendation: A significant price adjustment.

If your house is being shown, but not getting any offers, it means the buyers are finding nicer homes for the money. Recommendation: A moderate price adjustment.

If your house is in the running, but the buyers buy something else or if the buyers view the house a second time, but buy something else, it means that the pricing is close to the right point. Recommendation: A minor price adjustment.

According to NAR, if a house is priced correctly, you should get one offer for every 10 showings. In a normal market, you should get 1-2 showings a week.

Hire an agent who knows the market and has the experience and knowledge to sell your home.

The nation's residential shadow inventory as of July declined slightly to 1.6 million units, representing a supply of five months, according to a report from CoreLogic (CLGX: 11.65 +0.60%).

That's down from 1.9 million units, a supply of six months, from a year ago, and follows a decline from April when shadow inventory stood at 1.7 million units.

"The steady improvement in the shadow inventory is a positive development for the housing market," said Mark Fleming, chief economist for CoreLogic. "However, continued price declines, high levels of negative equity and a sluggish labor market will keep the shadow supply elevated for an extended period of time."

CoreLogic said the decline is driven by a pace of new delinquencies that is slower than the pace of the disposition of distressed assets.

The company estimates the current stock of properties in the shadow inventory, or pending supply, by calculating the number of distressed properties not listed on multiple listing services that are more than 90-days deliquent, in foreclosure and real estate owned by lenders.

Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent (2.2-months’ supply), 430,000 are in some stage of foreclosure (1.2-months’ supply) and 390,000 are already in REO (1.1-months’ supply).

The inventory is 22% lower than the peak in of 2 million units, or 8.4-months of supply, in January 2010. The total shadow and visible inventory was 5.4 million units in July, down from 6.1 million units a year ago.

The aggregate current mortgage debt outstanding of the shadow inventory was $336 billion in July, down 18% from a year ago.

The charts below show the overall shadow inventory by category and by months' supply.

First-time homebuyers are growing tired of short sales, which take nearly 17 weeks to complete, according to the latest Campbell/Inside mortgage finance housing survey.

While first-time homebuyers acquired 54.1% of all short-sales in November 2009, the segment's share of acquisition activity fell to 39.7% in August with many buyers losing interest due to several factors slowing down the process, the Campbell/Inside mortgage finance survey showed. The August figure represented a "three-month slide and was the lowest level for first-time homebuyers ever recorded in the survey" of 2,500real estate agents.

The short-sale process is often delayed due to paperwork issues, challenges coordinating with multiple investors, slow appraisals and understaffing at mortgage servicing outlets, according to the survey.

short sales do maintain some allure for first-time borrowers because the generally sell at prices 27% lower than non-distressed properties, the report said.

California remains a hot spot for short sale activity, with these transactions representing 31% of all home purchases in the Golden State in August.

In many cases, first-time buyers are making multiple offers on short sales to try and expedite the process, according to the Campbell/Inside mortgage finance survey.

Write to Kerri Panchuk