Ocala Real Estate Talk

Archive for the ‘Ocala home buyers’ Category

Banked-owned sales no longer a bargain

SEATTLE – Nov. 9, 2012 – While “foreclosure” remains a buzzword for bargain seekers, a study finds that the actual discount off a “normal” price is far less than it used to be.

According to a study by Zillow, the national average discount of a real estate owned (REO) property compared to a non-REO was only 7.7 percent in September – a sizable change from the 23.7 percent average discount that peaked nationally in August 2009 and less than the average 9.1 percent discount one year earlier.

In some areas of Florida, REOs aren’t a bargain at all. Zillow included three Florida metro areas in its analysis and claims an average REO savings of only 2.9 percent in the Miami-Fort Lauderdale market – a significant drop from the peak of 22.7 percent in August 2008 and a notable decline year-to-year; in September 2011, a South Florida REO sold for 6.8 percent less.

In Tampa, a REO in September 2012 sold for 9 percent less than a non-REO sale, down slightly from the 9.6 percent discount one year earlier, but significantly lower than the peak 29.1 percent discount recorded in November 2008.

In Orlando, the REO discount of 4.6 percent rose slightly year-to-year; in September 2011, it was 2 percent. However, both numbers are down from the peak 24.4 percent discount for a REO recorded in January 2010.

In two cities – Phoenix and Las Vegas – REOs no longer come with a discount, with sale prices roughly equal to other home sales.

“The smallest foreclosure discount is found in places where competition for homes” is high, says Zillow Chief Economist Dr. Stan Humphries. “People are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability.”

Year-over-year foreclosure discounts fell in roughly three-quarters (76.9 percent) of metro areas analyzed, and all metros are down from their peak. Nationwide, foreclosure discounts reached their height in 2008 and 2009, and in some areas peaked at more than 30 percent.

© 2012 Florida Realtors®

I’ve thought for a long time that people looking at foreclosures too easily over look condition issues and the fact that foreclosures come with a Special Warranty Deed. Prices of traditional sales have come down a lot and in many cases aren’t that much more than a foreclosure.

The purpose of a home inspection is to find a problem so large and costly the buyer might not want to buy the house. Or in some cases so many problems that add up to so much money that the buyer might want to back out of the deal. Home inspections aren’t intended to create a laundry list of repairs to make a home like new again.

One problem I encounter is that home inspectors as a courtesy provide maintenance suggestions in addition to needed repairs. The difference in repairs and cosmetic items is defined in the Florida real estate sales contracts but that doesn’t seem to help with the confusion.

The way that repairs are defined in the Florida RE contract can cause problems. For example a 20 years old roof that doesn’t leak but is at the absolute end of it’s life doesn’t need to be replaced. The same with termites. A seller can make repairs up to 1 1/2% of the purchase price. You might just want to walk away but the contract locks you in.

In certain circumstances like the above examples it’s better to use an AS IS contract that let’s you out of the deal for any reason regarding the inspection or you can use a right to inspect right to cancel addendum.

Link to a good home inspection article. Ocala Star Banner article on home inspections

When you write an offer on a house you’re expected to make a good faith deposit. That deposit is held in escrow by the title company and can be contingent on things like financing or a home inspection. I usually tell me buyers around $1,000.00 and it’s surprising how many sellers will accept that amount. However from a sellers point of view you have to ask yourself if you wanted to get out of a contract would you walk away from $1,000.00? A lot of people might if they had a good enough reason. But would you walk away from $5,000.00? Probably not. $10,000.00? Pretty much definitely not. A lot of my buyers are also sellers somewhere else. You have to look at things from both points of view depending on which side you are on at the time.

I constantly get buyers looking for newer homes. The market crashed here in 2007. This is the Great Recession. There has been very little building here since the crash. Why you ask? Resales are priced below what it costs to build new. So far below that builders can’t compete. Land has gone down in price but no new large scale planned communities have been started since 07. Building materials aren’t much cheaper. Most sub contractors have gone bankrupt or cut back to much smaller companies.  A couple of retirement communities that were started before 07 are building but not much else. New home building won’t get going again until prices go up. It’s just a matter of economics.

I get people who want to make a quick pit stop and check out a house or 2 on their way to a cruise ship or Disney. I assume this is unique to Florida but I think it’s a waste of time. A cross country move is a big deal and requires extensive planning. I know I moved all the way to Ocala from the western mountains of Maine. You shouldn’t even bother looking at houses in a city you’ve never been to. You should pick the city fiirst. Then look for few communities in that city. Finally you look at houses.

If you want to make a low offer on a home here in Ocala you have to give the seller a good reason to accept your offer. Here are a few things that make for a “strong offer”.

1. Cash. Cash means no finance contingency. The seller can be confident that their sale won’t blow up at the last minute because the loan gets rejected by the banks under writing department. Happens more often than you might think. Not all loan pre approvals are created equal.

2. AS IS. A contract that gives the buyer the right to inspect the home and walk away if the inspection is not satisfactory. The seller makes no repairs and knows exactly what they will net from the sale. Attractive to out of area sellers who would have a hard time getting repairs accomplished.

3. Fast Closing. A cash offer can close very fast, 7-14 days. The seller may not like the offer but is tempted by the fact that the deal will close fast and they can move on saving money in taxes, utilities, insurance, mortgage ect.

If you think that making an offer using a loan with little or no down payment, asking for closing costs or expecting the seller to throw in their furniture or a golf cart is the way to get a deal on a house then you’ve been watching way to many real estate shows on cable TV.

I spend about 95% of my time as a buyers agent here in Ocala. One question that comes up is “what should I offer?”. I suggest that a buyer look at comparable sales to come up with an offer. A good comparable would meet the following criteria.

same sub division

sold in the last 90 days

within 1 mile of subject property

+/- 10% of the sq ft of living area

same # of beds, baths and size garage

+/- 5 years in age, 10 years if home is over 10 years old

same construction type

All this above can be used by a buyer to come up with an offer on a home or it can be used by a seller to find a proper list price. In the end it doesn’t matter what a buyer or seller thinks a house is worth. What matters is the price that similar homes have sold for in the past 90 days. Sellers should keep in mind that in order for a buyer to get a loan a bank will send out an appraiser who will use very similar criteria for an appraisal.

Here in Ocala we have the lowest mediam home prices in Florida. We have foreclosures, estate sales and even great prices on traditional sales. I mostly work with buyers and I’ve seen 100′s of such homes.  I’ve come to the conclusion that it’s a big mistake to concentrate on just the price. Buyers don’t think enough about condition.

I think the big 4 are the age of the roof, the AC heat pump unit,  the flooring and the kitchen appliances. When looking at newer foreclosures I’d add landscaping to this list.

The roof. Standard shingles here last about 15 years. Some insurance companies won’t insure a house with a standard shingle roof over 15 years old. Architectural shingles are good for 20 years or so.  The heat of our summers give a roof a real beating.

The AC unit, which in most cases is a heat pump, is harder to judge. An AC guy told me that they can break in 5 years and I’ve seen them 20 years old.

Flooring is really taken for granted. To carpet an entire house, as can be the case in an estate sale or even a newer foreclosure, can cost as much as a roof. For some reason buyers who would walk away from a house with a bad roof will have no problem replacing flooring. Flooring prices vary a lot from builder quality carpet to tile and wood floors.

Kitchen appliances can be 20 years old in an estate sale and missing altogether in many foreclosures. Here again there is a big difference in price between builder quality and top of the line. I do think appliances are at the bottom of the list price wise though.

Landscaping is often totally absent in foreclosures. No shrubs or trees, dead sod in the front of the home and a back yard that never had grass in the first place because builders here for some reason give an amount of sod that won’t cover the whole yard. You don’t over seed a bad lawn here. You rip out the old sod and lay down new sod.  Mature trees and shrubs won’t add anything to an appraisal. However I owned a landscape company and I can tell you an extensive landscape job on the house in an empty field can cost as much as all the four items above combined! Curb appeal is what makes a house a home.

Am I trying to sell more expensive houses? No I just believe too many people are “Penny wise and pound foolish”. I’ve walked out of what at first appeared to be low priced homes and said to my buyers that they couldn’t buy that house cheap enough to make up for all the work it needed.

Horse Topiary photo by Joe Dallorso

Most of the readers of my blog are from outside the Ocala Marion County area. A great way to get to know an area is to read the newspaper. If you’re a younger person you probably think newspapers are like dinosaurs. The reality is that only local newspapers have local news. All the Ocala Marion County newspapers can be read online.

The Ocala Star Banner is Marion County’s daily newspaper. You need to read it daily in order not to miss anything. This is a great source  to get an idea of what different areas of the county are like.

The South Marion Citizen is a great place to find information about the SW corridor retirement communities. If you click on news and then community you’ll fing columns written about the goings on in various retirement communities written by people who there. The South Marion Citizen is a weekly paper.

The Citrus County Chronicle is a weekly paper than covers Dunnellon and west into Citrus County.

The Ocala area also has 2 magazines. That’s pretty extraordinary seeing that Ocala is such a small city. Both magazines are lot nicer in print than online. They are both printed on exceptionally nice glossy paper, in a large format, with great photography.  Even the advertisements have beautiful photography.

Ocala Magazine

Ocala Style

Moving cross country is a huge undertaking. I know, I moved from Maine to Ocala in 2004. You have to do your home work and keeping up on current events is part of the job

I often get buyers looking for newer homes here in the Ocala Marion County area. Many are interested in a new or newer Ocala 55+ retirement home. I end up telling these buyers that there has been very little building here since the market crashed in 2007. The reason for this lack of new construction is that resales are selling at prices below the cost of new construction and in some non retirement communities much less.

The below survey is based on active listings on the Ocala Marion county MLS as of July 7, 2011

Total residential listings 3915

new homes dated as 2011…..19

homes from 2010-2011………32

homes from 2009-2011………55

homes from 2008-2011……..114

homes from 2007-2011……..311

homes from 2006-2011……..571

homes from 2005-2011……..769

What does this all mean? It means that despite the fact that vacant land is available at fire sale prices and Marion County has suspended impact fees on new homes, builders still think it’s not worth trying to compete with newer resales. This is the time to but a house in Ocala.

The above numbers include both 55+ communities and non retirement communities and all types of construction including mobile and manufactured homes. They do not include homes offered by builders that are not listed on the OMCAR MLS.