Foreclosures Slow, Shadow Inventory Declines

The good news keeps hitting the San Francisco real estate market. With prices up 13-16.5% over the prior 180 days in the single-family home, condo and multi-unit market, property owners have a lot to smile about.

And it seems like the foreclosure sales have tailed off a bit, as well as short sales.

Out in the neighborhoods, word is that street improvements are coming to Oak and Fell. And the tech shuttle map has been revealed!

It’s all here in this edition of the Zephyr MarketTracker.

How To Compete for Bank-Owned Properties

The past two years have ushered in an unprecedented number of bank-owned property sales in San Francisco. But actually purchasing one can be a challenge.

Competition among buyers in general for bank-owned homes is strong, because the perception exists that such properties are “deals.” In some cases, they are. But disclosures are minimal, and even with property inspections involved, there will always be information lacking (and appliances missing). And the reality is that many homes in this category end up selling at or around market value—especially those located in central, walkable locations. Paying market value for properties that offer little in the way of history or known issues doesn’t usually resonate well with buyers.

Even so, the bar is rather high in San Francisco when you’re competing for bank-owned properties, especially when they’re listed below market value. So when that bank-owned, $500,000 house comes on the market in the neighborhood where such homes typically sell for $650,000 and above, you can bet you won’t be the only buyer making a bid. The list-it-low strategy still works like a charm.

Here’s what you can expect if you decide to write an offer:
Preapproval with the bank that owns the property. You may have spent hours submitting documentation to your mortgage broker or lender to get to this point, but if the listing office is recommending preapproval with a particular lender, the bank probably won’t consider your offer if you haven’t been preapproved with that institution. Allow time for completing the preapproval.

Short inspection periods. Expect to compete with buyers who are limiting themselves to waived or very short inspection contingency periods, and keep in mind that the bank won’t be making repairs or offering credits. What you see is what you get.

45-day close of escrow. All-cash buyers will probably be able to close in 15 days, but 45 is the norm for bank-owned sales. Expect some rough going when it comes to the appraisals, because appraisers like to see appliances and working systems.

14-day loan/appraisal condition removals. If you’re working with the lender who’s also selling the property, this is doable. But make sure your agent is on top of things and checks in with the lender. I’ve seen situations lately wherein lenders let a file sit for a week before anything got done.

No appraisal condition for over-asking prices. If you write an offer for substantially over the list price, it’s likely you’ll be expected to waive an appraisal contingency. If the appraisal does come in at less than your offered price, you’ll have to come up with the outstanding amount.

Keep in mind that none of the aforementioned are mandatory. You can write an offer with whatever terms you’d like. But do know that your competition will be working on this level. So if you really want the property, this is probably what you’ll need to include in your offer to “win.”

SFGate: Foreclosure Activity Down in First Quarter

I spoke with the San Francisco Chronicle’s Robert Selna yesterday about the foreclosure activity I’ve been seeing in the San Francisco market. The upshot of the story: Fewer homeowners in the Bay Area and California are headed down the path toward official foreclosure in the first three months of 2010 compared with the prior quarter and with a year ago.

As I maintained in the article, I’m not seeing a wave of foreclosures on tap in the city that will dramatically affect home prices. Of course, there will be foreclosure and short sales popping up, but compared with the overall number of homes that sell in a given year, the foreclosure numbers are fairly small.

Read the full Chronicle article here.