In last week's blog I wrote about the sales figures for September 2010. Although I already knew that foreclosures and short sales represent a large part of our business today, I was reawakened to that fact by my examination of the sales statistics for condos. Depending on the region up to 80% of all condo sales were foreclosures or short sales in September, and I don't see that number dropping radically in the foreseeable future. For that reason, I thought I would share some information regarding the purchase of foreclosure condos for this week's blog. Below are a couple issues I think should be kept in mind when in escrow to purchase a foreclosure condo.
Addendums
Typically a bank-owned foreclosure will have an addendum to the purchase contract that both buyers and sellers (the owner bank) will need to sign. The addendum supersedes the purchase contract, meaning that if there is a contradiction between the two documents the Addendum will have precedence. This is a very important fact because the purchase contract is written by the buyer's real estate agent from the buyer's perspective but the Addendum comes from the bank and written to be advantageous to the bank. I strongly urge buyers read and understand what they are signing in the Addendum before they actually sign it.
One other feature of Addendums is that they have passive contingency removal dates. A passive contingency removal means that as the calendar date comes and goes the contingency will be removed automatically. In contrast, when dealing with a traditional sales transaction, the buyer (or seller) will have to actually remove the contingency in writing, that it doesn't just get removed automatically. For this reason it's very important to keep an eye on the calendar with relation to the contingency removal periods on foreclosures.
What do you do when the contingency is about to be removed and you're not ready yet? Ask for an extension! This happens a lot, especially for certain contingencies. Loan and HOA Document contingency periods are two that are typically shorter than they need to be and therefore ripe for an extension. As long as the extension is requested before the contingency has come and gone and is for a reasonable amount of time (let's say another week) the seller should be okay with this option. Remember, the bank wants to sell this property or they wouldn't have accepted your offer in the first place, so a reasonable request will probably be accepted.
Repairs
When I'm working with a buyer on an offer to submit on a foreclosure condo I usually recommend that the buyer negotiate hard up front to get the best price. The reason for this is because after the property is in escrow the seller bank usually doesn't reduce price at all. Contrary to this, in a traditional sale if the home inspection discovers a few issues the buyer and seller can come back to the table to negotiate what will be repaired or reduced in price. With a forclosure sale I'd usually not recommend asking for repairs on minor issues. However, if a home inspection discovers a big problem the buyer should always put in a request for repair and see what happens. I recently conducted a home inspection on a foreclosure condo and the process found that the entire heating and air conditioning system was worn out. I got a specialist to give a price estimate and I submitted this to the seller bank for them to repair. They don't usually do the repair and instead offer money back or a reduced price. In this instance the bank could see that if these buyers didn't buy the property they'd be stuck with a property with a defective heating and air conditioning system so they accepted a reduced price close to the estimate of the new system. So again, although a bank usually won't negotiate further on price after an in-escrow price has been agreed upon certain circumstances do warrant further price negotiation.
In today's real estate market foreclosures are still very common. Please feel free to contact me if you have any questions about purchasing your very own Palm Springs Condo.
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, October 21, 2010
Thursday, October 14, 2010
September 2010 Sales Analysis
The following sales analysis compares September 2010 sales data with data from the preceding month (August 2010) and the previous year (September 2009). Data is analyzed by region in the city: South Palm Springs, Central Palm Springs, and North Palm Springs.
South Palm Springs - South of Ramon Road
Overall sales in South Palm Springs are down 10% in September 2010 vs. August 2010, but they are up 22% over September 2009. All of the pricing information, however, has dropped. The price range this September is similar to August, but it is a significant drop over the price range experienced last year. The average sales price this September is down 15% over August and is down 27% over September of last year. The median sales price figures are similar with a 14% drop vs. August and a 29% drop vs. last year. The average price per square foot is down 12% compared with August and down 35% compared with September of 2009. The number of days on the market are similar for all three time periods...115 days, 110 days, and 119 days respectively. The percentage of properties that are distressed did drop 22% vs. August, but the percentage of properties that are distressed had a huge increase of over 3 times the number sold in September 2009.
Central Palm Springs - Between Ramon Road and Vista Chino
The number of condos sold in Central Palm Springs were consistent with last month and last year, experiencing a 22% increase over the sales of August 2010, but an 18% decrease over September 2009. The price range of all condos sold was also in the middle in comparison with last month and last year. The price range was a lot higher than the dismal August 2010 results, but not nearly as high as September 2009. The average price was 30% higher in September than August, but 32% lower than September 2009. The median price was even with August at approximately $105,000, but both of these were a drop of 35% over September 2009. Average price per square foot increased 15% compared with August, but decreased 22% compared with September 2009. The number of days on the market dropped a whopping 40% compared with August and also dropped by 21% compared with September 2009. Percentage of properties sold that are distressed stayed similar in September and August 2010 at approximately 2/3 of all sales, and this was an increase in comparison with last year when the distressed sales was under 50%.
North Palm Springs - North of Vista Chino
In North Palm Springs the increase in sales (66%) over last month looks really dramatic, but with only 6 sales in August anything would look good! Number of sales compared with 2009 were down 33%. The price range of condos sold across all time periods is similar, although in August there were no inexpensive condos sold in the area which impacted sales figures considerably. For example, the average price in September compared with September of 2009 was up 11%, but compared with August it was down 43%. Median price is similar...an increase of 10% compared with last year, but a 57% drop from August. Price per square foot dropped 35% vs. August and also dropped 21% vs. last year. Days on market increased in September 21% compared with August and also increased a whopping 121% compared with last September. The big news in North Palm Springs, though, is the number of distressed sales...80% of all condo sales in the region were distressed in September vs. 33% in August and 53% last September.
I'm sounding like a broken record, but Palm Springs is still experiencing a very volatile condo market. Pricing in South Palm Springs was considerably lower than last year, although the number sold was higher. Similarly, Central Palm Springs experienced lower sales and pricing compared with last year, although there were better sales than in August. North Palm Springs was the main point of difference with last year in the region. Sales were similar or even better than last year, although considerably worse than August 2010. The only issue that is similar across the region concerns the percentage of distressed sales. More and more, across all areas, the condos that are sold are either foreclosures or short sales. For the foreseeable future this trend should continue. This means it will still be a challenging market for sellers. But for buyers, it's a buyer's market and the savvy buyer can get an incredible deal on a Palm Springs Condo.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
South Palm Springs - South of Ramon Road
| September 2010 | August 2010 | September 2009 | |
| Condos Sold | 28 | 31 | 23 |
| Price Range | $29,000 - $350,000 | $36,500 - $388,000 | $69,000 - $456,000 |
| Average Price | $150,779 | $173,203 | $191,424 |
| Median Price | $132,000 | $150,000 | $170,000 |
| Price/Square Foot | $108.71 | $121.77 | $146.30 |
| Days on Market | 115 | 110 | 119 |
| % Distressed Sales (REO or Short Sale) | 43% | 55% | 13% |
Overall sales in South Palm Springs are down 10% in September 2010 vs. August 2010, but they are up 22% over September 2009. All of the pricing information, however, has dropped. The price range this September is similar to August, but it is a significant drop over the price range experienced last year. The average sales price this September is down 15% over August and is down 27% over September of last year. The median sales price figures are similar with a 14% drop vs. August and a 29% drop vs. last year. The average price per square foot is down 12% compared with August and down 35% compared with September of 2009. The number of days on the market are similar for all three time periods...115 days, 110 days, and 119 days respectively. The percentage of properties that are distressed did drop 22% vs. August, but the percentage of properties that are distressed had a huge increase of over 3 times the number sold in September 2009.
Central Palm Springs - Between Ramon Road and Vista Chino
| September 2010 | August 2010 | September 2009 | |
| Condos Sold | 11 | 9 | 13 |
| Price Range | $30,000 - $400,000 | $59,500 - $175,000 | $72,000 - $647,000 |
| Average Price | $143,409 | $110,049 | $210,138 |
| Median Price | $105,000 | $105,500 | $160,000 |
| Price/Square Foot | $133.89 | $116.63 | $170.96 |
| Days on Market | 107 | 176 | 135 |
| % Distressed Sales (REO or Short Sale) | 64% | 67% | 46% |
The number of condos sold in Central Palm Springs were consistent with last month and last year, experiencing a 22% increase over the sales of August 2010, but an 18% decrease over September 2009. The price range of all condos sold was also in the middle in comparison with last month and last year. The price range was a lot higher than the dismal August 2010 results, but not nearly as high as September 2009. The average price was 30% higher in September than August, but 32% lower than September 2009. The median price was even with August at approximately $105,000, but both of these were a drop of 35% over September 2009. Average price per square foot increased 15% compared with August, but decreased 22% compared with September 2009. The number of days on the market dropped a whopping 40% compared with August and also dropped by 21% compared with September 2009. Percentage of properties sold that are distressed stayed similar in September and August 2010 at approximately 2/3 of all sales, and this was an increase in comparison with last year when the distressed sales was under 50%.
North Palm Springs - North of Vista Chino
| September 2010 | August 2010 | September 2009 | |
| Condos Sold | 10 | 6 | 15 |
| Price Range | $42,000 - $235,000 | $113,500 - $250,000 | $48,000 - $232,000 |
| Average Price | $94,445 | $164,367 | $85,340 |
| Median Price | $66,350 | $153,750 | $60,500 |
| Price/Square Foot | $93.81 | $142.55 | $119.12 |
| Days on Market | 117 | 92 | 53 |
| % Distressed Sales (REO or Short Sale) | 80% | 33% | 53% |
In North Palm Springs the increase in sales (66%) over last month looks really dramatic, but with only 6 sales in August anything would look good! Number of sales compared with 2009 were down 33%. The price range of condos sold across all time periods is similar, although in August there were no inexpensive condos sold in the area which impacted sales figures considerably. For example, the average price in September compared with September of 2009 was up 11%, but compared with August it was down 43%. Median price is similar...an increase of 10% compared with last year, but a 57% drop from August. Price per square foot dropped 35% vs. August and also dropped 21% vs. last year. Days on market increased in September 21% compared with August and also increased a whopping 121% compared with last September. The big news in North Palm Springs, though, is the number of distressed sales...80% of all condo sales in the region were distressed in September vs. 33% in August and 53% last September.
I'm sounding like a broken record, but Palm Springs is still experiencing a very volatile condo market. Pricing in South Palm Springs was considerably lower than last year, although the number sold was higher. Similarly, Central Palm Springs experienced lower sales and pricing compared with last year, although there were better sales than in August. North Palm Springs was the main point of difference with last year in the region. Sales were similar or even better than last year, although considerably worse than August 2010. The only issue that is similar across the region concerns the percentage of distressed sales. More and more, across all areas, the condos that are sold are either foreclosures or short sales. For the foreseeable future this trend should continue. This means it will still be a challenging market for sellers. But for buyers, it's a buyer's market and the savvy buyer can get an incredible deal on a Palm Springs Condo.
If you have any questions or comments regarding this data and/or the analysis please feel free to contact me...I'd love to hear from you!
Alan Wilke
Condos@PalmSpringsCondoLiving.Com
760-464-6693
Thursday, October 7, 2010
The Condo Buying Process: Home Inspections
The home buying process, whether it be a condo or a house, can be complicated. There are many things to consider and everything is on a tight timeline. One step in the process that is not required, but that I always recommend, is a home inspection. A home inspection can save a home owner thousands of dollars in unexpected repairs and can help a buyer make the decision to proceed with, or get out of, an escrow. I've participated in many home inspections and work frequently with Walker Novak of Novak Home Inspections. We recently sat down and discussed the differences in doing a home inspection on a condo and a house.
PSCL: You have many years of experience doing home inspections. What would you say are the differences in doing one for a condo vs. a house?
WN: Actually, there isn't much difference to them except that with a house you're concerned with the entire structure, roof to foundation, and with a condo it's really only concerned with everything inside the interior walls of the unit. However, there are some steps that I do when inspecting a condo that aren't specific to the unit, but may impact the buyer's decision making.
PSCL: What's that?
WN: The main thing has to deal with the roof. I go up on the roof to see what the current condition is.
PSCL: Since this is outside the condo itself shouldn't this be an HOA issue?
WN: It typically is an HOA issue, but if there are problems with the roof this could lead to a huge assessment to the individual owners, depending on how the specific HOA operates. If an HOA has plenty of reserves they may pay for the repair out of that, but if they are cash poor the individual owners will have to foot the bill. I like to share roof condition with the buyers so they can then research the issue with the HOA to see what sort of expense they can expect.
PSCL: That sounds like a great idea. What else is unique to the condo buying process?
WN: With a house, I don't get too concerned with the neighbors, but with a condo it can be very important. Any issue in an adjacent condo, particularly upstairs/downstairs can impact your condo. A neighboring unit issue that can have a huge impact on your unit is water. Let's say you have upstairs/downstairs neighbors. The upstairs unit gets a water leak and since nobody is there for 6 months it goes unnoticed. Pretty soon the downstairs unit notices a sagging ceiling with black spots all over it. They've got a potentially big problem, and it didn't start in their unit but rather upstairs. Not only does the upstairs neighbor have to repair their own unit, they also have to repair the downstairs unit. This is something you don't worry about with an inspection at a house.
PSCL: Ugh...sounds like a nightmare. What else do you do to try to avoid this type of issue?
WN: The biggest threat is with the hot water heater. They have a lot of water in them and are usually hidden in the back of a closet with stuff stored in front of them so you can't see them and usually don't have a water pan. I make sure the water heater is operating properly, suggest getting a water pan, and make sure that the heater is accessible as part of my inspection.
Palm Springs Condo Living: Hi Walker, Thanks for joining me today to talk about home inspections.
Walker Novak: No problem.
PSCL: You have many years of experience doing home inspections. What would you say are the differences in doing one for a condo vs. a house?
WN: Actually, there isn't much difference to them except that with a house you're concerned with the entire structure, roof to foundation, and with a condo it's really only concerned with everything inside the interior walls of the unit. However, there are some steps that I do when inspecting a condo that aren't specific to the unit, but may impact the buyer's decision making.
PSCL: What's that?
WN: The main thing has to deal with the roof. I go up on the roof to see what the current condition is.
PSCL: Since this is outside the condo itself shouldn't this be an HOA issue?
WN: It typically is an HOA issue, but if there are problems with the roof this could lead to a huge assessment to the individual owners, depending on how the specific HOA operates. If an HOA has plenty of reserves they may pay for the repair out of that, but if they are cash poor the individual owners will have to foot the bill. I like to share roof condition with the buyers so they can then research the issue with the HOA to see what sort of expense they can expect.
PSCL: That sounds like a great idea. What else is unique to the condo buying process?
WN: With a house, I don't get too concerned with the neighbors, but with a condo it can be very important. Any issue in an adjacent condo, particularly upstairs/downstairs can impact your condo. A neighboring unit issue that can have a huge impact on your unit is water. Let's say you have upstairs/downstairs neighbors. The upstairs unit gets a water leak and since nobody is there for 6 months it goes unnoticed. Pretty soon the downstairs unit notices a sagging ceiling with black spots all over it. They've got a potentially big problem, and it didn't start in their unit but rather upstairs. Not only does the upstairs neighbor have to repair their own unit, they also have to repair the downstairs unit. This is something you don't worry about with an inspection at a house.
PSCL: Ugh...sounds like a nightmare. What else do you do to try to avoid this type of issue?
WN: The biggest threat is with the hot water heater. They have a lot of water in them and are usually hidden in the back of a closet with stuff stored in front of them so you can't see them and usually don't have a water pan. I make sure the water heater is operating properly, suggest getting a water pan, and make sure that the heater is accessible as part of my inspection.
PSCL: I'm sure your clients are grateful for your extra attention to these issues. Thanks for taking the time to talk with us today.
WN: You're welcome.
If you have questions for Walker Novak you can reach him at:
Novak Home Inspections
760-880-1393
If you have questions for me please contact me...I'd love to hear from you:
Alan Wilke
760-464-6693
Subscribe to:
Posts (Atom)