Gary Wuestenberg's Blog

This week I would like to address the current market conditions. So far the previous discussion hve been about REO (bank owned) properties. With the number of REO properties that have come on the market and sold in the last 2 years it has changed the landscape of the market. Some would say for the better and others would say for the worse. It depends on your situation. If you are a home owner you have seen the value drop significantly. If you didn’t or don’t own a home than the market is starting to look pretty good. It has become a buyers market like we haven’t seen in some time.

With the value of homes dropping it has opened up home ownership possibilities to some that never thought they would own a home in California, especially the Bay Area. No matter which part of the Bay Area you are in we haven’t seen prices like this in some time. That combined with truly historically low interest rates it is almost like a perfect storm.

Between the beginning of 2007 and the end of 2008 the number of REO properties has grown on a monthly basis. But somethings have happened lately that have changed that. First of all the banks were asked by the government to stop foreclosing on houses for 3 months. On top of that, with the mergers between the large banks and the banks that got into trouble, there was an additional 3 month moritorium. The result of that has lead to a lower than normal inventory. When inventory gets low it becomes a sellers market. So what I am currently seeing is multiple offers on a lot of properties. The competition between first time home buyers and investors is strong. So strong in fact that with the multiple offers the prices appear to be moving up for the first time since 2005. Most of this activity is taking place in the lower priced homes but that will eventually push into the homes price above that.

I am afraid that this will not last very long. The reason for this is that the banks are still sitting on a large amount of foreclosed homes that they have not released to the market. Once this happens the inventory will move higher and we should see the market swing back to the buyers favor.

So if you have been thinking about buying your first home or investing I believe the time is right. Interest rates will have to move up sooner or later. My recommnedation is to take advantage of this perfect storm.

Welcome back to my weekly blog. This week I want to talk about FHA financing and buying REO properties. First of all FHA financing is way for buyers to purchase a property without having a lot of money to put down. It requires a minimum 3.5% downpayment and the loan is backed by the government. Its a great way to buy a house for a first time buyer however there are some restrictions.  FHA guidelines require that the property be in safe liveable conditions. That means all electrical and water must be working properly, the house must have a clean pest report, no broken windows or doors and if the kitchen has a spot for a stove/oven and or dishwasher then they need to be installed and working. The roof needs to be in good condition and leak free.

That brings me to buying an REO with FHA financing.  As I said in my last blog most REO properties are in some sort of disrepair and are sold AS-IS. Getting the banks to agree to bring the house up to FHA standards isn’t easy but not impossible. Once a property has had inspections and some sort of damage or defects has been found it must be disclosed to any future buyers and it is in the best interest of the seller to agree to do the repairs or agree to credit for the repairs with their current buyer. Now if you are using FHA financing, repairs would have to be done in order for the transaction to be completed. Another issue with FHA financing is that there is a case or file # attached to any property in which a buyer is using FHA. That file # stays with the property even if the buyer doesn’t purchase the house. So another reason for the seller to agree to repairs. 

So in short, FHA financing is possible with REO properties. Not easy but possible. Knowing these things are benificial when negotiating your purchase of an REO or any other property and I’ll go into that in my next blog.

Thanks for reading!