This is a short update newsletter on what’s going on in our area regarding the REO-Real Estate Owned properties within the Santa Clara County. Recently I have been working with the REO properties researching them before they become REO’s from being first on the MLS and finding out that those homes on the MLS are not such the deals that they are made out to be.

When my clients are thinking of putting an offer on a property they ask me to do a CMA-Competitive Market Analysis within the subject home and then they ask about the history on that home. When I reveal to them the original price or another home that sold within the same neighborhood was lower, they shy away from the original price.

So the next step is to offer less and depending on where the sellers financial position is, the sellers will become reluctant to the current offer from the buyers. So the buyers then prepare themselves for the alternatives I give them. Thus this becomes the Auctions where the end bidding results are 30-40% below market value and it may not be their "Dream Home" but for an investment home or a stepping stone towards a future "Dream Home" this will perhaps suffice.

I went to the auction in the first part of November and prior to going I received a catalog of properties within Santa Clara County properties to be held at this particular auction so that I could look up the MLS # and the entire history on the property itself so that when I attend the auction, I will already know if the ending bid is justified and they were. So now for those clients of mine who want the "Forced Equity" already incorporated within the closing of escrow they have a sense of comfort if the market still slips as forecast within the next year.

Over 80% of the properties were justified with over 30% of "Forced Equity" that I created an excel spreadsheet to reflect the amount of “Forced Equity” each property had. I was amazed at the results and within the next 14-18 months I would not be suprised for it to continue in this trend. I now have my clients sign a “Buyers/Broker Agreement” and I represent them at the auction. Requirement is 10% down in Cashiers check and 30 days to finance the balance of the purchase price with a typical 5% Buyers Premium fee of the purchase price.

By all means work with your Realtor first to do the research on the property you are interested in and make the best offer for you. If you want to give money to the seller then it’s your choice, but we will find more and more homes on the market and less than 1/3 selling in this economy in some areas. As I’ve stated before, be the 5% who are willing to get educated in this market and not the 95% who think they already are? Call me with any questions.