Real Estate Talk Blog for the Willamette Valley

• Modified statistics, starting 11 April, 2009 SOLD statistics no longer include any pending data.

Albany

¨ SOLD (past 90 days) – 142

o Average price – $194,170

o Median Sale Price – $180,200

o Average Days on the Market – 141

o Average Dollar per Square Foot - $123.75

¨ Current Active Listings – 389

o Average Price of Active Listings - $216,254

o Months of Inventory – 8.22

¨ Pending/Contingent Sales – 101 / Value $18.8 million

o Total Contingent- 54

o Total Pending - 47

Corvallis

¨ SOLD (past 90 days) – 130

o Average price – $264,773

o Median Sale Price – $241,500

o Average Days on the Market – 127

o Average Dollar per Square Foot - $162.61

¨ Current Active Listings – 254

o Average Price of Active Listings - $342,868

o Months of Inventory – 5.86

¨ Pending/Contingent Sales – 63 / Value $15.8 million

o Total Contingent- 45

o Total Pending - 18

Lebanon

¨ SOLD (past 90 days) – 43

o Average price – $139,457

o Median Sale Price – $143,000

o Average Days on the Market – 152

o Average Dollar per Square Foot - $102.91

¨ Current Active Listings – 157

o Average Price of Active Listings - $168,278

o Months of Inventory – 10.95

¨ Pending/Contingent Sales – 49 / Value $8.3 million

o Total Contingent- 26

o Total Pending - 23

Upcoming Guests Scheduled:

September Guests:

17 September – Real Estate Roundtable; Jason Cadwell (RE/MAX Integrity), Sam Williams (Wells Fargo). Current events in the local mid-Willamette Valley real estate market

26 September – Eli Volem, Energy Trust. Green building, changes and updates to the building codes in our future, sustainability in building codes and products; tax credits. EnergyStar and EarthAdvantage.

I have an investor/contractor that I work with.  He's looking for an opportunity to make money in real estate, even in this market.  His strategy:  Buy 'em cheap, fix 'em nice, and sell for a nice profit. 

The second element of his strategy is indeed 100% under his control.  The challenges come in during the first and final phases.  The lessons that HE has learned may be valuable for you too.

1. Buy 'Em Cheap.  There are plenty of distressed properties on the market unfortunately.  Short sales and foreclosures are becoming a standard phrase in the real estate vocabulary.  That means there ARE lots of bargain properties available but getting the right ones can be tough.

     a.  As a rule, foreclosures work out better than short sales.  The timelines are shorter and cleaner, and the negotiations are much more straight forward.  The bank is all about the bottom line.

     b. The best deals come when CASH is the only way to get it sold.  A property that is otherwise un-financable sets the stage for the buyer competition to be largely investors instead of traditional buyers.  Now all the buyers are looking at the bottom line.  Make your highest and best and don't sweat the "win some, lose some" outcomes.                  (1) This is truly the toughest challenge!  The best deals are snapped up by OTHER investors fairly quickly (and often with muliple offers), which means that the next best opportunity to buy may be when the unrealistic seller (and yes, even Banks can be unrealistic sellers at some point) become a little more motivated...90-100 days into the listing.

                (2) Don't get into a rush and over pay, especially when there are other offers.   There WILL be another one coming.

     c. Look for an upside.  Evaluating the property and being able to do an on the fly estimate of the repairs and upgrades are important skill sets to making money in this business.  How much upside?  Well, every deal is different but you absolutely must account for Purchase Price, Closing Costs (both sides - remember, you'll be selling later), Repairs, Upgrades, Unexpected repairs, Carrying Costs if it doesn't sell quickly, Estimate of Sale Price...and Realtor commissions.  So, if a property doesn't have $20-30K in upside this becomes a very expensive hobby with a lot of risk.

2. Fix 'Em Nice

     a. I'm not a contractor OR a designer.  I'm going to leave you with only one thought here.  Craftsmanship is important, even in these flips.  The people making the most money are the ones that have the skills to do a professional job 'in house' vice contracting out or worse...doing it themselves poorly. 

3.  Sell for a nice profit.

     a. For Sale by Owner - Full Listing - Buyer's Agent Co-op?  There are pros and cons, and COSTS to each of these strategies.  Assess your skills, your time management priorities, and the budget.  I'm sure you know my opinion, but I won't belabor it here.

     b. When you were calculating costs at the front end of this process, your plan (and profit margin) was (hopefully) to be able to market the property at 5 - 15% BELOW the current market.  Time is either your friend or your enemy - and success in this type of strategy requires you to minimize carrying costs and get it SOLD quickly.  The only way to do that is to focus on price!

     c.  Keep in mind the buyer financing situation.  Will you need to pay some of the Buyer closing costs?  Certain loan programs have new rules requiring the seller to have been in title for 90 days! 

If you want to find out a little more about some short sale opportunities - which we haven't really discussed here, but do offer potential profit margins...check out www.linncountyshortsales.com

Let me begin this posting with a disclaimer...I do not have the ear of anyone in Congress, nor do I have any inside information!  This is just my opinion and shouldn't be relied upon in your home buying decision making.

Whew, with that out of the way...here are my thoughts.

The First Time Homebuyer $8000 Tax Credit has certainly been effective in getting some buyers off the fence and into the housing market.  For a real estate professional who relies on commissioned sales to feed my family - it's been a good thing.  We have definitely seen an increase in activity, and sales at the entry level, and that has also given some boost to home sales in the move up levels as well.

It expires on 30 November this year which means that the clock is ticking and, with increased sales maxing out the processing resources...if you don't have a transaction in the works within the next few weeks you MAY miss out.  Unless of course Congress decides to extend the credit.  There are rumors swirling that this is going to happen.  There are ALSO rumors out there that the credit will be expanded to include a broader swath of home buyers, and may even be increased to $15,000. 

Let me go on record.  I am all for an extension of the current tax credit.  We are in a transitional phase in the housing market where having a positive equity position in a home is absolutely a MUST.  Not only due to more stringent lending regulations, but also in order that a home owner can deal with the ups and downs of a confusing market.  Many Consumers have not yet had sufficient time to build up the cash resources that it will take to buy a first home with 15 or 20 percent down.  This tax credit enables them to get into a home in a market where they can make an excellent purchase, and not completely deplete their savings, retirement accounts, or good will (and savings accounts) of their parents!  This tax credit is offered as an incentive - which is one of the long-held traditions in this country (1 example is the mortgage interest tax deduction).  It's a good thing.

However, I'm against (at least in principal) giving more free money, and do NOT think there should be a major expansion in either scope or price to this credit.  That, in my never humble opinion, will lead us right down the road we traveled before.  Home ownership is not a right to be given by the government (especially not on the backs of the taxpayers). 

Last point of this blog - IF Congress is going to extend the credit, some of my peers are hoping they wait until 29 November to do so.  Me, I recommend that any extension be announced in the middle of October.  Here's why:

(1) Home buyers who are currently in a transaction that is squeaking under the deadline will breathe a little easier - and they WILL stay in their purchase deals.  So there is no cost to an earlier announcement.

(2) Other buyers who realize too late that they are MISSING the cut off date are going to stay on the bench.  If they then commit to a 1 year lease renewal...they're staying on the bench and an 11th hour extension isn't going to help them.

(3) The biggest initial boom is going to come between October and December...unless they make the credit usable on 2009 taxes for purchases that extend into the calendar year 2010 (like they do for IRA contributions for example).  I think even with an extension, we're likely to see a falling off of first time buyers after the first of the year.  If they can't get that $8K until they file their 2010 taxes...why rush?  Take more time to save up for down payment and closing costs; you'll have even MORE leverage in your purchase.

This Buyer's Market is not going anywhere for at least the next 12-18 months (at least here in the mid-Willamette Valley), prices will stay flat, and may even go down a bit further.  The only fly in the ointment is "what is going to go on with interest rates?"  And THAT my friends, is a whole 'nother blog!