Friday, May 04, 2007

Don't Get Pre-Qualified, Get Pre-Approved!

Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one bargaining chip in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller. In years past, we have always recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "pre-qualified" and issues a certificate that you can show to a seller. Sellers are aware that such certificates are worthless, and here's why! None of the information has been verified! Unknown problems can surface for example: recorded judgments, child support payments due, glitches on the credit report (due to any number of reasons both accurately and inaccurately), down payment funds that have not been in the clients' bank account long enough, etc. So the way to make a strong offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon we recommend to all of our clients to have in their negotiating arsenal.

Search the MLS for Ventura County Real Estate at:


At 5/05/2007 9:53 AM, Anonymous Josh said...

Hey Hope,
Remember when we talked last Spring about Ventura County Real Estate. What a difference a year makes.

Let me give an example:
Duplex Across the Street: 10350 Alexandria St. #1, Ventura
-Sold May 2006 for 550,000 (which was pretty much in line with what things were going for then per sq.ft.) to a hardworking young Hispanic fellow with wife and two children. Moves in and immediately spends 100's of hours on landscaping, re-roofing, painting, etc... (does most of the work himself with the help of a few friends and his wife). For sale sign goes up in August 2006 so I check it out and it is listed with some discount agent (on MLS) at 540,000-short sale subject to lender approval (he must have been financed close to 100%). So, I am thinking, what happened, did this guy lose his job or something that would change his circumstances that quickly. For the next few months, I still see him leaving for work at about the same time I leave for work everyday so I think he still must have a job. Meanwhile the price is dropped by a few thousand every week, and by November 06 the house is listed for 505,000. Then in December the for sale sign comes down, and the listing is pulled from the MLS. I think, OK the guy must be back on his feet and keeping up with payments.
Well, in the end of February the guy moves out, and I haven't seen anybody there for two months. So I'm thinking forecloure, the house now belongs to the bank. Well I was just checking the MLS yesterday and I see the house back on the market with REMAX. Price = $439,000. (no mention of short sale, REO or any such thing). So I check Zillow (which I know isn't always accurate) and I find that the house did indeed sell for 550K back in May 06, then it sold again in February 07 for 470K. So I am really baffled. Who would buy this house for 470K in February, close escrow, then turn around and list for 439K (taking a 30K loss plus transaction costs). I don't think that the Hispanic guy was a straw buyer, because he wouldn't have spent the time and money to fix the place up. He might have been duped into buying a house he couldn't afford, but if there was any fraud on this transaction, I don't think he was in on it. Is it possible that the February 07 sale being reported by Zillow is actually a foreclosure amount recorded by the first mortgage holder? Or could there be a straw buyer here? Would anyone trash their credit for 30K minus transaction costs?
Anyway, this house is representative of what is going on here in Ventura. I picked it because it is so easy to demonstrate the dramatic drop in value using the same house over a few years. But believe me this is not isolated. Condos and houses that were in the mid-high 500K's last year are now in the low-mid 400K's. This is getting good. I almost called the agent about this house, because the guy fixed it up really nice and I started thinking if I could low-ball at 415K then it would be a really good deal. But then I came back to my senses. This house was only worth 169K back in 2001. Lets wait and see how close it gets to that after another couple of years.

At 5/07/2007 7:40 AM, Blogger Hope Goss, Realtor said...

Hey Josh,
Nice to see you are still keeping your eye on the market. You might want to look into getting your license one of these days. Yes, we are seeing some foreclosure activity, as well as some decreasing values. It's not across the board, though. Certain areas, and price ranges, are seeing more than others. The lower end of the market seems to be seeing the most foreclosure activity, as well as decreasing values, here in Ventura County. However, there still seams to be a healthy demand out there for housing. Well priced homes, in good condition, are selling quickly right now. In fact, the last 5 offers I have written in the past couple of weeks have been competing with other offers, with 3 of them eventually selling for over list price. I'm in no way saying this is the norm, instead pointing out that it's not all doom and gloom out there. Wait as long as you need to, to feel good about buying your own home. Everyone has a different reason for becoming a home owner. Making money is only one of the many reasons people buy.


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