Under $100,000 in Santa Rosa
Santa Rosa has more foreclosed homes for sale than anywhere else in Sonoma County. Bank owned homes are available from $89,000 to nearly $3,000,000, although the high end drops to $985,000 for the next highest priced Fountaingrove REO property. This wide range of prices provides opportunities for first time home buyers, investors, and move-up buyers, but I want to focus here on first time buyers.
I got a call recently from a young couple who wanted to know if they should think about purchasing REO property. They wanted a house, but didn’t know if bank owned homes were a good idea for them. It’s a logical question for newcomers to buying houses. Here’s how I explained today’s housing market to them.
There are three main classes of sellers in the market today.
1. The smallest category is people selling their homes who still have equity in the property. Many of these are estate sales where the heirs are disposing of a loved ones home. Some are divorces or other forced liquidations where there is value in the property. These sellers have a hard time accepting how much home prices have declined in Sonoma County. In many cases the house is worth as much as 40% less than they thought two years ago. It’s hard for them to be realistic about value.
2. The second category is people who have fallen behind on their house payments. It could be a loss of a job or an unaffordable increase in the interest rate on the home loan. In many of these cases, particularly for homes purchased or refinanced between 2003 and 2007, the home is worth less than the loan amount (that’s what being “underwater” or “upside down” means). These sales are called short sales since the amount of money the home will sell for is “short” of the amount needed to pay off the loan(s). These sales have the emotional entanglements of people who have spent time and money on upgrades and who love their homes. They may have multiple lenders who are often reluctant to negotiate away their principal. The emotions of the sellers and financial consequences for the lenders make these sales very hard to manage.
3. The final category is for homes that either didn’t sell as a “short sale” or the owners were simply unable to continue with the house payments and defaulted on the loan. The bank, through a long process, “forecloses” on the property, the owners have to move out, and the bank takes possession. The banks aren’t in the home-owning business, so they assign the foreclosed house to a real estate agent who puts it on the market at a price designed to get the house sold and off the bank’s books. These homes, priced to sell, represent a chance for first time home buyers to get a well priced home from an eager seller, and they represent a plurality of sales in Santa Rosa today. In Rohnert Park, foreclosed homes represent over 50% of all transactions.
I explained to this young couple that in many ways, the buyers of foreclosed houses are the heroes of our economic recovery. Purchasing a bank owned home provides capital to the bank just as effectively as a loan from the Treasure Department. Moving into a foreclosed home restores vitality to the neighborhood, helping home owners nearby maintain the value of their property. Moving from renter status to home owner status helps young couples start saving for their future. The real estate bubble we are suffering from doesn’t change the underlying nature of a house as a sound basis for financial planning.
They hadn’t thought of themselves as heroes of the economic recovery, but first time homebuyers have an important role to play in our economic recovery. I hope I can help them find their dream property.
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yes this is true that we need to get these reo’s off the market- they are flying off like hot cakes in santa rosa – we have been looking to buy are first house for under 205k — we have had 10 offers in and they we mostly all 25k over asking – and still we are being beat out by all cash offers and investers! it is not as easy as some would think to get a home – i wish that there was away to help eveyone like us from being beat out by those with nothing to lose -
Ashley, I’m sympathetic to your plight. There isn’t a simple answer to take care of buyers in your position. The combination of good interest rates and relatively low prices puts many new buyers in the market and everyone is competing for fewer and fewer available homes. I do think we may see more listings this summer, so all I can do is encourage you to keep doing what you are already working on. It sounds like you have a great agent, so keep working with them until you finally are the successful offeror.