Given the current real estate climate, bank owned or REO (real estate owned by banks) properties have become highly sought after by today’s buyers.  Whether or not they ultimately end up purchasing one, most buyers are starting off with this thought in mind. 

Naturally, these buyers are looking for a deal and most bank owned properties fit this category perfectly.  It is not uncommon to see Big Bear REO properties selling from 75 to 90 cents on the dollar as compared to similar homes on the market. 

While buying a bank owned property can save you some money, there can be some major  contractual differences when buying a property from a bank as compared to a typical and the standard C.A.R. purchase contract. 

It is very common for a bank to have their own contract and/or addenda that they will require the buyer to sign and agree to.  Most of the differences in these contracts include potentially unfavorable terms that buyers should consider and discuss with their real estate agent or attorney prior to signing a contract to purchase a bank owned property.  To do otherwise is taking a big risk.

These are some of the most common types of terms banks like to add to the standard purchase contract (as provided by California Association of Realtors legal services):

·  Requiring a substantial amount for good faith deposit.  This can become even more important should the buyer be in default and risk losing their deposit.

·  Requiring a buyer to prequalify with the REO lender.  Getting prequalified is always a good idea.  But, assuming the buyer has already been prequalified with their own lender, this is just another step that a buyer will have to take, not to mention that they will probably push you to use that lender as well.

·  Requiring an “as is” clause.  This is pretty typical and is included in the standard C.A.R. contract as well.  The key item to discern is what, exactly, they are referring to by “as is”.  Is the buyer still able to have a home inspection and back out of the contract with the deposit returned to them should they not approve of the inspections?  Or, are they tied into the property once they sign the contract?

·  Disallowing buyer contingencies, especially a contingency for sale of buyer’s property.  Most sellers don’t like a contingency on the sale of buyer’s property either.  But, there are many other buyer contingencies, like the loan, appraisal, and home inspection.  It is very important to figure out what contingencies they do not want to allow for.

·  Allowing contingencies, but deeming them passively waived through the passage of time.  The standard C.A.R. contract requires that the buyer actively remove their contingencies in writing.  Until the buyer does that, or the deal closes, the contingencies are deemed to have not been removed.  Passive removal means that once the time frame passes, 10 days for example, and the buyer has not said anything about, then the contingency is deemed to have been removed.  This is a very important distinction.

·  Refusing to do repairs (although an REO may be more willing to give credit in lieu of repairs).  Most sellers these days are willing to do some repairs or credit for them to be done in order to keep the buyer on board with the purchase.

·  Refusing to pay closing costs.  Some sellers are this way as well.

·  Refusing to provide a home warranty plan.  Nearly every seller is willing to do this.  The cost for such a warranty runs from $300 to $500 for the upgraded plan.  While I am not a huge fan of home warranty companies (some are more difficult to deal with than it is worth), it is nice to have this extra insurance policy.

·  Refusing to provide disclosures.  Most notably, the TDS or transfer disclosure statement.  This is a the statutorily required document in CA that the seller must give to the buyer disclosing what they know about the property that may materially effect the value of the property.  Banks, however, are not required to provide this form.  Because banks typically do not have any knowledge about the properties they own, they do not fill out these type of disclosure forms.  Accordingly, the buyer should really step up their due diligence efforts on their inspections to make sure they find out as much as possible on the property.

·  Charging a per diem or daily charge for any delays in closing escrow.  Some of these clauses say that the buyer must pay up to $100.00 per day for every day that the escrow is late (assuming the delay is not caused by the seller/bank).  Given that the majority of escrows do not close on time as a result of the buyer, this could be a real cost the buyer.  And given that they would have removed their contingencies by that time, they could stuck in a bad position.

·  Requiring hold-harmless agreements. I am not too familiar with these type of clauses but there are some in the standard contracts as well.

·  Requiring a buyer to waive other rights.  Such as the right to a home inspection or appraisal contingency.  It is not uncommon for them to shorten the buyer’s inspection time frame down to 5-7 days, if any time frame at all.  The standard time frame for the C.A.R. contract is 17 days.  Inspections can be done in a 5-7 time frame but everyone (buyer, agent, home inspector) need to be on the same page.

There are many great real estate opportunities in Big Bear on the market today.  Keeping these things in mind when buying a bank owned property should help save you time, money, and potential frustration down the road.  All banks are different so be sure to read the fine print on their contracts!

This may be a little late but it is still informative to look at and compare the first quarter home sales for 2008 with that of the previous 5 years.

It is pretty well known that home sales in Big Bear have slowed down tremendously.  First quarter sales were off 48% from the first quarter of 2007 (and 2007 was the slowest year for the number of sales that we have seen in over 20 years) and 69% less than the first quarter of 2004, the best first quarter in the past 6 years.

Prices appear to be at the level they were in the first quarter of 2005, even with the limited amount of sales this year. This is an important reality to understand if you are considering selling or buying a property in the Big Bear area.

If you are thinking of selling, and you purchased the property around 2004/2005 or after that time frame, then you will need to be realistic on the pricing. There is a good chance that your property will sell for less than what you paid for it.  On some rare occasions, this may not be the case, but for the majority of properties in Big Bear, this is definitely the case. 

If you are looking to buy a property, finding out when the owner bought the property and how much they paid for it is important to know in this market.  While this will provide some good insight, it s not the only thing to consider however. 

There are a lot of other factors to find out, like improvements done to the property since the last purchase, the circumstances of the previous purchase (foreclosure, bank owned, Reo, short sale, got from parents, distressed sale, etc), the seller’s motivation, any other offers on the property, and how long it has been on the market are just a few others to consider.

The fact remains the recently sold comparables in the area are the best way to justify the current value of your home, no matter what was paid for it, what you need to get out of it or what you put into it.

* Information courtesy of the Big Bear MLS. This update includes MLS data from areas including Big Bear Lake, Big Bear City, Moonridge, Fox Farm, Sugarloaf, Erwin Lake, Fawnskin & Baldwin Lake. It does not include data from areas in the Big Bear MLS that are located outside of the Big Bear area. Information is deemed reliable but cannot be guaranteed.

The time it will take to sell a house in Big Bear dropped by 10 months in April 2008.  With the pick up in home sales that we saw in March, the absorption rate for the Big Bear real estate market dropped from 32.72 months to sell to 22.80 months to sell. 

This is encouraging news for home sellers though the market is still very heavily favored toward buyers.  The market will need to get closer to a 1-3 month absorption rate in order to get back to a sellers market.

Now that we are heading into the spring and summer season for Big Bear, sales will pick up even more.  But, so will the properties coming on the market.  The total inventory of houses on the market is currently at 1094.  This number could easily be 1500 by July 4th of this year.  So, even if the number of sales pick up to 100 home sales per month, the number of homes on the market will still far outweigh the demand. 

The number of sales per month needs to be closer to 200 for the market to see any kind of significant pick up.

                                                            Absorption Rate By Price Range

                                                                   Absorption Rates By Area

Properties priced under $500,000 are selling the quickest while those between $500,000 and $1,000,000 are not faring as well.

Properties in Fox Farm, Sugarloaf, & Erwin Lake sold better as compared to Big Bear Lake Central, Lake Williams, Baldwin Lake,  & Big Bear City.

These numbers change from month to month.  Some of the price ranges and areas that are not doing well now have performed better in previous months. 

If you are interested in how the real estate market in Big Bear is performing, be sure to sign up for my RSS feed or email newsletter.

The National Association of Realtors recently released a report on second home sales that was reported on by The Dallas Morning News.

The article states that second home sales nationwide dropped by more than 30% in 2007 when compared to 2006. This is pretty consistent with what we saw in the Big Bear real estate market in 2007. There were 1172 residential sales in 2006 as compared to 796 sales in 2007, a difference of 34%.

I noticed a few important points to take from the article as it relates to the Big Bear real estate market:

Second homes are discretionary purchases, and there is a natural tendency to pull back from big-ticket items in periods of uncertainty.

This seems relatively straight forward though we are still seeing some big ticket sales.

There were 45 sales in Big Bear over $1,000,000 in 2006 and 39 sales in 2007. That is only a drop of 13%. There have been 6 sales so far in 2008 over $1,000,000 and 4 properties in escrow right now.

There were 186 houses sold in 2006 priced between $500,000 and $1,000,000 while there was 135 sales in the same price range for 2007. This a drop of 27%.

Houses sold under $500,000 in 2006 totaled 945, with 2007 numbers for this price range coming in at 623 homes sold. This is where the biggest drop was noticed, almost a 34% drop in sales.

Buyers simply adopted a wait-and-see attitude

We definitely noticed this mentality in Big Bear’s prospective buyers over the past year. Buyers would come up and look at properties, find the perfect place, and then say,”we are going wait and see what happens with things.” In a time of uncertainty, most people want to wait and see what is going to happen with the prices of homes, which is completely understandable.

But, it is during these times that good opportunities will present themselves so you have to be aware of this fact. By the time you realize we have hit the bottom of this market, it will be too late. The top of the market was late 2005 and no one knew until until mid 2006 and later. Once you find we’ve hit bottom, everyone knows. This changes all the dynamics of a buyer’s market. Prices and buyer competition will again rise. Does this sound familiar?

Even with the slowdowns, a significant number of residential properties purchased in 2007 – almost one third of total sales – were acquired as second homes.

This is a significant number when you look at it. For every 3 home sales in the U.S last year, 1 was a second home. This should only increase as more and more Boomers start thinking about retirement. Also, as the world population continues to grow everyday, many people are going to want the cabin in the woods to get away from it (and them) all.

Big Bear is uniquely situated to capitalize on both of these aspects. With over 20+ million people in the Southern CA area, Big Bear and Lake Arrowhead are really the only two options within a few hours drive. And given that we are surrounded by the National Forest, there are only so many options that will be available.

The median price of vacation homes purchased nationwide in 2007 was $195,000, down 2.5 percent from 2006.

The median price for homes purchased in Big Bear in 2007 was $309,950, down 3% from the median price of $319,400 in 2006.

Vacation home buyers appear to be more bullish about the housing market. About 80 percent second-home buyers surveyed last year said they considered it a good time to invest in real estate. That compares with about 60 percent of primary home buyers who had that view of the market.

Interesting point given that most of them have been waiting to see what happens with this market. The current rumblings out there that were are hitting bottom now is bringing some of the fence sitters out to buy. It is still too earlier to tell but I expect things to start getting better in the next 12-24 months.

A peak of population is moving through the prime years for buying recreational property.

The Baby Boomer generation should continue to drive second home and vacation homes sales for years to come. Boomers are the biggest generation from a population standpoint. This, coupled with the fact that many Boomers are now getting the money from their parents passing away, a good amount of this money will be spent on discretionary items like second homes.

Though it may be slow now, pent up demand will catch up and sales are certain to follow.

Knowledge and information are key components of making any smart decision. While all real estate values, customs, and trends are determined by local standards and economic forces, there are still some similarities shared by all second home markets.

These are all good points to keep in mind if you are planning on investing in, or selling, a home in the Big Bear area in the near future.

Below is a market update for residential properties in the Big Bear Valley during the week of March 31 to April 6.

New listings and pending sales were up from the previous week while closed sales were down.

The majority of closed sales continue to occur in the Big Bear Lake areas of Boulder Bay, Gilner Point, Ironwood Estates, Eagle Point, Fox Farm and Moonridge.  The areas of Big Bear City, Erwin Lake, Baldwin Lake, Lake Williams and Sugarloaf are still seeing very few sales.

Average days on the market for closed sales this week was 138 days and the average list price to sale price ratio was 94%.  The median sales price was $229,000.  These are good numbers to keep in mind when understanding the real estate market in Big Bear.

This information is updated on a weekly and monthly basis. Be sure to check back or sign up for my email newsletter to be kept informed on the real estate market conditions in Big Bear.

* Information updated weekly, courtesy of the Big Bear MLS. This update includes MLS data from areas including Big Bear Lake, Big Bear City, Moonridge, Fox Farm, Sugarloaf, Erwin Lake, Fawnskin & Baldwin Lake. It does not include data from areas in the Big Bear MLS that are located outside of the Big Bear area. Information is deemed reliable but cannot be guaranteed.

Below is an update for the Big Bear real estate market as of 4/7/2008.

The residential properties listed for sale in Big Bear are up 11 from 1078 homes for sale to 1089 total.

The number of houses in escrow are up 16 from last week to 107 while sales year to date now stand at 114 Big Bear homes sold since the beginning of the year, up 7 from last week.

Vacant land listings in Big Bear are up by 3 to 340 parcels now for sale. The number of pending sales are up 2 from last week for a total of 28 escrows for vacant land. There were no new closed sales so year to date sales for vacant land still stand at 16 closed sales, which is still very slow as compared to the 114 houses sold.

The number of condos for sale in Big Bear was up 2 for a total of 64 while the number of pending sales was down 1.  The number of condos sold in Big Bear remained the same at 2 closed sales.  Only 2 sales so far this year for condos…..ouch.  Selling a condo on Big Bear still remains a difficult task.

The Government Lease properties in Big Bear have remained the same for the past two months.  There are still 4 for sale, 1 pending sale, and 1 closed sale this year for the these types of cabins.

The number of commercial & residential investment opportunities on the market this week remained the same.  There is 1 less pending sale, though sales for the year are up 1 to 6 total for the year.

Business opportunity listings are up 4 from last week to 16 for sale while sales and pending escrows remained the same.

See last week’s Big Bear real estate market numbers.

Be sure to check back here every Monday for your Big Bear Market Update or click here to get this emailed to you every week.

* Information updated weekly, courtesy of the Big Bear MLS. This update includes MLS data from areas including Big Bear Lake, Big Bear City, Moonridge, Fox Farm, Sugarloaf, Erwin Lake, Fawnskin & Baldwin Lake. It does not include data from areas in the Big Bear MLS that are located outside of the Big Bear area.