Washoe County Realtors find opportunities in distress
June 14, 2010
RENO, Nev. – When he learned how to sell homes that were either in foreclosure, or involved in a short sale, one real estate professional, with tongue buried deeply in his cheek, quipped in his blog, “Now I no longer have to eat off the Dollar Menu!”
Jennifer Capurro, president-elect of the Reno-Sparks Association of Realtors, gets the joke and chuckles.
“When you know how to deal with distressed property owners and potential buyers, it opens up a whole new arena for you as a Realtor,” she says.
Capurro, a broker/agent with RE/MAX Realty Affiliates in Reno, is among a growing number of real estate professionals throughout northern Nevada who have shelled out hundreds of dollars to earn a new certification approved by the National Association of Realtors-that of Certified Distressed Property Expert (CDPE).
Because more than 55 percent of the homes in Washoe County are considered “under water” – their value is less than the amount of the mortgage on the property – the number of distressed sales over the past few years have increased. In the case of foreclosures, this means dealing with lenders – often banks – whose rigid stance has frustrated potential buyers.
Bank-owned houses actually are selling faster today than they did two or three years ago. Peter Moritz, a Realtor/broker for Keller Williams in Reno, says a few years ago, the banks or asset managers held firm on what they believed to be the true value of a property.
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“They took the attitude of ‘Here it is; take it or leave it’ despite what our market said the property was worth,” Moritz says. “They wouldn’t put a penny into it to help sell a house.”
In fairness, says Moritz, it’s important to understand that the average foreclosed home in the greater Truckee Meadows today represents about a 40 percent loss to the lien holder. Today, lenders are assisting the real estate professionals here, and Ken Amundson, president of the Reno Sparks Association of Realtors, says there are very few bank-owned properties on the market right now.
For awhile, though, real estate professionals here had to work their way through a labyrinth of red tape in order to successfully conclude a sale. “I would guess that 75 percent of the transactions I’ve closed over the last two years have been distressed properties,” says Capurro. “I’ve been closing short sales now for four years and, in my opinion, the public shouldn’t be dealing with anyone who does not have the CDPE education.
“There are nuances on both REO’s and short sales,” she says. “Short sales do take longer, but if you don’t also know the nuances of writing an offer on a bank-owned property, you are never going to get it.”
Amundson, who is managing broker for Coldwell Banker Select Real Estate in Sparks, says the certification for dealing with distressed properties does have some merit, but that doesn’t mean knowledgeable real estate professionals can’t close distressed property sales. “The REOs tend to close when they are put on the market,” he says, “and about one third of short sales never close as short sales.” But he allows that individual agents with the certification do tend to close a higher percentage of short sales.
One of the sticking points with most real estate professionals in northern Nevada today is the fact that many lenders shy away from aggressively writing mortgage loans in the Silver State.
“Our next big hurdle,” says Amundson, “is to get our state off the declining market status with the bankers because it is a fact that prices here have been held down artificially. We would be up 5 percent if the appraiser/bank relationship had not been protecting themselves from the falling markets. We believe there has been an overcorrection in pricing to the detriment of sellers.”
Capurro agrees. “The appraisers are difficult right now,” she says. “When the market was going through the roof in 2002 through 2005, homes were being appraised without using comparables. Today, on the flip side, they are having to hold things down in a market where banks are somewhat wary.”
Despite the cautious approach taken by lenders, Capurro says there are still lending programs out there for first time homebuyers. Houses, she says, are as affordable as they have been in years and interest rates are at record lows. “The average person living in Washoe County today, working the average job, can buy a home today,” she says. “You can buy something for less than you can rent it.”
Paul Bishop, vice president of research for the National Association of Realtors, was in Reno recently and told a real estate audience that it did appear the market to value in the Truckee Meadows had overcorrected to the downside. He also told those in attendance that current numbers locally suggest things are improving.
“Prices here have stabilized and this a positive piece of news,” Bishop says. “There is still fear of further price decline, but the fear of not getting a mortgage at favorable rates is also in play.”
Amundson says while the recent tax credit for first time home buyers expired April 30, he is encouraged that the number of housing sales in May is only down by 11 percent. He believes the median home price here has reached a plateau he hopes is also the bottom.
“Last year, the median household income in the Reno/Sparks market could not afford the median home price. It’s much healthier now in that respect. The number of new listings is consistent with the previous month and the number of new distressed properties is holding. They are not going either up or down. Hopefully, this market behaves rationally rather than runs amok.”
Keller Williams’ Moritz sees a huge pent up demand for first-time homebuyers despite the end of the federal tax credit. Houses priced at $200,000 or less typically have multiple offers and are, on the average, on the market for two months or less.
Houses priced in the $300,000 to $400,000 range are still selling, but may take upwards of five months to sell. Anything priced at $500,000 and up could take up to a year. And those houses in the $1 million stratosphere and upwards may sit on the market for two to three years.