The Santa Maria and Lompoc real estate markets are currently dominated by foreclosure listings. Of the 663 active listings for homes/condos in the Santa Maria - Orcutt area, approximately 25% (165) are bank owned properties (REOs), and about 50% (339) were short sales. Similarly in the Lompoc - Vandenberg Village active market for homes and condos, there are 198 total listings, and 20% (39) were REOs and 40% (81) were short sales. This means that 75% of the active market in Santa Maria and 60% of the active market in Lompoc and its surrounding areas could be classified as either a foreclosure or a pre-foreclosure. Certain trends or practices are becoming fairly routine in this market (and in many cases contributing to buyer fatigue):

1) Properties listed as "active" that are not actually available. The local boards have taken the position that unless a written contract signed by both the parties is in the broker's hands, the property should still be listed as active. Because of the bureaucracy of dealing with a bank, it can take weeks to receive signed documents back. During that time the property is still being marketed as active, but in fact they have a verbal acceptance on the property. I disagree with the decision to leave these properties active; but that does not change the practice. This is very frustrating for buyers as they research active properties that are not truly available.

2) Underpriced listings. Yes, properties are actually being listed too low by some banks to attract an intense amount of interest. Two recent examples come to mind, in both instances the bank priced a property almost $100,000 below its current market value and as a result received over 25 offers. This is becoming fairly common tactic, although to a lesser degree than the example given, and many times results in REOs being bid up slightly past the reasonable market value. It is a smart tactic for banks, but it creates a frenzied atmosphere for buyers.

3) The "Highest & Best" counter offer. Instead of countering to buyers individually, (which many times would be impractical with so many offers), banks will simply issue a request for a buyer's "highest & best" offer. This puts the buyer in the position of bidding in the dark against their own first bid. For all they know, they are the highest bidder, and are simply increasing their bid even more. This has also contributed to a stressful environment for buyers. Sometimes, the "winners" of these highest & best contests walk away from their winning bid simply because they don't feel like a winner after they've won!

4) Sitting on an offer until multiple offers are received. When the techniques above don't work, sometimes banks will try to create a competitive situation by sitting on an offer until they receive multiple offers, and then issue a "highest & best" call. I've witnessed situations where there was one buyer and that buyer could not receive a response to their offer for 2 weeks until another offer came in, and the bank then requested both buyers to sign multiple counter offer paperwork. The buyer was understandably furious. Some banks are upfront about the practice and disclose in their listing information that they will not look at any offers the first week their listing is active.

Overall, these effective tactics work for bank sellers but burn out buyers very quickly. Many buyers simply drop out of the foreclosure market. It is a difficult market to buy, but not an impossible one. I have tips and strategies to help you navigate the current market for foreclosures in the Santa Maria and Lompoc areas. Please feel free to give me a call at 805-878-9879; I would be happy to answer any questions you may have about the local real estate market.

Tni LeBlanc, JD, M.A. , e-PRO
Broker/Owner
Mint Properties
(805) 878-9879
tni@MintProp.com

www.MintProp.com
www.YourMonthlyMint.com
www.SantaMariaRealEstateBlog.com
www.VAFBRealEstateSearch.com
www.CentralCoastRealEstateSearch.com

*Based on the information from the Central Coast Regional MLS & Lompoc Valley MLS. Neither the Association, the Multiple Listing Service, or Mint Properties guarantees or is in any way responsible for its accuracy. Data maintained by the Association or its MLS may not reflect all real estate activity in the market

The Santa Maria/Orcutt CA market for foreclosure properties is certainly not unique. However, because of media reports on overall trends in the national real estate market, many who venture into the local home buying market are under the misimpression that there are hundreds of cheap houses sitting out there for the picking. That is not exactly how it is currently working. I might say that about the local condo market -- but not the market for homes. That is not to say that there are not bargains out there. There clearly are. But, the local market for foreclosed properties is extremely competitive. On one particularly choice recent bank owned listing, the listing agent reported 28 offers in 5 days.

At present, there are plenty of buyers who have not had success buying a foreclosure. That is because out of approximately 700 single family residences currently on the market, about 300 are short sales. Some are referring to these short sales as "pre-foreclosures" although the term is not altogether accurate as not all will end up in foreclosure if they do not sell. Indeed, some sellers will simply remove them from the market and suffer through, but it is true that the vast majority are trending toward foreclosure.

Short sales are listings where the seller offers the home contingent upon the lender approving the sale at that price because the seller owes more than the house is currently worth. In my experience, short sales take about 3-4 months to close and at least 2/3's of the time they fail, i.e., the seller cannot come to terms with their lender to accomplish the sale. This seems counter intuitive in many cases as often the lender ends up taking less for the property as a bank owned home than as a short sale. However, there are competing interests involved in a short sale including the lender's interest in trying to get more money out of the distressed seller, appeasing sometimes unrealistic investors who are in denial about the extent of their loss, and the fact that the extent of the loss in this unique market many times outweighs the cost savings of avoiding a foreclosure (some estimates place this at $30k-$50k at maximum). Short sales have their advantages for buyers in that you are dealing with a seller who is VERY motivated and the property is usually in better condition than the average foreclosure. But, in my experience buyers get terribly frustrated with them and the success rate is low. This puts an almost laser like focus on the properties that pop up as bank owned as these sales have more certainty -- if you get an accepted contract you will get the property at the end of the process. The tricky part is getting an accepted contract. Currently there are about half as many active bank owned properties as short sales on the market (about 150) in the Santa Maria/Orcutt market. In my view, this reflects the fact that the bank owned market moves FAST. When bank owned properties, i.e., properties that have completed the foreclosure process, are placed back on the market at competitive prices they are under contract quickly. The days on market reflected may prove deceptive to this trend as many times a deal is all but accepted but still reflected as active in the MLS as the contract makes its way through a bank beaucracy for final signatures and approval. However, every bank owned property I have written on for buyers this month except for one -- has had multiple offers.

The tactic many bank sellers are undertaking is to list the properties low, refuse to consider offers until they collect a number of offers over a couple of days or weekend and then "counter offer" back to all potential buyers with a request for their "highest and best" offer. Nice -- now buyers are in the position to bid against themselves -- blindly. I have a technique to aid in this situation -- one that will keep you from overpaying. However, it is still an ugly position to be in. As a result, some properties are being bid up slightly -- which is contrary to what many buyers expect and what the media portrays about the real estate market. Take into account that each bank owned home has to make its way through the foreclosure pipeline, a process which takes months. So, when they hit the market they are a hot commodity -- when priced right. Be ready when you step onto this foreclosure highway -- be prepared for the fast lane.

I specialize in guiding people through this process. You need an expert. Call me today to take advantage of this market (805) 878-9879.

Sincerely,

Tni LeBlanc, JD, M.A. , e-PRO
Broker/Owner
Mint Properties
(805) 878-9879
tni@MintProp.com
www.MintProp.com
www.BuySantaMariaForeclosures.com
www.SantaMariaRealEstateBlog.com
www.CentralCoastRealEstateSearch.com
www.VAFBRealEstateSearch.com

*Based on the information from the Central Coast Regional MLS. Neither the Association, the Multiple Listing Service, or Mint Properties guarantees or is in any way responsible for its accuracy. Data maintained by the Association or its MLS may not reflect all real estate activity in the market.



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