I tell Howard County home buyers all the time that, sometimes all you need to do to get the “best deal” is simply to recognize a great deal, and act on it, when you find it.

Take the home below.  A 4 bedroom, 2 full bath contemporary with 2 car garage and tax assessed at $444,000.  It is in clean shape, a bit dated, but extremely well priced at just $400,000.  When most homes are selling at around 97% to 103% of their tax assessment value, this home is asking a mere 90.1% of its tax assessment value.

Is it a buyer’s market right now? Heck yeah.  But, even now about 25% of all homes that sell each month are sold within 30 days or less of being listed, and sell for darned near (if not even over) their asking price – yes in 2008!  My guess is, this home at 5414 Lightning View Road in Columbia will be one of them.

For an article on understanding and calculating a home’s Assessment Value Ratio click here.

Or, you can request a list of well-priced Howard County homes here.

Priced 10% under tax assessment? Such homes sell fast.

This is a (growing) series of short articles on Howard County Maryland’s real estate market from the buyer’s viewpoint. For other articles see: How to Value A Home (Recognizing Value); Finding Great Deals – Auctions & Foreclosures; Finding Great Deals – FSBO and Short Sales; Finding Great Deals – Realtor® MRIS; and How To Negotiate A Great Deal.

Howard County’s Best Home Deals – Realtor-Owned MRIS

My wife likes to do things the easy way, while I seem drawn to over-complicate things.  Take shopping. My wife will go to the location known to have quality products at the best prices, quickly find what she wants, buy it, and head home.  Me? I’ll run all over town looking for a “better deal” somewhere, waisting time and gas, and end up never finding a deal that is better than what my wife found in 15 minutes! 

Moral: When you’re buying a house – shop like my wife, not like me.

Your best bet for finding the best “deal” on a Howard County home also happens to be the “easy” way – working with a local Realtor® who has access to the the local Realtor® owned Multiple Listing Service (“MLS”). 

 Realtor® owned MLS services date back to 1907.  In a MLS service all area Realtors® “list” their homes for sale into a collective “pool”, sharing information (price, features) with one another and agreeing to split the sales commission when they sell one another’s home listings.

Originally MLS services were in printed form, updated monthly and circulated to different Realtor® offices.  In the 1980′s MLS services were computerized and accessed over a private network.  In the Maryland/DC/Virginia region about 60 Realtor® MLS services merged in the 1990′s to form the Metropolitan Regional Information Service (“MRIS”), and in 1998 consumer access to the MRIS was granted over the Internet on a limited basis. 

According to research by the National Association of Realtors, over 92% of all home sales take place via one more of the nation’s MLS services.  And, for buyers looking for a “good deal” on just the “right home”, the local MLS is easily the best place to find it.

Is every home listed with the Realtor® owned MRIS a great deal? Of course not.  Of the approximately 2,000 homes listed for sale in Howard County at any given time, plenty of them are overpriced. However, plenty more are listed at very attractive prices. Virtually all Howard County “short sale” homes and/or bank-owned foreclosure homes are listed on the MRIS.

When a bank owns a home and needs to get rid of it quickly, or when any other highly-motivated seller needs to sell, their #1 choice is to list with a Realtor® who has access to the MRIS.  The overwhelming majority of “bargain” homes for sale in Howard County can be found on the MRIS.

In fact, we have a recent software enchancement that allows you to do a targeted search just for ”bank-owned” properties! Contact us by phone or email about this exciting new tool!

So, How Do You “Spot” The Good Home Deals?

If the MRIS is a mixture of Howard County home bargains and over-priced homes (and it is), how do you “spot” the bargains?  That partly involves “Recognizing Value“, an earlier blog entry, and partly involves “Negotiating The Best Deal”, our next blog entry.

How Can YOU Access The MRIS? 

ONLINE (LIMITED) ACCESS.  As a consumer, since 2001,  you have been able to get partial access to the MLS over the Internet.   Not all consumer MLS sites are equal. Sites vary in terms of how much information is offered (e.g. some offer street addresses of homes, some don’t), how current the information is (some are updated instantly, others not for weeks), and whether or not the user is required to “register” in order to perform a search.

For maximum consumer access to Howard County homes online click here.

FULL (REALTOR) ACCESS. To gain full and complete access to the MLS, and to actually tour the inside of properties, you must work with a local Realtor®.  State law requires a real estate agent to disclose to you in writing whether or not they will work for you as a “buyer’s agent” (protecting your best interests), or “seller’s agent” (working for the seller’s best interests).  Typically the Realtor®’s fees are paid by the seller of the home you purchase, not by you. 

As a home buyer you should clarify, upfront, with your agent whether or not they will work as a “buyer’s agent” and whether or not you will be expected to pay the agent’s fee.  It would be wise to ask for references, as well as to inquire about the agent’s prior real estate experience.

This is the second in a series of short articles on Howard County Maryland’s real estate market from the buyer’s viewpoint. For other articles see: How to Value A Home (Recognizing Value); Finding Great Deals – Auctions & Foreclosures; Finding Great Deals – FSBO and Short Sales; Finding Great Deals – Realtor® MRIS; and How To Negotiate A Great Deal.

FINDING Great Deals – FSBO and ‘Short Sales’

Where is the best place to look for a great deal on a home in Howard County today? For sale by owner? Auction or foreclosure? “Short sale”? Word-of-mouth? The Realtor® owned multiple listing service, MRIS? Let’s review each.

Homes “For Sale By Owner”

The National Association of  Realtors® tracks homes sales all across the country. Of homes offered for sale “by owner”, fewer than 18% actually sell.

One reason is limited marketing – individual owners don’t have the experience or money to market their home as well as an army of local Realtors® can. And, unlike the Realtor® MRIS system, there is no single, reliable source for all ‘by owner’ listings.  Newspaper ads are hit-or-miss, and ‘by-owner’ websites are notoriously out-of-date, being both over- and under-inclusive (they continue to post ‘by owner’ homes that have gone off the market or have been listed with a Realtor®, and they fail to include a majority of ‘by owner’ homes that currently are for sale).

A second reason most ‘by owner’ homes don’t sell is because they typically aren’t staged or priced well.  Most owners tend to have biased view of their own home, and often ask too high a price while at the same time taking too little care to ‘spruce up’ or “stage” their home for the market.

Can you ever find a good deal on a “by owner” home? Sure. One reason is that, on the rare occasion when a home actually does sell “by owner”, 42% of the time it’s between family members and/or close friends, according to the National Association of Realtors.

Even if you don’t know the owner, you can sometimes negotiate a good price with a ‘by owner’ seller. But, if you are not experienced in negotiating purchases in the hundreds of thousands of dollars, you may wish to allow a Realtor® to act as your buyer’s agent. Not only can a buyer’s agent protect you in preparing contract papers correctly, they can also arrange to have expert professionals inspect the home for problems. And, more often than not a good buyer’s agent will be able to negotiate a better deal with the owner than you could yourself.

So – if you have a family member or close friend selling their home, “by owner” may be a good way to find a “good deal” on a home. Generally speaking, though, you are far, far more likely to find 10 good deals on the Realtor® MRIS system than to find just one good deal “by owner.”

(For the most complete Howard County home search – ‘by owner’ AND Realtor® listed homes – click here).

Howard County “Short Sales”

Short sale defined: a lender allows a property to be sold for less than the remaining balance on the mortgage loan, forgiving the unpaid remainder.

In the typical sale only two parties must agree on price and terms: buyer and seller. But, in a short sale a third party – the seller’s lender – must also agree to the terms of sale.  (Bankrate.com has a simple and clear article on the short sale process here).

Suppose a home is worth $375,000, the current owner owes $400,000 and costs of sale will be $28,000 – meaning the owner is “short” $53,000 from being able to sell ($375,000 value, less $28,000 sale costs, is $347,000 or $53,000 “short” of the $400,000 mortgage balance). If the owner is cash-flush he can sell the home for less than the mortgage amount, and pay the difference ($53,000) in cash.

However, in today’s market a lot of owners owe more than their homes are now worth and they don’t have any assets to pay the difference. In such cases, the homes can only be sold if the lender agrees to a “short sale”, agreeing to accept less than full payment on the mortgage.

Why Would A Lender Agree To A Short Sale?

When a home owner gets in financial trouble the lender has no good options. If they agree to a short sale the lender will “lose” thousands on the unpaid mortgage amount. However, foreclosing on the homeowner isn’t must better as the lender will likely lose the same amount on the unpaid mortgage amount and will also have to pay the legal costs of a foreclosure. And, a foreclosure can add months and months of delay, which a lender will want to avoid. Agreeing to a short sale is often the lesser of two evils.

How Do You Find Short Sales In Howard County?

Virtually all short sales can be find via the Realtor®-owned Metropolitan Regional Information System (“MRIS”). It’s simple. Lenders who agree to a short sale want the home sold as quickly as possible and they will always choose to market short sales through a Realtor® who can “list” the home on the MRIS.

What Are The Benefits, And Risks, Of Buying A Short Sale?

The benefit of buying a short sale home is that it can be offered at an attractive price. (However, this is not always true, and just as often a “normal” sale may be offered at an equally or even more attractive price than many short sales).

The downside of buying a short sale is long delays and complicated paperwork.

Suppose a home is offered for sale at $375,000 and you want to offer $360,000 with $5,000 back for closing costs. An individual seller will give you an answer typically within 24 hours. However, in a short sale you are dealing with a “committee” at a bank, often at a distance of thousand of miles. You easily may not get an answer back for literally weeks.

And, even when you do get an “answer”, it may be simple a request that you submit additional paperwork. In a short sale the paperwork is much more complicated and it is easy for an inexperienced agent to neglect an important detail. So, you can make an offer, wait 2-3 weeks for an answer, and be told “we need document X completed plus two info on two additional comparable sold homes.” You may not hear a real response for an additional 2-3 weeks.

Any Realtor® who has access to the MRIS can help you find short sale properties. However, the process of actually buying a short sale can be somewhat ugly unless your agent is experienced in such matters.

Questions/comments? Please email me.

This is the second in a series of short articles on Howard County Maryland’s real estate market from the buyer’s viewpoint. For other articles see: How to Value A Home (Recognizing Value); Finding Great Deals – Auctions & Foreclosures; Finding Great Deals – FSBO and Short Sales; Finding Great Deals – Realtor® MRIS; and How To Negotiate A Great Deal.

Howard County’s Best Home Deals – Part 2

(FINDING Great Deals – Auctions & Foreclosures)

Where is the best place to look for a great deal on a home in Howard County today? For sale by owner? Auction or foreclosure? “Short sale”? Word-of-mouth? The Realtor® owned multiple listing service, MRIS? Let’s review each.

Howard County Real Estate Auctions

There are two types of “auction” sale – absolute auction, and reserve auction. In an absolute auction the property shall be sold to the highest bidder, regardless of price. In a reserve auction, the seller retains the right to not accept any bids if he feels the price isn’t high enough.

The word “auction” induces strong emotions in buyers, making them think a bargain can be had. However, most private auctions are of the “reserve” variety. Unless you see the actual words “absolute auction” in the ad, assume an auction is a reserve auction, where the seller can turn down all offers if his or her bottom-line price isn’t met.

Since most private auctions are “reserve”, or non-absolute, the net outcome is often the same as any other means of sale: if the seller’s bottom line isn’t met, there is no sale.  Such auctions are simply a colorful method for a seller to “market” her home.

Howard County Real Estate Foreclosures

A foreclosure sale is the end of a legal process by a lender against the homeowner/mortgagee to seize a home for non-payment of the mortgage. In Howard County foreclosure auctions typically take place on the steps of the Howard County Circuit Court, Court Place & Park Avenue, Ellicott City. Foreclosure auctions are always “absolute auctions” (see above).  In Howard County real estate foreclosures are advertised in the Howard County Times, which is the newspaper of legal record for the county.

When people refer to “buying a foreclosure” they may mean either buying live at the foreclosure auction (being the successful, high bidder); or they may refer to buying a home after it has been foreclosed upon (buying from the successful bidder).

Buying A Previously Foreclosed Upon Home

Buying a home that has previously been foreclosed on is usually not that different from any other home purchase.  Whether the home went through foreclosure with HUD, VA or a private lender, such homes are nearly always listed with a Realtor® and listed for sale on the Realtor MRIS system.

Homes previously foreclosed on can be located, and purchased, pretty much the same as you’d purchase any other home – except for the fact that the home went through a legal/financial “cleansing” process called foreclosure.  Sometimes these homes are very well priced compared to the rest of the market, but just as often (and stupidly on the foreclosing bank’s part) these homes are often offered for sale at a price well above the rest of the market.

Buying a previously foreclosed home is like like buying a previously owned car from a car dealer – often you wouldn’t know, or care, if the former owner had had their care repossessed or not. All you care about is the overall condition and price of the car as compared to the rest of the market.

Most of Howard County’s previously foreclosed homes can be found at this site.

Buying Real Estate At A Foreclosure Auction

Lawyers.com says this: “Buying at a foreclosure auction is the riskiest way to purchase foreclosed property, and shouldn’t be attempted by a first-time buyer.”  If you are a “normal” home buyer who intends to buy a home to live in it you should almost certainly avoid buying at a foreclosure auction for three reasons: (1) risk; (2) financing; and (3) price.

Buying a home at foreclosure home is risky. You must put up, in cash, 10% of the auction sales price at the close of the auction, and you will forfeit this money completely if you fail to get your purchase loan or fail to settle for any other reason. Also, you are NOT allowed to make your purchase contingent on a professional home inspection – and often you aren’t allowed to even inspect the home yourself prior to the auction.

Financing an auction purchase can be difficult. Often these properties are in severe disrepair and banks are reluctant to loan money on them, especially in today’s market. There is a good chance you won’t get financing (and lose your 10% deposit), and/or will have to pay a higher price for financing.

Finally, the cost of buying at auction is higher than you would think. First, most foreclosing lenders require you to pay both buyer’s and seller’s share of transfer and recording taxes – adding an extra 1% to the sales price. Also, you are required to pay ALL expenses beginning the day of the auction (interest on your bid amount, property taxes, utilities), even though you won’t get actual possession for usually another 4 – 6 weeks. And, since you haven’t been able to inspect the property prior to auction, you must assume it is in poor condition and requires extensive repair.

Given the added costs and risks of buying at foreclosure, a home would need to sell for a minimum of 15% below “market value” in order to be a decent deal. Your blog host has attended dozens of Howard County foreclosure auctions, and typically the sale prices exceed that amount. (Either because an inexperienced buyer is bidding, or because the foreclosing bank is bidding the full amount of their mortgage, which exceeds the value of the home).

In short – while it is possible in the best of circumstances to “get a deal” at auction and save tens of thousand off the price… it’s far EASIER to lose tens of thousands buying at auction, especially for the inexperienced.  These types of purchases are therefore far more suitable to experienced (and well funded) investor, who can afford to lose thousands in the hope of making thousands.

As per usual, Email John Toner if you have any specific questions I could help with.  Blessings!