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Are Foreclosures Good Deals?

February 20, 2013 By Rick Jarvis

It depends.

 

According to the statistics below, since 2011, in suburban Richmond, the REO market (Real Estate Owned by banks)  accounted for roughly 5.6% of the market (228 of 4,028 sales) and traded at an average of nearly 15% lower ($114/SF to $97/SF), respectively.

 

 

 

If this $16/SF difference is viewed in the context of a 2,500 SF home, then the average price difference is $40,000.

 

Is that enough?

 

It has always been a buyer tendency to over-estimate the cost of repairs.  People that walk into a home that is in need of paint, flooring, appliances and light to medium drywall repair and feel put off by the repairs.  “If the naked eye can see the items in the home that are in need of repair (they reason) then what CANNOT be seen is something that will bite them later.”  It is a legitimate fear but one that is often over-estimated and thus, REO property gets discounted more heavily than non-REO property.

 

Does that mean that you should seek REO property?  This doesn’t suggest that you should or shouldn’t but it does suggest that REO property is treated differently than non-REO property.  It also gives insight to the bank’s view of the property they own and their expectation of the value at which they should sign an offer.

 

The following list contains primarily suburban REO property that is priced between $200 and 800k.  The information on this site may lag up to 48 hours as do all IDX search sites.

 

Contact us at 804.201.9638 (our call policy) for an up to the minute/real time list of all distressed property.

Richmond’s Hottest Zones

January 30, 2013 By Rick Jarvis

Calling All Sellers!

The last two sales in the Fan District that we have been involved with both resulted in multiple offers…and when we say multiple offers, we mean 5 (or more) on a home.  And, no, this is not a reprint of an article from 2007.

How can this be?

The best way to think about the market right now is that there are two markets for housing, both operating concurrently and both behaving in radically different manners.  These two markets can exist almost adjacent to one another and are barely distinguishable from the other one.  The only way you can tell one from the other is by the result…immediate sale or extended days on market with no offers.

The first market, the RED hot one, is the market for “GOOD Housing.”  GOOD Housing can be defined as well designed, well maintained, fairly priced and in areas whose supporting amenities (schools, walkability, culture, architecture, history, shopping) are superlative.  Another characteristic is the inability to provide any new inventory (or at least very limited ability) to the market.  Richmond’s Fan District, Richmond’s West End (Westhampton, South of Cary, Libbie/Grove, Bellevue and West Ginter Park) all share these characteristics.  Many of these areas, at the upper-middle to lower-middle price points, are in the throws of a full on recovery.

The market that is struggling is the market for “BAD Housing.”  Homes that are poorly maintained, in poor school districts or located in areas where the amenities have not caught up to the residential development or where there are new homes being built on lots bought from banks at a sever discount, are struggling.  Sometimes what puts the home in the BAD category is a pricing or condition flaw.  Other times, it is a flaw that cannot be easily remedied.

It is imperative that the sellers and buyers recognize which side of the market they are on.  Expecting to buy a quality home that is new to the market requires quick action and a strong offer.  Selling a home with a flaw based on the anecdotal evidence of a friend or co-worker having a bidding war for their home is also a flawed strategy.

Price per Square Foot | A Critique

January 23, 2013 By Rick Jarvis

sfThe most important thing to remember about price per foot is that it is not linear.

The next most important thing to remember about price per foot is that it is not linear.

What do I mean?

Just because a 3,000 SF house is worth $400,000 does not make a 6,000 SF house worth $800,000 or a 30 SF house worth $4,000.

So often, people get hung up on price per foot as the absolute gospel when it comes to house valuations.  Price per foot, while a tool that can be very insightful when applied correctly, tends to act as a point of contention to ‘price per footists’ when the price for a home exceeds the price per foot within a neighborhood.  For whatever reason, a price per foot average within a neighborhood tends to drive decisions far more often that it should.

Here are things to take into account:

  • For price per foot to be at its most effective, lot prices, finishes, age, materials and other features (garage sizes, basements) must be very similar.  Examining homes in the same suburban neighborhood with similar features will be a good use of $/SF.  Using it to compare a brick ranch built in 1957 to a colonial built in 1987 is not the right use.
  • Comparing a home with a finished 3rd floor or basement against a home with unfinished areas is wrong.
  • Comparing home built prior to 1940 or so is really not a good idea as time has really eroded the accuracy of the measurement.
  • Using $/SF to compare different builders is also an issue.  Buying a home built by Ryan because it is cheaper by $10/SF than Boone is a very flawed decision.

I like to use $/SF as tool in the following manner:

  • $/SF can be used to establish neighborhood minimums and maximums.  This needs to be looked at in companion with aggregate sales prices in the neighborhood.  In other words, if a neighborhood has a average $/SF of $160 but a maximum price of $300,000, then be careful of a home that is 2,000 SF priced at $360,000.
  • $/SF works really well in new construction within the same neighborhood.
  • $/SF is a helpful tool in renovation or addition properties.  It can help the decision process greatly.
  • $/SF is helpful when it benefits you and a pain when it does not.  I use it to defend appraisals and listing prices or to argue down pricing for my buyer clients.

When the dust settles, using $/SF to make a decision is a bad idea.  When it is one part of an overall analysis, then it can be powerful.

We Bought an Office!

December 30, 2012 By Rick Jarvis

2012-12-11 12.16.07We recently closed on 2314 W Main Street as the future home of One South.

Sometimes known as the Richmond Kickers Building (as it was at one time the home of the soccer team and the mural on the side and front are well known), it is an 8000 SF warehouse that is being renovated into our new home.

When complete, we will have 4500 SF dedicated to office use and 5 apartments.

 

Buying for the Student – The VCU Housing Options

September 4, 2011 By Rick Jarvis

VCU housing
The TriBeCa Brownstones were built on land close to VCU and many were purchased by a parent for their child as a dorm alternative.

The Best VCU Housing Option – Buying a ‘Dorm’

I would like to offer the following debate to the parents of VCU students and their Medical School counterparts who are coming to Richmond this summer (or who have already arrived) and who need to make a decision about VCU Housing…

You should buy a house or condo.

Now I understand that my position on this is not without bias. I am a Realtor who sells a lot of property in and around both the VCU Campus and the MCV/VCU Health Systems Campus. It benefits me when you buy. It does not really benefit me when you rent. I am now done disclaiming my conflict of interest.

That being said, it does not mean that I am wrong about what is the most prudent decision regarding VCU housing options.

I am not going to give you the rent vs. buy calculator argument because we (Realtors) can all tweak the numbers until we can get it to show what we want it to. Depending on inflation, appreciation and tax effects, I can get one of those things to spew out some amazing numbers. Those are interesting tools and they have their place. This is not a debate for the rent vs. buy calculator.

My argument is more macro in nature and relates to the following set of circumstances:

  • Prices are down 20-30% depending on your market and asset type
  • Interest rates are being held down (somewhat artificially) by the Fed and are still hovering around 5%.
  • College tuition and college room and board is going up despite the rest of the economic world moving the other direction.

Renting a property for roughly $1.30 per SF per month (which translates to about $1,200-1,400/mo for the typical 2-bedroom apartment in City of Richmond in or around the VCU campus) or buying a property for about $190-210 per square foot yields about the same monthly cash payment at the end of the day.

Which one gives you some upside? It is pretty obvious that buying has the promise of upside.

I know that the counter argument is simply that many are not sure that the pricing declines behind us.

The facts are as follows:

  • On January 1 2009 there were over 400 condos for sale in Richmond, VA
  • On January 1 2010 there were less than 200 condos for sale in Richmond, VA
  • On January 1 2011 there were still roughly 200 condos on the market in Richmond, VA.
  • No new projects have come to the market since the adjustment in 2008.
  • Inventory in 2013 has been somewhat constant hovering around 100-130 units on the market at any one time

Life, at least financial life is about managing/pricing/understanding risk. Betting large sums of money on risky endeavors with no upside is not smart. Betting medium sums of money with a low cost-of-capital in a market that has balanced itself with no competition coming on line sounds like a pretty decent bet to me.

Don’t let the national media scare you off. While extremism and negativity sells, I have yet to see report on the college-driven housing market on 60 Minutes. As a matter of a fact, the student housing market is one of the healthiest housing sectors in the market and owning a home that is underpinned by a rental option to students is a way to remove a great deal of risk from the equation.

If really do have a VCU housing decision in your future, lets discuss the options.

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I am Kendall C. Kendall, Client Care Coordinator for the team. I am a licensed Realtor and it is my job to answer questions and schedule showings for the properties shown on our sites. Here's our call policy.

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Working With Buyers

I am Sarah Jarvis, Broker at One South and I work with our buyers. I bring 20+ years of experience to our Buyers Advocacy program and take great pride in helping our clients understand the RVA marketplace.

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From the Blog

The Making of an American Farmhouse — Walnut Hill, Rockville VA

Periodically, you get smitten with a neighborhood, and Walnut Hill in the Rockville area of Western Hanover County tends to have that effect on people. Walnut Hill is pretty close to what most are envisioning when they imagine a classic neighborhood in a rural setting. With extremely large lot …

[Read More...] about The Making of an American Farmhouse — Walnut Hill, Rockville VA

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