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The Shadow Inventory(s): What Banks are Hiding in the Stockton Real Estate Market

As I wrote yesterdays Blog update I knew that what I had been seeing first hand in the Stockton Real Estate Market was something that has never been seen before.  Not even in the late 1970’s and early 1980’s, the last time we saw the real estate market crash did we see such a devastation of the real estate market as it is manifesting today.

In the 1970’s and 1980’s we didn’t have government intervention under the guise of compassion, meddling in the housing or banking markets. Back then the Market was allowed to work and by virtue of no intervention, the market took care of the bubble that burst.

Sure we were in a deep recession, unemployment was at 7%, inflation was out of control, interest rates hit all time highs and credit was tight, but back then there was NOT a shadow inventory of foreclosures to exacerbate matters. Back then the rules were simple. When you were 90 days behind on a payment you were in foreclosure and if the mortgage remained unpaid a notice of default was sent out and the house went up for auction. As such, the house became a part of the general real estate market and landscape and was liquidated.

Did real estate values drop? Yes, but the market was allowed to do its job and the market absorbed them and there was no protracted and artificial “shadow inventory” of houses that no one knew about.

So what is this “shadow inventory” of houses that everyone refers to? The conventional definition is simple and refers to the houses that are technically in default (meaning mortgages that are 90 days past due), but no notice of default has been issued by the bank and as such no auction date has been set.

Today there are actually two “shadow inventories” that are dooming the Stockton Real Estate market to a protracted recovery.

Shadow Inventory I:  This is the “Shadow inventory” that everyone refers to in today’s housing market. They are the houses that have yet to be foreclosed upon. These are the houses that the banks have not collected a mortgage on for upwards of 36 months. Since the banks have not yet foreclosed on these houses they are sitting as an unknown number of houses that have yet to reenter the market place. As such they are either being lived in rent free by the current mortgage holder or a renter that is paying the Mortgage holder while the mortgage goes unpaid.

This is all occurring, thanks to “new and more compassionate government policies” that some would call government intervention and manipulation that has virtually changed the banking rules. These new rules have made it easier for banks to hide unpaid mortgages on their books, and since Banks are not required to foreclose according to any particular time frame, that means that they can carry unpaid mortgages apparently as long as they chose to do so. As a result, the market cannot deal with this inventory until the bank actually forecloses and acknowledges the bad debt.

Shadow Inventory II: The second “shadow inventory” that no one is talking about are all of the houses that have been foreclosed upon but have dropped out of the market because they did not sell. Every month I see hundreds of withdrawn or expired listings of Stockton real estate that is Bank owned that have disappeared from the real estate market. The only reminder that these houses exist is denoted at the bottom of a comparable market analysis while attempting to research another property in the neighborhood.

In the Stockton Real Estate Market alone there are hundreds of these houses that have been foreclosed upon, that have not been sold and are NOT currently listed for sale by the Bank directly or in the Realtors Multiple listing Service. Most of them are vacant, boarded up and in such a state of disrepair that they make up a huge second “shadow inventory” and they are contributing to dropping home values in Stockton.

It is estimated that Americans have lost close to $7 Trillion in home values and equity over the past four years and I don’t expect that we have hit the bottom. While many are projecting a real estate recovery in 2012, I don’t believe it so long as the supply of foreclosed properties is hidden and excluded from the market itself.

Brace yourself as home prices in Stockton Real Estate will continue to tumble.

Peter Westbrook is the owner of Westbrook Real Estate Investments and can be reached at 209-481-7780 or peterw@westbrookrei.com. If you have an unwanted house you can call Peter directly or visit http://IBuyHousesStockton.com

 

Stockton Real Estate Prices Continue to Tumble on word that 25% of Houses are Underwater

The fact that Stockton Real Estate Prices Continue to Tumbleis not nearly as shocking to me as it is concerning. Homeowners in Stockton are continuing to

lose value at a pace that cannot be controlled by anything that they can do. So what is a homeowner in Stockton Real Estate Market supposed to do as they watch what may be their largest single asset continue to lose value?

With the release of the latest “housing market” report earlier this week, news that 25% of all homeowners in America are underwater on their mortgages, just underscores how volitile the Stockton real estate market is and why house values are continuing to take another dip that mirrors the overall economy.

Americans as a whole lost over $7 Trillion in home value since 2007 and in Stockton Real Estate the numbers compared to the national average are much worse. This coupled with the ever increasing numbers of foreclosures that have been slowly released each month has placed tremendous downward pressure on the Stockton Real Estate and housing market. and home values.

These numbers however do not include the Banks “Shadow Inventory” of foreclosures of houses that the Banks have yet to foreclose on even though some homeowners have not made payments for two to three years. When added in you get a much bleaker picture and begin to understand that while individual Homeowners maybe underwater, the entire Stockton Real Estate Market appears to be flailing and may be actually be gasping for its last breath,

 You have to ask your self… how can the market go any lower? But the real question is; “How can the Stockton Real Estate Market recover if it isn’t allowed to hit bottom”? If the banks wont foreclose, and by not doing so, they prolong the inevitable, how many years can the Stockton Real Estate Market endure more of the same?

So when will this all end? When will the real estate market recover? If you listen to the so called experts, it was supposed to have happened in 2010 and 2011. Is 2012 the magic year?

The truth is that the Stockton Real Estate Market will not recover until all of the foreclosures including the shadow inventory are released to the market.  There is no way that a recovery can occur until “the market” can deal with the glut of houses” one at a time. Until then, don’t hold your breath for any improvement or an uptick in Stockton Real Estate Prices.

Every month I evaluate close to 100 properties that are for sale for one reason or another and every month I see firsthand how Stockton real estate is continuing to drop in value. I see houses that just two or three months ago were evaluated by comparing similar houses sold within one quarter mile in the last ninety days drop in value even more when the latest month’s home sales are factored into the equation.

The truth is that Sales of houses in Stockton over the past the past 90 days are offering no encouragement and its clear that nearly 25% of all of the houses that are sold are bought by real estate investors and they are paying cash

So, while it may not be the best time to sell that unwanted house in Stockton right now, don’t expect home values to all of a sudden turn around or gather some upward momentum either.  The other thing that you shouldn’t expect is any sympathy or leeway from the City of Stockton’s Code enforcement department as they are citing more and more vacant and unwanted homes in record numbers for repair and maintenance issues.

It is no secret that the cost of holding onto Stockton real estate is getting higher and higher when you add in falling rental values, increased cost of maintenance, homeowners insurance, property taxes and unpaid code violations that turn into liens against your property.

The truth of the matter may be that for your particular circumstances, NOW is the BEST time to sell that unwanted house and get whatever cash value remains before that too gets eaten up by fines, fees, taxes and damage caused by lack of maintenance or worse yet bad tenants.

If you have an unwanted house in the Stockton Real Estate Market, then I encourage you to call me to get a free market analysis and cash offer for your house. The worst thing that can happen is that you get a true understanding of what your house is worth in today’s Stockton Real Estate Market.

My name is Peter Westbrook and I Buy Houses in any condition. I can be reached at 209-481-7780 or my email address is peterw@westbrookrei.com.

Stockton Real Estate News: Things that do NOT make your House More Valuable in Stockton Anymore.

 

I spend a lot of time evaluating Stockton Real Estate, you might say it’s my passion, but it’s also what I do for a living. As a Stockton real estate investor in Stockton, I look at approximately 150 to 300 properties each month and some things, as much as you would like them to, don’t increase the value of your house.

In fact, I can say with certainty that the number one reason that a houses diminished value goes hand in hand with its current condition.

In fact, ignoring the most needed maintenance and repairs to a house will actually get more expensive as time goes on. It is also safe to say that when houses are left in a state of disrepair for a period of years rather than days, weeks or months, other serious damage and problems arise that also cost serious money to fix.

So, while I make a living buying and fixing real estate, it never ceases to amaze me that some people think property values are virtually unaffected by their houses current “as-is” and often awful condition.  It also seems to shock them when I tell them that their houses value has more to do with its current as-is condition then probably anything else and that potential has no cash value to an investor.

So I have learned three things as a Stockton Real Estate investor:  1) I am not a speculator, I am an investor, so I make cash offers on Stockton Real Estatefor real value not potential value, 2)When people call me with problem houses, I always ask if they have talked with a Realtor regarding their properties value (I’d rather not be the messenger that gets shot) and 3) I tell them that I buy houses based on their houses current condition MINUS repairs.

 

So, while your Stockton house may have sentimental memories and value for you, it may be a serious challenge for me to make you an offer knowing that your house is in serious need of repair. It may also be a serious challenge for you to hear exactly what I have to say, but what the heck, I will make you an offer as long as you realize that the following list will not make your house more valuable.

Holes in the wall: It doesn’t matter who made them

The Indoor laundry Room with virtually no outside wall:

The cracks and holes in the foundation:

The Dry Rot supporting the New Bathroom tub:

The Blue Tarp covering the 50 year old Roof that needs to be replaced:

40 Year old windows with holes and counter weights:

The Kicked in and rusted out Front Security Door: Curb Appeal

The Fact that the house is on a double lot in Central Stockton:  The original house was built in 1946, if no one has built on the extra lot by now… they never will.

The 10 year old leak under the Kitchen sink:

Pad Locks on each of the bedroom doors:

Pad locks on each of the Kitchen Cabinets:

Electrical Panels and Junction Boxes with 50 year old fuses:

It’s no secret, as an Investor in Stockton, I get to see it all, but I also understand that I am not the person of first resort when it comes to buying a property that needs a lot of work. I am the person of last resort, as people call me when they need to sell a house that NO ONE ELSE wants to buy.  People call me when the realtor scratched their head because they don’t know how to show the house in its best light.

Lets be clear, people call me when they want to sell their unwanted Stockton House quickly and without having to clean up or make repairs. People call me when they want Cash for their house now.

My name is Peter Westbrook and I buy Houses in Stockton in any condition. I Pay Cash and I can close quickly. Call me at 209-481-7780 and I will talk to you personally.

Stockton Real Estate Listing: 4178 E Sixth St, Stockton, CA $27,500.00

Stockton Real Estate Listing: 4178 E Sixth St, Stockton, CA $27,500.00 As Is

The 1000 square foot House needs a lot of work work but the end result would be a great investment property at a great price. I am in the provcess of rehabbing this house so each week the price will climb. I expect that when we are done we will list this house for $55,000.00

The bedrooms are large and have a large Bathroom in between.

The lot is small and there is no back yard but the side yard is large enough to be fenced with lots of potential

After Repair Value: $78,000.00

Owner willing to carry some financing.

Call Westbrook Real Estate Investments at 209-481-7780 for details and showings:

Owner willing to complete repairs for right buyer.  Price listed is for Cash Buyers.

Postlets Listing:

Stockton Real Estate Listing: 1603 E Worth St, Stockton, CA $48,500.00

This 4 Bedroom 2 Bath house was Built in 1946 is located in a great neighborhood in the heart of East Central  Stockton.

The 1367 square foot House needs work but the end result would be a house at a bargain price even by today’s standards.  Rent in this area would be close to $1,100.

The bedrooms are large and have a large Bathroom in between. The second Bath is located in the Master bedroom with plenty of space.

There is a large attached Garage with plenty of room for storage.

The back yard is large and fenced with lots of potential

Owner willing to carry some financing.

Call Westbrook Real Estate Investments at 209-481-7780 for details and showings:

Owner willing to complete repairs for right buyer.  Price listed is for Cash Buyers.

After Repair Value:  $83,000.00

See Postlest Listing:

Stockton Real Estate Listing: 737 E Fifth St, Stockton, CA $49,500.00

This 2 Bedroom 1 Bath house was Built in 1946 is located in a great neighborhood in the heart of South Stockton.

The House needs minor cosmetic updates but has been lovingly maintained.

The Kitchen and attached Breakfast area are spacious and could do with a few cosmetic updates, but they are not required.

The bedrooms are large and have an updated large Bathroom in between. This house with its intuitive layout has plenty of space for living.

The back yard is fenced and has been well kapt with a garden and lots of Fruit trees. It has an old BBQ pit area that could be rebuilt and a ton of potential.

Owner willing to carry some financing.

Call Westbrook Real Estate Investments at 209-481-7780 for details and showings:

Owner willing to complete repairs for right buyer.  Price listed is for Cash Buyers.

After Repair Value: $65,000.00

See Postlest Listing:

Stockton Real Estate Listing: 2261 E Vine St, Stockton, CA $58,900.00

This 4 Bedroom 1 Bath house was Built in 1946 is located in a quiet neighborhood in the heart of East Central  Stockton.
The 1610 square foot House used to be a duplex and can be converted back with a little work. The House needs mostly cosmetic  work but the end result would be a great rental that could bring in as much as $1700.00 month.  

 

The bedrooms are large and have a large Bathroom in between. The second Bath is located in the Master bedroom with plenty of space.

The lot is a double lot and almost a quarter acre so the backyard is very large and fenced with lots of potential

Owner willing to carry some financing.

Call Westbrook Real Estate Investments at 209-481-7780 for details and showings:

Owner willing to complete repairs for right buyer.  Price listed is for Cash Buyers.

After Repair Value: $85,000.00

 

Stockton Real Estate Listing: 302 E Hampton St, Stockton, CA $38,500.00

Offered by Westbrook Real Estate Investments, this 2 Bedroom 1 Bath house was Built in 1914 is located in a great neighborhood in the heart of Stockton.

This is an Investors Dream as the House needs work but it is mostly cosmetic.

The Kitchen and attached Breakfast Nook are spacious and with a few cosmetic  updates and repairs it could be a cooks dream.

The bedrooms are large and have a Jack and Jill Bathroom in between. A door from the living room could easily be installed giving whole house access.

The back yard is fenced and has a ton of potential.

Owner willing to carry some financing.

Call Westbrook Real Estate Investments at 209-481-7780 for details and showings:

Owner willing to complete repairs for right buyer.  Price listed is for Cash Buyers.

After Repair Value: $85,000.00

View on Postlets:

 

Buying Stockton Real Estate is all about your ability to “Show Me the Money”

If you want to sell your House or unwanted property in the Stockton Real Estate Market it’s important that you do your homework. If you want to sell that house for cash and quickly it is important that you find someone that can perform.

Likewise, if you want to be a successful Real Estate Investor in Stockton you better be able to close the transaction, because in the end and at the closing date, reputation and cash in hand does matter.

All too often, Stockton Real Estate Owners and Investors in Stockton forget that performance means being able to write the check for closing and sometimes that is a delicate balancing act that can cost you time, your reputation, money or worse all three. 

We have all seen the signs and advertisements that say “I Buy Houses” or “Private Party Pays Cash for Houses”, but the real question is can they finish what they started? This is probably the single most important question that a homeowner should ask prior to signing any Purchase and Sales Agreement with any Stockton Real Estate Investor.

At Westbrook Real Estate Investments, we say don’t just ask, tell them to prove it.

Does this mean that Investors in the Stockton Real Estate Market cannot be trusted? The answer is Not at all, because there are several that can be trusted, but just because you are seeking to sell your unwanted property to a Private Party does not meant that you don’t have to do your homework or that you can’t ask them to prove to you that they can actually buy your house. If you want to sell your house fast especially in today’s Stockton Real Estate Market, just say “Show me the Money!”

As a Homeowner you have to be realistic, Investors just like Realtors have all gotten into situations where they over commit to time frames and for successful Real Estate Investors in Stockton it does come down to timing and to be able to perform.

As Investors we make offers on a lot of properties and we don’t have a crystal ball to let us know which ones will be accepted at any given time. In my experience if I make 30 offers I know that one or two of them is going to be accepted within the first 30 days. As such I need to plan my cash flow accordingly and be ready for that third or fourth offer to pop up unexpectedly as accepted at the worst possible time.

Being prepared means that as an Investor you need to have at least 2 tools in your financial bag to perform; 1) multiple sources of investment dollars to be able to close quickly or unexpectedly and 2) knowing the multiple exit strategies for the properties that you buy because it creates flexibility in your ability to fund the transaction.

Without these to components, Stockton Real Estate Investor cannot look a seller in the eye and say for certain that they can close their transaction on any given day. Sound scary? It isn’t meant to be because there are plenty of Real Estate Investors in Stockton that can perform. We are just saying that there are just too many variables and we all know that we can’t buy every property that comes across our plate. So as a Homeowner ask your Real Estate Investors the Hard questions. Ask them for proof of performance. Don’t let their calling card be the only credential that they need to carry. MAKE THEM BACK IT UP WITH EVIDENCE!

So why do Homeowners just assume that an Investor will perform without providing any evidence that they can do so? Why is it that one out of every 100 homeowners I talk to will even ask me how I can guarantee to them that I will be able to buy their house? Seems silly, but its True! 99% of Homeowners will NOT ask that question and they should.

If you are a Homeowner in the Stockton Real Estate market and you want to sell your house quickly to an investor ask for two things to insure their ability

to close. 1) Proof of Funds and 2) References

Proof of Funds:

Any Real Estate Investor should be able to provide you with a letter from a financial institution that guarantees a source of available funds. If they can’t provide that don’t consider selling your house to them PERIOD.

References:

All Real Estate Investors should be able to come up with one or two references including Title Companies that they have successfully worked with to close their purchases. If they cannot or will not provide them then find another investor to buy your house. Heck Call Me at 209-481-7780.

While selling a house in Stockton or any other Real Estate Market is not rocket science, it does come down to being able to hold your Investors feet to the fire. Ask the hard questions so that you know what to expect when the date of closing arrives.

Tell them to Show you the Money!

If you have an unwanted House in the Stockton, Sacramento or Modesto Real Estate markets and you want to sell it fast and get a cash offer, Call Westbrook Real Estate Investments at 209-481-7780 and Peter Westbrook will talk to you personally.

Stockton Real Estate News: Stockton Code Violations Plague Vacant Houses

Code Violations Lead the Way in the Stockton Real Estate Market to Keep Vacant Houses under control.

The City of Stockton has very few tools in its box when it comes to forcing Stockton Real Estate Owners to cleaning up an unwanted

or vacant house, but the one with the most teeth seems to be the issuing of a “code violation”. While code violations are not new, the number of recent code violations issued to vacant houses that dot the Stockton Real Estate landscape and neighborhoods is overwhelming.

Certainly homeowners of Vacant houses in Stockton have always has their share of challenges, with squatters and vandalism, but now the City of Stockton has upped the ante by adding another financial burden in the form of fines and fee levied through Code Violation citations and they and their potential cost are no laughing matter.
If your vacant house in Stockton, is strewn with debris and garbage, has overgrown grass or weeds, trees that are dead and or windows and doors that are not boarded up, be on the lookout for a Stockton Code Enforcement Officer to “Red Tag” your slice of Stockton Real Estate for clean up. With that citation will come a date that the work needs to be completed by and if you don’t comply the fine is only the beginning. Left undone, the City by ordinance can hire an outside contractor to complete the work and bill you. Not only that the City is not required to get three bids. They just get the job done and all at your expense.
While “Red Tagging” a property for “code violations” is nothing new, the City of Stockton has taken on a new tone and posture for homeowners that do not act quickly and in good faith to what were once somewhat lenient standards and time frames have become out and out sprints for vacant house homeowners to get corrected.
Making matters even worse, Red Tags can sit on houses for weeks unnoticed by out of town homeowners and because the homeowner is unaware of the alleged violations makes no difference to the city. All of a sudden the stakes have gotten much higher for owning a vacant house in Stockton.
After analyzing the entire vacant house dilemma within the bigger Stockton Real Estate Market, it becomes apparent that there are at least 5 factors driving the sheer number or “red Tags” issued over the past three years.

1. The Stockton Real Estate market has an estimated 3,000 to 5,000 vacant houses.
2. The Sheer Number of Complaints. The City of Stockton is receiving a record numbers of complaints from neighbors that are tired of the blight seemingly on every block within the city. Vacant houses that are not maintained drive real estate prices down even further.
3. The Record Number of houses in Pre-Foreclosure or Foreclosure. Making it more challenging for the City of Stockton and the overall Stockton Real Estate Market is that a great number of the vacant Stockton homes are in one stage of foreclosure or another and without any on site resident to take responsibility for the home. So, the City looks to the Mortgage holder or bank to foot the bill to maintain the property. If the banks balk or haven’t foreclosed on the property being red tagged, the city files a lien against the property for later collection.
4. Budget Deficits: The city of Stockton’s budget woes are well known and “red tagging “properties in Stockton does mean additional revenue. Even if the City cannot collect that revenue today, it will be collected at the time that any property with any outstanding code violations is sold.
5. Vacant houses don’t sell to conventional buyers and they don’t sell fast. Houses left vacant for two and three years are not selling in Stockton and Days on market as an indicator of what is selling, is at record setting levels, with vacant homes leading the way.

I have talked to many vacant house homeowners that have owned investment property in Stockton for years and they have never seen a more aggressive code enforcement effort as is going on today. Likewise I have talked to several code enforcement officers and they have never seen the sheer numbers of vacant homes in a state of disrepair.
Even more challenged are absentee homeowners of vacant properties that came by the ownership of these properties unexpectedly. Imagine inheriting a house that has not been maintained for 10, 20 and even 30 years, and suddenly you are financially responsible for its upkeep and you live 3000 miles away. Imagine moving for a job relocation or a new employment opportunity and being unable to sell your existing house. Imagine going through a divorce and individually neither party can afford the house, so it ends up vacant. Whatever the situation, add the sheer numbers of foreclosure and the trail of red tags and their respective fines can be financially crippling to any family that is just struggling to get by.

 

Code violations are so common on some properties that have been abandoned for 3 to 5 years that they will never be sold as the cost of the fines and repairs already performed by the city exceeds the value of the house and the land. In these cases the City and County demolish the structures and take title to the property.

So, a word of caution to all Stockton Real Estate Investors and homeowners with vacant houses: If you own a vacant house in Stockton, do not let the lawn get tall, the debris accumulate or the trees get overgrown… and do not ignore the warnings, your vacant house is a financial time bomb waiting to explode. If you receive a red tag, call the city and work out a satisfactory solution. If you foresee an ongoing issue and you do not have the financial capability to pay for them, call a real estate investor that will buy your house in it’s as is condition.
Call Westbrook Real Estate Investments at (209) 481-7780 or visit www.westbrookrei.com or www.IBuyHousesStockton.com and we would be happy to offer you a free market analysis and make you an all cash offer for your house.

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