Summer months are on their way, but higher temperatures mean a different season for REO agents. It’s the time of year when air-conditioning (A/C) units go missing from foreclosed properties.

Oana Sterlacci is a broker and owner of Sellstate Realty Solutions in Las Vegas, Nev. She said thieves target different appliances during different seasons of the year.

“It’s the summer now, and air-conditioners and pool equipment will go. On a hot day in Vegas, there will be open storage units filled with appliances. And the longer these properties sit on the market, the more exposed to vandals they become,” Sterlacci said.

Dan Humston, a broker with Century 21 in Henderson, Nev., also said it’s a huge problem, and the thieves are targeting the copper wiring in the units.

“I have no idea how to prevent it. We cannot exactly chain them down. It’s happening in all neighborhoods,” Humeston said.

South of Vegas, in Arizona, Del Rounds is a broker and owner of RE/MAX Fine Properties in Scottsdale. He’s had an A/C unit go missing at the same home twice.

“There’s no solving the issue other than re-installing the unit one hour before the close of escrow,” Rounds said.

Camille Swanson had actually avoided the issue until thieves took the copper wiring that connected the exterior portion of the unit to the system inside. She’s a broker at Realty Executives in Phoenix, Ariz.

“It was an expensive repair, but the units themselves were intact. There was no barrier to the area where the A/C unit that was burglarized,” Swanson said.

Swanson has since learned the easiest way to prevent the theft of the A/C units is to create a barrier around it, whether it’s a locked gate or wall with no other exterior access.

“A/Cs usually aren’t installed in the front of properties so it’s not like they are right out on the street visible to everyone. Putting up a barrier if none exists may be just an added cost, but I think those costs are outweighed by the additional security gained,” Swanson said. “There are inexpensive ways to do everything. It just takes some creative thinking to come up with the right solution to the problem.”

How to Find a Good “Deal” in Today’s Challenging Real Estate Market

When I ask most potential buyers I meet what they want in a home they tell me they want a “deal”- some go a step further and say they want a “smokin’ deal”.  In a market where there are over 45,000 properties listed, one would expect that to be pretty easy. BUT, in fact buyer’s searching for a quality home (structurally & mechanically sound), in a good area at a good price will tell you otherwise.  It seems like every day I have a buyer shaking their head saying “I just don’t understand how there are NO good houses to buy with so much on the market!” Here in metro Phoenix, where the average sale price for a home is $163,506 and affordability is relatively high, the competition is fierce.

Prioritize needs/wants

“One man’s trash is another man’s treasure” always comes to mind.  What may be an awesome deal to some is trash to other buyers. Knowing what you want in a home is the first step in making a prudent real estate purchase. I suggest my buyers make a list- not in their head, on paper. This forces them to create a tangible set of characteristics by which they can objectively use to evaluate homes. If you'll commit on paper, you're more likely to commit in reality. 

Make Improvements

Though many homes on the market are the product of our overall distressed economy, they are not the “turn-key” or move in ready homes most buyers crave. They may need new interior/exterior paint, repairs for deferred maintenance, appliances (may have been taken), at a minimum. Some are literally stripped bare by desperate homeowners trying to salvage anything/everything they can as they lose big on a bad investment.

As a result, these homes are “undesirable”, leaving door open for the next buyer who's willing to roll up their sleeves and put a little work into a home.  There are deals to be had for those willing to put their time and money into it! Don’t exclude a home just because the appliances are gone, as I’ve literally seen some buyers do.  If you can put down 10% or more on a home, pull some of that money from your down payment and earmark it toward repairs.

For instance, if you are buying a home for $200,000, and new appliances or repairs cost $2,000, that represents only 1% of the total cost of a home. That’s almost nothing considering you are making a direct investment in the home itself.  Ask the seller for a $2,000, credit toward your closing costs instead and that’s $2,000 more than you would have had otherwise.

Don't overlook the obvious

Frequently, homes that sit on the market for a long time gather the speculation that “something’s wrong with it”, when it may in fact be that it’s always been buyers' 2nd choice. It may have had a contract fall out or the seller just priced the home incorrectly and they’ve “chased down the market”. Do not discount these homes.

Most sellers who want to sell will get to a point where they just want the home SOLD. They may discount the purchase price or make concessions that they would not have otherwise considered earlier. Always hire a professional do an inspection to verify the true condition of the home.

Hey, you never know..

I don’t think buyers are concerned about insulting sellers with their offer, but don’t throw something ridiculous out there to “test the waters”.  Make an offer you could live with in a “take it or leave it” fashion and see where it gets you. My best discount to date was a home that had been listed for 192 days with a list price of $575K. 

After making an initial offer of $480K, My clients ultimately purchased this home for $505,000! Three thousand dollars made this deal. The sellers waffled at $502K, but at $505K the deal was done. Persistence and patience usually pay off if a buyer is truly serious.

Location, location, location!

It’s the first rule of real estate. How accessible are jobs, goods school and amenities like shopping, dining and recreation? Buying the smallest dumpiest home in the best neighborhood is always more prudent than buying the biggest and most expensive home in the neighborhood. The sale for $505K I mentioned was exactly that; a smaller, well-maintained home on 1 full acre without the niceties one would expect in the tony neighborhood where it was purchased (the home 2 doors down is literally listed today for over $2M! 

After planning a larger remodel in the future, I don’t think it will be long before this home comes somewhat in line with what the values the neighborhood will bear. It will never be a $2M home, but it will come closer to the $1.434M average that this town had in the last year.

Run the numbers

Putting all the details on paper is also a good way to figure out if you have a good deal on your hands. Expenses like taxes, HOA, utility costs and more can make or break a deal, literally. For instance, my family personally bought a home last year that was about 800SF larger than our previous home that we sold, however, due to the fact that the home we bought had newer heating/cooling systems, newer low-e windows and other energy saving features, our utilities are roughly the same! 

So the net cost of our new home after buying it as a foreclosure from a bank is really only a few hundred dollars more than we were paying before- more than worth the cost for a bigger home with more amenities. Consequently, buying a home with substantially higher taxes or insurance costs, a steep HOA or older mechanical systems or more yard to maintain, etc. can really make what seems like the best deal really more like a financial disaster.

Go back to basics

Consider the traditional seller who is not facing foreclosure or having to short sell to get his/her home sold. These sellers may be the ones who bought their home cash, 20-30 years ago and/or has paid down the mortgage to an insignificant amount.  These folks that HAVE to sell and their hand aren’t held by a bank as to what they can or can’t sell represent a HUGE opportunity for buyers. Not to keep bringing it up, but this was the situation for those same folks who bought their house for $505K, as well.  The sellers were going through a divorce and had to liquidate assets.  They were not short-selling the home. Mind you they were not happy about taking the $110K hit from when they purchased it 6 years earlier, but they could do it and still walk away with about $1,000 in each of their pockets.

Prepare to move on a dime!

My last recommendation to find a good deal is to be prepared to move at the drop of a hat.  Good deals of any kind don’t last long, especially if lots of people are looking for the same thing.

• Get your finances in order.
• Get your pre-approval from a lender and get them the paperwork they need to process everything. 
• Have the funds you will use to open escrow, liquid and easily accessible from a checking or savings account.
• Put off those other big purchases (cars, jewelry, etc.). 

Being ready to move quickly is the difference between snatching the deal from everyone else or losing out all together.

Final thoughts

Please keep this in mind when you are out there looking. What seems to be the boring, least sexy property can truly pay off if you have the vision to look beyond the obvious: a too high price, so-so condition (or worse) and a long time on the market.

This is where it pays to have a licensed professional representing you and helping you to do this legwork. I regularly do this for my clients and if you’d like me to help you with this process, let me know. I’m happy to do it again. Even if you don’t live in my area, I’m always happy to lend an ear and give my honest opinion.

Happy holidays!

Camille Swanson

But one demographic is being largely ignored: homeowners with higher-price loans.

They don't qualify for mortgage modifications under the Obama plan. They can't get today's low interest rates if they try to refinance. And with newly cautious lenders warier about who they lend to, just try to sell a home that costs $730,000 or more these days. In many cases, finding a buyer who can get financing takes far longer than for lower-price homes, because banks want as much as 30% down and six months of mortgage payments in reserve.

The result is a housing market in which sales and purchases of higher-price homes have come almost to a standstill, and it's a predicament that could undermine the housing recovery. Move-up buyers (homeowners who want to buy larger, pricier homes) are getting locked out by lack of financing. Too many unsold homes in the top tier of the market also can push down prices for homes in the midprice range.

"We need to have a market recovery in all segments," says Lawrence Yun, chief economist with the National Association of Realtors (NAR). "If the high-end market weakens, those in the middle have to reduce prices."

While the number of homeowners with higher loans is small relative to the entire market, Yun says, "All of Middle America is undoubtedly impacted."

Jumbos and super-jumbos

Bigger loans, known as jumbo loans, come in three types.

Loans up to $417,000 are considered "conforming," and can be sold to mortgage-finance giants Fannie Mae and Freddie Mac, which also guarantee them when they resell those mortgages to investors. But after that, the situation is more complex.

Loans between $417,000 and $729,750 are "conforming jumbo," and loans above $729,750 are "super-jumbo." Fannie and Freddie back only conforming jumbos, and what qualifies as conforming can vary depending on location. In San Francisco, Fannie and Freddie will back loans up to $729,750. In Atlantic City, the maximum is $453,750.

Lenders are leery of making loans above the amount that Freddie and Fannie will guarantee, because if a jumbo loan borrower defaults, it's harder for a bank to quickly sell a higher-end foreclosed property. And because Freddie and Fannie don't buy non-conforming jumbo loans, there's less of a secondary market for super-size loans.

States with the highest percentages of jumbo mortgages include Hawaii, California and New York, as well as the District of Columbia. In New Jersey, Maryland, Massachusetts, Virginia, Connecticut, Washington, Nevada and Florida, jumbos account for 10% or more of all loans.

Jumbo loans aren't just for the very rich: In some pricey areas, $500,000 may buy only a modest single-family house or condo.

Sales of higher-price homes have slowed to a glacial pace, driving the supply of homes for sale above $750,000 from 18.7 months in 2007 to 41.1 months in 2009, according to NAR.

With home values still falling in many areas, borrowers who took out jumbos a few years ago are finding they can't refinance, and their mortgages are sliding into default. The number of jumbos 90 or more days delinquent reached 4.83% in March 2009, up from 1.68% in March 2008, says First American CoreLogic.

That trend is helping spread the foreclosure crisis from real-estate-bubble markets, such as California and Florida, where the housing crisis started, to other areas. Data from First American CoreLogic show that delinquency rates on jumbo mortgages under $1 million have more than doubled in areas such as Atlanta, St. Louis and Portland, Ore.

Some cities with high percentages of jumbo loans that are 90 or more days delinquent include Merced, Calif., Muncie, Ind., and Las Vegas-Paradise, Nev.

It's been a costly situation for Victor Montalvo-Lugo, a clinical program manager at MedImmune in Gaithersburg, Md. He and his wife, Janette, bought a $1.6 million home in Thousand Oaks, Calif., in late 2005. He moved to Maryland for the MedImmune post in December, contracting for an $800,000 home to be built by late August. But with the California house on the market for weeks, he's had no luck selling, even asking $1.05 million.

If he can't sell that home before a company buy-out option expires, Montalvo-Lugo worries about the financing on the new one. A similar but smaller home down the block from his in California is listed in the $900,000s, forcing him to lower his initial asking price. "I'm very concerned. We are already listing for less than what we owe," Montalvo-Lugo says. "We lost all of the initial equity, and we owe the bank more than we will get."

Pressure on prices

Those with jumbo loans who lose a job or have an adjustable-rate mortgage that resets to a higher amount are struggling. But help is scarce: Under the Obama housing rescue plan, homeowners with loans above $729,750 aren't eligible for mortgage modifications. Lenders may make such modifications on an individual basis, however.

Many homeowners in higher-end markets are finding they must drastically lower prices to try to get buyers. From July 1, 2008, to July 1, 2009, nearly 26% of homes on the market for more than $1 million have seen price reductions, and the average reduction is 13% off the asking price, according to real estate information provider Trulia. Homes on the market for less than $1 million have seen an average reduction of 9% off the asking price.

"What you're seeing are those properties sitting on the market for a lot longer because people can't get loans," says David Kerr, a ZipRealty agent in the San Francisco area. "I got a call about a property in Berkeley for more than $1 million and almost fell out of my chair. All of what we're showing is in the $200,000 to $300,000 price range."

Jumbos are still being offered at Investors Savings Bank in Short Hills, N.J. But demand has slacked off because those taking out or refinancing jumbo loans must pay higher interest rates than other borrowers, says Richard Spengler, chief lending officer. Rates on jumbos are hovering around 6%, vs. 5.20% on a 30-year, fixed conventional loan.

The bank requires down payments of 20% to 30%, depending on the size of the jumbo. Spengler says many banks have gotten out of jumbo lending because of the lack of a secondary market. Investor Savings Bank keeps jumbos it issues in its own portfolio.

The overall stagnation in the market has a spillover effect on the economy. NAR estimates the slump in the jumbo home loan market has led to a $42 billion decline in economic activity.

That's because borrowers who take out jumbos have much higher incomes than a typical borrower (an average $207,600 in 2007, says NAR's most recent data) and when they buy a home, they spend a lot to furnish it. When sales of costly homes slow, sellers of furniture, carpeting, flooring and appliances get hurt.

Z Gallerie, a home merchandise retailer, is the latest in a string of higher-end stores to feel pinched. The store filed for bankruptcy-court protection from creditors in April, citing a severe sales drop. January sales were down 19% from a year earlier.

"The high-end retailers are being impacted," says Gary Drenik at BIGresearch, a consumer intelligence firm. "When people buy a home, home-improvement and related sales go up."

Those who can buy higher-end homes are seeing their discretionary income further whacked by strict lending conditions. Lenders are requiring some borrowers seeking to finance 80% of their home purchase keep 40% of the total loan value in a reserve account, says Michael Tooker, a mortgage planning specialist for Valley Private Mortgage Group in Scottsdale, Ariz. On a $1 million loan, "that's $400,000 in reserve," he says. "Some want six months total debt service in reserve. It's so arbitrary."

Camille Swanson, a Realtor at Realty Executives in Phoenix, can relate to the struggle. After selling her home, she fell in love with a foreclosed stacked-stone home in the desert that had been abandoned. But she discovered that no lender wanted to give her a jumbo loan on a property that needed so much renovation.

Swanson is almost finished obtaining a loan for the new place with an approval up to $640,000, but details are still being negotiated. With her 20% down payment, the total investment will be $800,000. She approached five lenders as far as Washington before finding one in her area to give her a loan. She didn't need money in reserve because of her retirement assets. "For them, it's an issue of risk," Swanson says.

Raising the roof

Real estate groups such as the NAR are pressuring Congress and the Obama administration to increase the jumbo loan limits that Fannie and Freddie will guarantee and make them permanent. Current amounts were raised in 2008 and are set to expire Dec. 31. They also want the Federal Reserve to buy jumbo-backed securities because Freddie and Fannie can't. The hope is that Fed purchases would create enough of a secondary market for these loans so banks would be more open to lending higher amounts.

Meanwhile, in jumbo-heavy markets, homeowners are increasingly frustrated by their inability to sell. They can't relocate for jobs or retirement. They can't unload vacation homes that they may now struggle to afford.

One such homeowner is Robert Westover, who works for the federal government in Washington, D.C. He's been trying for months to sell a home in Hawaii with an ocean view. He bought it for $585,000 six years ago; it was valued at $1.1 million during the real estate peak in 2006. But there are no offers. He planned to list it for $940,000, but his Realtor suggested $890,000. Then he lowered it to $850,000. At one point, a potential buyer came forward but had no financing.

"It's just been tough. It was getting crazy," says Westover, 45, who now is taking the home off the market and renting it instead. "I hope I've learned a lesson, which is don't put anything on the market in this economy. Most people who have homes in the jumbo (price range) are reliable, pay bills. Why are we suffering while the government gives help to everyone else?"