Buying a foreclosed home 101

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Don’t bother browsing through the legal filings in your local paper or showing up to courthouse auctions—there is too much risk and most banks will not sell at auction for less than the amount currently owed against it. Instead, contact myself or Hua Hin Real Estate Agents that can provide you a list of homes for sale. Also, you can go directly to www.TrustIdaho.com to search specifically for bank owned property being offered at rock bottom prices.

It’s makes more sense to purchase homes that are being sold directly through the bank since a buyer purchasing homes at foreclosure auctions must have cash on hand at the time of the sale and typically hasn’t had an opportunity to inspect the home appropriately. Also, many homes sold at auction may have additional liens such as a home equity line of credit or a second mortgage that may have fallen under the cracks. If that is the case then the buyer of the auctioned home is responsible for clearing the lien(s).

When a bank takes final possession after foreclosure and lack of a winning bidder at the auction, the entity will clear the home of all liens and encumbrances. When buying a bank owned home, the purchaser has an opportunity to inspect the home and the offer and earnest money put down is contingent upon buyer approval of the inspection. You can check here to get it inspected. A home purchased directly from the bank can also be financed.

Bank owned homes currently for sale on the public market typically have been sitting vacant for no less than six months and have often been vandalized or stripped of items such as water heaters, oven/ranges, microwaves and even cabinetry. “One mistake a lot of people make is underestimating how much work the home needs and the cost associated with fixing it,” say Rick Sharga of RealtyTrac. To avoid getting stuck with any surprise bills, it is essential to have a certified home inspector provide the true condition of the home. Secondly, it is important to properly estimate the amount of time and money needed to bring the home back to a livable condition.

Be aware, not all banks are selling their inventory (foreclosures) at fire sale prices; some are listed at or around market value. However, most firms offer property at or around 10% under current market value with the hope that a buyer will purchase within a 30-day timeframe. The larger the inventory of foreclosed homes the bank is holding along with the length of time the home has been on the market will determine your chances of nabbing a home drastically under market value.

Determine your offering price by finding out how many days the home has been on the market along with the activity associated with it (it is important for your representation to inquire with the banks representation to find out if there are alternate interested parties). I suggest offering 10% under the banks asking price unless it is found that the bank is highly motivated. You must also consider alternate buyers that may be willing to pay more than you at that time.

Be prepared to wait for a response to your offer when attempting to purchase a bank owned home. While some banks respond w/in 36 hours, others dealing with an enormous backlog can hold up response for as long as three month. While you wait, another party can unfortunately trump your offer with a higher one. With that, it is important to have multiple properties in mind and to get pre-approved for financing prior to making an offer (unless you plan on purchasing with cash). Even if the home of your dreams has gone into pending status prior to you writing an offer for it, be sure to have your representation continually check the status since real estate transactions do fall.

Remember, it is essential to have representation when purchasing bank owned, short sales or fair market homes. Contact me today to discuss the possibilities!

Short Sales 101

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Brushing up on your short sale knowledge is essential in this market since nearly 50% if all homes currently for sale are distressed (either short sale or bank owned).  Bank owned homes can typically be purchased within 30 days since the home has been foreclosed upon and title has been transferred to the bank.  Purchasing a bank owned property is very similar to purchasing from a normal seller yet there are much more disclosures involved.  A short sale means that the current owner is requesting the bank to take less than what is owed in order to avoid foreclosure—short the bank on what is owed is a way to look at it.  This requires approval from the lending institution. 

 The process:

 1)     To be a short sale, the homeowner usually is in default or in a position to be in default (divorce, loss of job, injury, etc) The seller most likely has tried to get their loan modified yet to no avail.  Next step is to place the home on the market as a short sale.

2)     The agent marketing the property will advertise to the public as a short sale.  Short sales are typically priced very aggressively yet it is important to remember that the bank determines the final price. 

3)     An offer is submitted to the seller and the seller accepts it in writing (unless the seller feels that the offer would not be accepted by the bank) 

4)     The seller will compile a short sale package for submittal to the lender (or lenders) that includes the executed offer, seller financial statements, bank authorization letters, previous 2 years taxes, a hardship letter and listing agreement. 

5)     Once the package is submitted to the lender the buyer and seller must wait for approval.  The lender will typically request an appraisal to be completed firstly in order to determine value.  Second, they will compare proceeds of the short sale to the proceeds received if the home is foreclosed upon in order to determine whether or not the sale can be approved. Banks such as B of A and Chase can take as long as 4 months for a response.  Patience is a virtue!

6)     The bank approves, rejects or counters the offer.  If there is acceptances of your offer then expect to close w/in 30 days after the approval is obtained. 

 It is important for a buyer who is pursuing a short sale to keep all options open.  Most offers submitted on a short sale can be cancelled at any time prior to bank approval by both the buyer or the seller.  With that, I suggest continuing to look for homes while the offer is working its way through the approval process.  More often than not, an alternate home will come onto the market that fits the buyer’s needs and IS NOT a short sale. 

 The lending institutions are working in association with the US Government to streamline short sales during the year of 2010 and beyond in order to decrease approval timeframes that in turn helps fewer homes go into foreclosure.  Personally, I have noticed that banks are already responding to short sale offers more rapidly and hope that the trend continues.

BUYING A HOME 101

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Buying a home has many components associated with the process. Although every transaction is different, below you will find steps linked with most real estate purchases.

  1. Hire a buyers agent. A crucial step since it is essential to have an experienced Broker protected your interests.  Using the services of a buyer’s agent in the State of Idaho is free to the buyer in 99% of all real estate transaction.  Choose wisely!
  2. Get school play set installation pre-qualified.  A pre-qualification will provide you and your agent essential knowledge prior to step 3.  Visit your local bank or mortgage broker.  Or, ask me for a list of home loan specialists that have provided top-notch service along with lower fees.
  3. Start browsing for homes online—if you haven’t already. Go to www.TrustIdaho.com to view property descriptions, interior photos, virtual tours, community information, school ratings and much more.
  4. View property.  By now you and your agent have probably have a list of homes to view.  Rely on your agent to schedule appointments and accompany you to all viewings. Especially if you are looking at houses for sale in beaufort.
  5. Write a purchase and sale agreement. Now that you’ve found the home you would like, it is time to write an offer.  Consult with your agent for strategies.  Things to take into consideration are the following:  how many days on the market?  Short Sale or bank owned?  How much interest is there currently on the property? (your agent will find this out for you)
  6. Negotiate.  An essential element of the Broker’s duties.  Hiring an experienced real estate broker that has been involved with hundreds of transactions will have the negotiation skills that will save you time and money.
  7. Earnest money deposited.  Usually after the offer is accepted your earnest money will be deposited in a non-interest bearing trust account.  Your earnest money is credited to you at closing and can be returned if you are unable to obtain necessary financing or have an unsatisfactory inspection or appraisal.
  8. Open escrow or submit your offer to the title company agreed to on the purchase and sale agreement. Your buyers agent will coordinate this step for you and will review the title policy ensuring that you have clean title at time of closing.
  9. Order an appraisal. Your lender will typically coordinate the ordering of the appraisal.  The purpose of the appraisal is to ensure value and safety for you and the firm providing financing.
  10. Review and execute all necessary disclosures.  Types of disclosure may include a Seller’s Property Disclosure Form, A Lead Based Paint Disclosure, FHA Disclosures, Lender Disclosures—so on and so forth.  Your agent will help make sense of it all.
  11. Get a home inspection—even if the home is brand new. One of the most important aspects when purchasing a home.  Your inspector’s job is to go over your future investment with a fine-toothed comb.  He or she will typically provide a report of the findings.  Ask your agent for a list of quality inspectors if you don’t already have one.   If there are problems, you have the right to request that the seller make necessary repairs.
  12. Removal of all other contingencies. These contingencies could sewer video inspections along with other miscellaneous contingencies—depending upon the type of property being purchased.
  13. Get Homeowners insurance. Provide to your lender proof of insurance so that it can be reviewed and approved prior to closing.  It is essential to have proper insurance yet remember to insure the structure, not the land.  I suggest shopping for the best insurance rate.
  14. Conduct a final walk-through. Done to ensure that any repairs requested were completed such as a roof replacement, along with making certain there was no damage to the property after the inspection was completed.
  15. Sign closing documentation. Typically done at a title company.  Your lender and agent will most likely be present to walk you through the documentation.
  16. Deposit funds with the title company. Depending upon the type of financing you choose to use, a check for your down payment and closing costs may be required unless you are taking advantage of the first time homebuyer tax credit.  The title company will verify funds and also request funds from your lender.
  17. Get keys. Within 24 hours necessary monies will be transferred and the property will be recorded in your name.  At this time the home is officially yours.

Make sure to keep in touch with your agent.  You may have questions after the fact or others that could use the services of a knowledgable real estate broker. Our  job doesn’t end at closing.

The New Normal?

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The crisis that almost collapsed the financial system, the markets and the economy was a once-in-a-lifetime event for most of us. The effect was not only monetary, but psychological. Shifts in attitudes about money, financial independence, retirement, leverage and consumption may leave their marks for years to come.

Many people have seen the values of their financial assets, including real estate, drop close to 18 percent; however, few have changed their approaches to investment management. Some affluent investors suffered losses of 40 percent to 50 percent – enough to shatter their faith.

January is Financial Wellness month, so let’s take a quick look back and then think about what’s to come and how to work toward restoring some semblance of stability.

There is a lot of evidence out there to support all the scary thoughts. The 100-year flood happens about every five to seven years. Markets are never average or normal and are usually above or below the bell curve. The tools available to make investment decisions are not forward-looking. They are always historical. Can you imagine using only the rear-view mirror?

Financial advisors need to help people rebuild plans that address new economic realities and long-term goals. With my long-time clients, I still check and double check to make sure I understand their thinking and feelings. In many cases, my clients’ families have become even more important, and we include them in meetings. Mindsets continue to shift, and approaches need adjustments. Simply keeping in touch is more critical than ever. Many of my older clients are now looking to move into an active adult community when they retire; something that they did not think of doing before.

Many successful Americans come from average backgrounds and circumstances, and have worked hard to earn their success, wealth and comforts. Their financial position, investing and saving has been a source of pride. They felt they understood the rules of the game – the American dream. The sharp downturn in real estate values, falls of some of the leading financial institutions and job losses lead to weakened faith in the system.

Some have responded by shifting their behavior, reducing discretionary spending and looking for exceptional value. Psychologically, it feels wrong to be wasteful. Saving feels more moral and has increased significantly in recent months.

We’ve arrived at a time many are referring to as the new normal.

High unemployment and slow growth for the U.S. Gross Domestic Product of 1 percent to 2 percent have been forecast. This will be unacceptable to Americans, who will put pressure on politicians to encourage domestic growth. Americans are burdened with high debt and slow growth. Some are unhappy with government presence.
How do we turn the economy toward healthier growth and exports with a cheap dollar? These are questions that will continue to be explored into 2010. In the new normal, people will think and plan differently for the future.

There is a sense that the worst is over and a kind of pride in surviving the worst of times. There is a satisfaction that comes from emphasis on real needs, simple pleasures and a focus on managing what one can control. People are taking pride in their shopping skills. Shopping at thrift stores is no longer just fun and funky; it just makes more sense, in most cases, than buying new.

I’ve seen family ties that have been strengthened. In times of financial crisis, many families are forced to communicate. Even divorce rates are falling.
In the investment world, we’re focusing on quality and value, which is fundamental.

There is some evidence of renewed confidence. But investors remain cautious. Low-quality investments in the early stages of recovery may be attractive, but can be far too risky. It is important to measure the risk of investing against the risk of not investing. Staying in cash at no return won’t help in the long term.

Don’t sit and wait. Know what to fear and what may be advantageous. Embrace the new economic reality.

Contact Carson Wealth Portland financial planning.
**IBR

Sweat Equity on the Rise!!

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Jim and Kristina have taken advantage of the real estate market.

At the start of 2009 this couple sold their home in Meridian with the intention of moving to California to be near family. After months and months of looking at several homes in the Golden State, the couple became discouraged and began to sense that Boise Idaho’s pricing, along with quality of living, was too good to pass up. With that, Jim, Kristina and I began a search for their new home.

New construction, short sales, bank-owned property and occupied homes alike all had positives and negatives. When the dust settled, however, the couple found that a well-built bank-owned property within a cozy community fit the bill very nicely. Although the paint was distasteful and the curb lacking any appeal, the parquet flooring of the house made up for that. The kitchen was open and bright with plenty of cabinet space, the floor plan flowed with ease and the quality of construction was first rate. In 2006 this home would have sold for the mid 180’s but by working together, the Beans were able to make the purchase for only $130,000.

Jim and Kristina have always been “handy” people. In fact, while in California the couple spent many weeks helping their son and daughter construct their personal home. During this time, Jim and Kristina learned trades that included installing tile, hardwood flooring, siding-you name it!! The knowledge was definitely put to good use.

The work began. Kristina began stripping the countertops and laying tile. Jim started pulling the dirty carpet and ripped vinyl planning to lay a hickory floor. Even the roofs had to be repaired with the broken ones to be replaced with new pieces to prevent leaks. Commercial roof repair St. Louis helped them with that while they were busy working on the kitchen renovation. All the while, doing prep work for the full interior paint job, they also found some helpful roofing tips from Bourdeau Contracting LLC website. After nearly 30 days of sleeping on cots and eating cold dinners, the Beans completed their project and invited me over to see the results of their “sweat equity”.

I could hardly believe that it was the same home! The smell of fresh paint and lacquer was prevalent while Kristina excitedly directly me toward the kitchen. Granite and tile graced the middle island, countertops and backsplashes; the cabinetry was antiqued while the stainless steel appliances topped it off. “Wow!” I exclaimed. Next, Jim spoke about the hickory flooring that was laid throughout the first floor. It was gorgeous and only cost $1,000 for the material! Jim and Kristina were proud of their work and had every right to be. Click for more information if you want to achieve such an impressive result, too.

Before leaving, Jim and I discussed the market and what the home might sell for right now. At least $150,000, I mentioned, if not more. Jim stated that he and Kristina had put $2,000 (plus or minus) into material and couldn’t be more thrilled that they had realistically made $16,000 for their time. “In a year or so, Matt, we’ll be doing this again. And also, my kids down South are itching take advantage of the pricing around here”.

Jim, Kristina and I

Jim, Kristina and I

Before Remodel--Kitchen

Before Remodel–Kitchen

After Remodel--Kitchen

After Remodel–Kitchen

Before Remodel--Living Room

Before Remodel–Living Room

After Remodel--Living room/mantle

After Remodel–Living room/mantle

The Consequences Of Foreclosure

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Foreclosure can be a stressful process and it can also stick with you for a long time.  Give us a call at 208-869-3469 if you are facing foreclosure so we can see if we can help.  There are some options that you need to explore such as loan modifications and short sales.

First Time Home Buyer $8000 Tax Credit

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First Time Home Buyer $8000 Tax Credit is still available, but quickly coming to an end.  You must close on your new home by December 1, 2009.  Keep in mind that most transactions take about 30 days.  So, time is really running out.

The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Home Selling Quick Tip 3

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Make sure to clear out the clutter.  You want your home to shine above and beyond the other homes on the market.  Remember that the average home buyer is going to look at 10-20 homes that meet their criteria before they make a decision.  This is a case of first impressions.  If you don’t make the list of top 2-3 homes on their list, your home will be forgotten and discarded from their search.  You usually only get one chance.  Make it count.

By taking 4-5 hours upfront to fix up your home and stage it a bit can go a long way.  Even $200 – $500 in staging can end up netting you thousands more on your house.  It is so worth it.

Sell Your Home Quick: Tip 2

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Come up with a sales strategy, but make sure it’s flexible. What’s your initial asking price? How long will you insist on it before making a reduction? How much of a cut will you accept? What about after that? Having a plan in place will help you react quickly, according to Greenwood, and will move your home that much more quickly.

Buyers want to feel like they are getting a deal these days.  It is important to know your bottom line and not be offended if you don’t get a full price offer.   Roll with the punches and understand that this is business and not to take it personal.  You always have final say when it comes to the actual accepted price.

Sell Your Home Quick: Tip 1

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Price it right. The No. 1 thing that will sell a house quickly is price.  Of course you want to make sure that it is out there and people know it is for sale.  But all the marketing in the world won’t sell an overpriced house.

OK, so just how do you play the home-sale version of “The Price is Right”? That crackerjack agent you hired should have a good sense of what price will help sell your home sooner rather than later. As the owner, your objectivity is diminished, so give your agent free rein, within reason, to set the price. The broker will look at the average days a home in your neighborhood is on the market, how your home compares to others in the area and its condition.

Keep in mind too that even if you are able to find a buyer at above market value, an appraiser will have to “approve” the price if the buyer is financing the home.   This can be a deal killer and is becoming more and more prominent.