How to Buy a Foreclosed Home

ks14446There is a major sale going on in the housing market, and with real estate appraisals coming up with comparables that are lower than ever, it may be the perfect time to buy. One of the questions my real estate appraisers in Valley Village are getting is how to buy a foreclosed home. This is also a big issue for real estate appraisers in North Hollywood. Though there are a lot of bank-owned properties available these days, trying to buy one can be risky. With a conventional home purchase, you have all sorts of protections against being taken, but in a foreclosed deal, its buyer bewares. There are, however, steps you can take to protect yourself and get a great bargain. Keep in mind that one of the best ways to find out what a house is worth is by checking on the comparables of the surrounding neighborhood and what their home appraisals were valued at.

 

The first thing you want to look out for is if the website you are going through to find out how to buy a foreclosed home is charging a fee. There are free ways to find out about foreclosures in your area like calling local brokers, real estate appraisers and agents. Like I said, my real estate appraisers in Valley Village as well as my real estate appraisers in North Hollywood are constantly out in the field doing home appraisals, so they have some of the most up-to-date information. The same is true for real estate agents and brokers; and because they want more business, they are more willing than ever to dole out free advice and information.If that’s a concern, try to negotiate to have the utilities turned on for inspection before you close on the home. A home inspection usually runs from $250 to $400 and can save you a lot of money if something is wrong with the home’s structure or systems. You need to know what repairs you’re on the hook for to determine whether the price is fair. This is also where a home appraisal comes in, because they document all of these factors in their official real estate appraisals that get used to determine the value of the home.

 

 One important thing to keep in mind is the fact that if the property has been on the market for less than 30 days, lenders are usually looking for full-price offers. After 30 days they may be willing to accept a lower price. After 60 days you can offer even less. So this is basic economics and supply and demand. Logically, the general rule is the longer the house has been vacant, the lower the price will be. So, one of the best things you can do when you’re trying to figure out how to buy a foreclosed home is find out which homes in your area have been on the market the longest.

 

Once you’ve found a home you want to purchase, you’ll want to invest in a full home inspection. This is always a good idea when buying a home and my real estate appraisers in Valley Village along with the real estate appraisers in North Hollywood recommend this to all of our clients, but it is especially important when buying a foreclosed home. Vandals may have stripped fixtures and appliances. What’s more, the utilities have probably been shut off, making it impossible to gauge the shower pressure or test for leaky pipes.

 

If you are looking at how to buy a foreclosed home, you also want to beware of the fact that s0me states have a redemption period that lets the original homeowner satisfy his or her debt and take back the foreclosed home during a specified period after a foreclosure. This is especially true right now, with all the steps President Obama is taking to try and save homes from foreclosure. You’ll also need to be patient because banks may take 60 days or more to decide whether to accept your offer on a foreclosed home. These lenders are looking at things like your finances, the home appraisal of the house and other competing offers. In fact, one of my real estate appraisers in North Hollywood just saw one of our clients go through a bidding war on a foreclosed house in the area.

While the housing market is clearly a mess right now, there is an upside to it; the fact that homes haven’t been this affordable in years. That being said, you want to be smart about your purchase and learn everything you can about how to buy a foreclosed home such as what the home appraisals in the area are going for. Find yourself professional and trustworthy real estate appraisers, lenders and agents and get as much information as they are willing to offer. Once you have done all that and researched as much as possible, you’ll be ready to go out and find your dream home.

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The Foreclosure Process; Can it be Stopped?

The foreclosure process is still steamrolling through America. While President Obama has promised to put the second half of TARP funds to better use than the first half, it still may take a while before the real estate industry and homeowners see any relief from what has become a long, arduous journey. Until things begin to improve, here are a few things you need to know, to stall or prevent going into foreclosure.

Mortgage lenders naturally want to recover as much money as they can from the loans they provided homeowners. While a foreclosure isn’t ideal and won’t get them even half the money they originally put out, something is better than nothing…at least that’s the way they look at it. So in order to save your home from the foreclosure process, you have to show them the money. But before you do that, keep in mind what Mike Himes, a housing counselor for the nonprofit group NeighborWorks Homeownership Center in California has to say; “troubled homeowners need to be realistic about their ability to pay. He says that there have been many borrowers who have swiped their cards for $20,000 on their credit cards only to be forced out of their homes later on.” Trying to appease the mortgage lenders this way can end up costing you more than you can ever repay, in the end.

If you don’t have the money to give to your mortgage lender to save your home from foreclosure, the best move is for you to call them weeks before your next amortization is due. The reason for this is that you will be considered delinquent the day after the due date if it is not paid, so you want to take control of the situation before you become part of the nasty real estate statistics that are out there right now. That being said, homeowners usually have grace periods of up to 15 days to pay what’s due.

When the call comes from your mortgage lender regarding delinquency depends on your payment history with them. I know as a homeowner that this is not the call any of us wants to get, especially when it comes to something as sacred as our personal real estate. But, if they do, here’s what you can expect according to Wells Fargo Home Mortgage executive Joe Ohayon, “if you frequently pay in the middle of the grace period, you will not be called before that point. If you have been a good payor, the calls will just be reminders and not direct collection calls.” So there does appear to be some consideration for the type of customer you have been.

If the worst does happen, and a homeowner receives a notice of default of foreclosure, they still have 90 days to negotiate with the lender to save their real estate. For example; you could still negotiate a loan modification, a short sale or a temporary moratorium. While these are some of the things you can expect when your home is under threat of foreclosure, every situation is different and every mortgage lender is different. Ultimately, until we begin to see some results from the second half of the TARP money, homeowners are going to continue to lose their homes, and banks are going to continue to lose money, which is the vicious cycle that got us into this mess in the first place. What about all of you, what have you done or heard of other people doing to save themselves from foreclosure? Is there any real help out there, or is it just a bunch of smoke and mirrors? Please share your experiences with the rest of us and post any comments, questions or suggestions you may have.

If you are in jeopardy of losing your home, visit www.hud.gov for guidance on what you can do. 

Fannie Mae and Freddie Mac Roll Out New Deal for Homeowners

There’s finally some good news on the real estate front; “Fannie Mae and Freddie Mac have directed their network of servicers to halt all foreclosure and eviction proceedings between Nov. 26 2008 and Jan. 9, 2009, meant to give a recently announced rescue plan time to work,” according to money.cnn.com. It’s been a few months since these mortgage giants got bailed out by the government, and this is the first sign that they are finally doing something to try and at least help, if not fix, the problem they helped create in the housing market.

This action is meant to keep homeowners afloat while they await the start of the Streamlined Modification Program, which begins Dec. 15, and will allow homeowners behind in their mortgage to get a modified mortgage to no more than 38% of their gross incomes. Some people may feel as though this is bailing out those who never should have gotten into the real estate market to begin with, but the fact is that home foreclosures hurt us all, by lowering home values and draining our economy.

Notification to the homeowners who have already received eviction notices and/or have homes up for auction, should begin immediately, which should make for a much brighter holiday season. Unfortunately, homeowners who are in jeopardy of eviction between Nov. 20 and Nov. 26 will not get to benefit from this new deal; however, they may qualify for other deals offered by FHA.

This is good news, to be sure; however, it will boil down to a small percentage of homeowners in the shaky real estate market, even though Fannie Mae and Freddie Mac hold the mortgage for approximately half of the people currently in the housing market.

There are several factors that will go into the eligibility of this new deal. First, homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy. Again, it’s a good offer, but will only end up helping a small percentage of people, so I wouldn’t say it’s going to put a huge dent in the housing crisis.

On the up side, something has to be done and at least this is a start. The real estate industry is a vital part of our economy, and even the global economy as a whole. Things will get better in the housing market, but it may take a bit longer than we originally thought. Holding off on at least some of the foreclosures out there, is a good first step.

 

     

How Foreclosures Are Affecting Renters

As if the number of home foreclosures wasn’t bad enough news, now we hear they are affecting people who rent as well! You may think that renting real estate, whether it be a home or an apartment, is the safest thing to do right now, but you might be wrong. With the influx of former homeowners in the rental market and the housing market being what it is, the competition for low-rent housing has gone through the roof. Add to that the fact that renters are facing eviction due to the properties they’re living in being foreclosed, and you have a sticky situation.

 

Moreover, because many of the high-risk home-purchase and home-refinance loans now in default are concentrated in low-income and minority communities, the fallout from foreclosures is hitting the same neighborhoods where many of the nation’s most economically vulnerable renters live. So now there are homes sitting vacant because the former homeowners walked away or were forced out in the same housing market as the rental properties these displaced people were forced to move to. How frustrating it must be to see the real estate you once owned outside your apartment window…even worse, you may get kicked out of there as well because the apartment owner can’t pay his mortgage either.

 

Just to give you an idea of how much rental real estate is affected, the number of renter households rose by nearly one million last year, which is more than four times the pace of renter growth between 2003 and 2006, according to the center’s report, “America’s Rental Housing: The Key to a Balanced National Policy.” The U.S. median monthly gross rent reached a record high of $775 last year. Add to that the mess the credit market is in because of the shady practices of some mortgage lenders, and you can see how the housing market got into the mess it is in.

 

Another problem facing the rental real estate market is the fact that those low-interest and creative financing deal mortgage lenders were offering enticed companies to build much faster than they had before. Assuming they would get a quick return on their investment, these builders kept taking out more and more loans to build more and more housing, and of course they now find themselves in the same predicament as the single-family homeowners.

 

In short, the demand for affordable rental housing is increasing while the supply of low-cost units is declining; it’s a simple matter of supply and demand. That’s why it’s so important to add rental properties in the debate, with regards to the housing market. Homeowners weren’t the only ones devastated when the housing bubble burst. The silver lining in all this may be the fact that it is now becoming a buyer’s market, so people who can’t find affordable rental units may want to consider purchasing a home. Of course this only works for the people who didn’t end up in foreclosure and have the credit to get approved by a mortgage lender. So what can everybody else do?

 

The current conditions provide an opportunity to transform the inventory of foreclosed and vacant properties into affordable rental housing. With all these houses going into foreclosure, banks, mortgage companies and homeowner are desperate to get rid of them, which means the price of real estate is going down. These deals in the housing market aren’t just for the homeowners, real estate investors who have a mind to can buy them up cheap and use them to subsidize affordable rental properties for the plethora of people on the market right now. This solution doesn’t have to be considered charity, because any investor who does this will still make a huge profit, again because real estate is starting to get cheaper and cheaper.

 

Currently adding to the rental inventory on the higher end of the rental market are the vacant condos and houses that owners are renting out due to weak home-buying conditions. However, many renters don’t have the income required for those rentals, which is why the housing market needs more diversity.

 

The real estate industry will survive and even thrive again, it always does. But will these former homeowner, renters and investors of affordable housing come out of it ok? That’s the question will all need to be asking ourselves.

 

If you are thinking about buying a home, selling a home, refinancing a home or simply want to know what your home is currently worth, please contact us at Mahler & Associates.


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How Will The Foreclosure Rescue Bill Help Homeowners?

Can the government help America get out of the housing market crash? I tend to think it’s doubtful, especially for this particular government. Call me jaded and bitter or just call me ill-informed, but I just don’t trust everybody that would be involved in passing some type of bill that helps out with the mortgage crises is sincere. Let’s face it, in government everybody has their own agenda, and the real estate market has just as many lobbyists as the next guy. Even if they do end up passing the long embattled rescue package, is it going to help out the little guy or the lenders? To tell you the truth, I’m playing devil’s advocate here, because I’d love to see the Senate pass some type of bill that helps regulate the mortgage industry so that we can get rid of predatory lending.

However, in typical fashion, an omnibus housing rescue package, some elements of which have been debated in Congress for years, had been on track Wednesday to finally move toward enactment but hit a speed bump that puts in question when lawmakers will vote. In a press conference Wednesday morning, Senate minority leader Mitch McConnell, R-Ky., said he and the Senate majority leader, Harry Reid, D-Nev., have reached a general agreement on “the most pressing amendments” and that the bill “is likely to pass this week.” But the Senate got bogged down by a procedural maneuver by one senator who insists the body include a series of energy tax breaks in the housing bill.

 

Ah-ha! This is exactly what I was talking about. A bill that was supposed to help with the housing market is being bogged down by somebody in Senate who is trying to pad it with benefits that suit their own agenda. Banking Committee Chairman Christopher Dodd, D-Conn., said lawmakers were close to getting passage on the bill “if only we can get it to the floor.” This package is supposed to help the more at-rick borrowers. So instead of manipulating these people with jargon they can’t understand and sticking them with homes they could never really afford anyway, the Senate is trying to come up with better, more reputable ways of helping lower-income families’ move into their own piece of real estate. Ok, it sounds good, but what does this package really do?

 

One of the positive aspects I found out about this housing market package is that would change how key players in the mortgage market are regulated, which they hope will in turn create more activity in the housing market. But can regulating mortgage lenders really generate heat in the real estate industry, or is this an example of a little too little a little too late? One thing we do know is that we are beginning to see the real estate industry crawl its way back to a buyer’s market, so I suppose keeping a closer eye on lenders isn’t a bad thing. But if the Senate can’t come up with a package that’s devoid of hidden bargaining chips, how can we realistically expect them to be the housing market’s watch dog? Making matters worse is the fact that President Bush has declared he will veto the bill in its current form.

 

 

Actually I don’t know if that’s a good thing or a bad thing, I just don’t happen to trust anything President Bush does. One of the sticking points is a provision that would give $4 billion in aid to states to buy up foreclosed homes. The White House believes this would help lenders more than the public, but I don’t know. There are a lot of reasons it’s a bad thing to have a bunch of empty foreclosed homes littering the landscape; namely the fact that it brings down the property value of the other homes in the area. Here are some more of the provisions in the package as it stands right now

 

The provision that has garnered the most attention is one that would allow the Federal Housing Administration to insure up to $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers’ homes. The program, which would be voluntary for both lenders and borrowers, would be paid for in the Senate bill by the premiums borrowers pay and by fees from Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500), the two government-sponsored enterprises that guarantee the purchase and trade of mortgages. First off, that’s a whole lot of gobbly gook to most people, I barely understand it. In a nutshell their saying they, the government because that’s what FHA is a government agency, will guarantee loans for up to $300 billion to lenders who are big enough to shell out money to lower-income families’ that otherwise wouldn’t have a snow balls chance in H— of getting one. Ok, that sounds good, but is it?

 

Critics of the plan say lenders are more likely to saddle the program with their worst loans – those most likely to foreclose, which is exactly what happened during the housing bubble and caused the housing market mess we’re in right now. The Congressional Budget Office estimates that the program would end up guaranteeing 400,000 loans worth $68 billion, and of those, about a third would result in default. So I ask you, how is that any different than the realities of the real estate market right now? Another provision would raise the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The House version raises the limit to nearly $730,000. The bill also calls for an independent regulator to oversee Fannie and Freddie, but Democrats are trying to amend the bill so that the regulator would not be put in place until the next president takes office.

 

Ultimately, the problem is the fact that many people don’t trust the government, and when somebody raises concerns about whether these provisions are good for the buyers out there or the lenders, we have to be willing to listen. That being said, the bill won’t fail or pass based on what we think, so I suggest everybody educate themselves as much as possible, especially concerning these possible new lending practices. If you don’t, you may find yourself one of the thousands of people facing foreclosure.

 

Please visit us at www.iappraiseforyou.com for all your appraisal needs

 

 

 

 

 

How to Buy a Foreclosed House

I’m the last person to suggest you should profit off of somebody else’s misery, but the housing market is in the dumper and one of the best ways to get out of it is for qualified people to start buying. Now, with the influx of homes in foreclosure, this may be a good time to jump in and get your feet wet. But, before you consider purchasing real estate that the bank owns, you should do a little research, and please don’t buy any home without getting it appraised by a reputable real estate appraiser who can make sure you are paying fair market value.

 

 First let me give you some fact; according to RealtyTrac, lenders repossessed 197,800 homes in the first four months of 2008 vs. 90,800 in that period last year. Banks don’t want to be in the real estate business, so sometimes they’ll accept much less than you might think to get rid of them – especially in markets having lots of trouble. But buying such properties has drawbacks. Real estate is almost always a good investment, especially if you’ve had it appraised, but before you run out and spend your hard-earned cash, here’s what you need to know.

 

1. When looking for real estate that has been foreclosed, let you’re your fingers do the walking through the web. For example;

Redfin.com, lets you do a free search for so-called real estate owned (REO) properties – those for which the bank holds the deed – in Baltimore, Boston, Los Angeles, San Diego, San Francisco, Seattle and Washington, D.C. (and soon, Chicago). This will help you narrow down your search, and while your online you can look up the closest real estate appraiser in your area, just make sure they are experienced and thorough. GOD knows we’ve all had enough shady mortgage lenders who strong-armed many appraisers to bring in values higher than what was going on in the housing market (as if the value of homes wasn’t overly inflated as it was during the bubble.) Another place you can look is foreclosures.com.

 

2. Another thing you can do to improve your chances of getting the best deal is to get a broker. I know, they don’t have the best reputation right now, but an honest and ethical broker will help ensure you don’t pay more than you have to, and they will probably get a real estate appraiser involved to help you understand the current value of the home you are thinking of buying. But keep in mind; you’ll want to find the real estate that is REO before going to the broker; doing a little leg work on your own ahead of time will help speed the process along.

 

3. Finally, look for homes and real estate that have been on the market for a while, like over 90 days. The longer a property is on the market, the more desperate the bank is to get rid of it. But be very careful, because bank-owned houses typically need a lot of work: People facing foreclosure often neglect maintenance and may have swiped fixtures and appliances on their way out.

Never buy an REO property without an inspection, and be sure to factor repair and remodeling work into your offering price. Again, this is another good reason to get an appraiser involved as well.

 

Well, there you have it. I know it can be a little uncomfortable to buy a house somebody else was kicked out of, but remember many of these people chose to walk away. That being said, getting this influx of real estate off the market will help the housing market correct itself, so you’re just doing your part to help the economy.

 

If you are considering a purchase, please visit us at www.iappraiseforyou.com for all your appraisal needs.

 


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