6 Questions Foreclosure Buyers Should Ask
There are questions that buyers in any market should be asking before they make an offer on a property in foreclosure.
April 2009
Is now a good time to buy a foreclosure?
This is a very common question from both real estate professionals and prospective buyers. Obviously, because local market conditions vary, the answer is different from market to market. But there are questions that buyers in any market should be asking before they make an offer on a property in foreclosure.
What’s the first step buyers need to take?
Require buyers you work with to be preapproved for a loan before you help them shop for a foreclosure. If they’re thinking of buying a foreclosure as an investment or second home, they need to understand that financing the home will be more difficult and more expensive than financing a primary residence. Lenders typically charge higher interest rates and require a larger down payment for investment or second homes.
How can you tell a bad foreclosure from a good one?
Certainly there are great deals in many markets for both investors and buyers looking for a primary residence. But making a sound deal can be tricky. Buyers need to be wary of unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage. Any or all of these financial obligations could become your clients’ responsibility when they purchase a property in foreclosure. Unless the property goes through a foreclosure auction and becomes a bank-owned REO, the outstanding foreclosure liens and fees could be simply transferred to the new owner—your clients. Don’t let them fall into the same financial trap as the previous owner.
If I’m a qualifying borrower, can I appeal to banks for better loan terms?
Lenders are drowning in defaults—particularly in hard-hit real estate markets such as Arizona, California, Florida, Michigan, Nevada, and Ohio—so they may be motivated to cut a deal. If your clients have a good credit score, many banks will offer them a below-market-rate loan on a bank-owned home. Unlike paying down with points, this doesn’t cost anything in fees, and it gives them the ability to spend more for the home.
What are the costs of buying a foreclosure?
It takes money to make money. The best opportunities are for buyers with cash. If your clients are planning to rent out the property or even resell it for a quick profit, make sure they consider the carrying costs, including sales commissions, marketing costs, vacancies, taxes, insurance, and maintenance costs. Once you’ve calculated all the expenses, add on another 10 percent to 15 percent. If they don’t build in a "surprise fund," your clients might be the next foreclosure statistic.
How does choice of neighborhood affect foreclosure investments?
Clients looking for a good investment should generally avoid neighborhoods overrun with foreclosures, particularly newer subdivisions in overbuilt exurban areas. Investors will be tempted to buy foreclosures in these areas because they offer the steepest discounts—but they also carry the most risk of further depreciation. Look in well established neighborhoods with good schools and transportation. If you’re in a market where prices are still falling, encourage your clients to factor falling prices into any offer they submit on a foreclosed property.
Source: James J. Saccacio is chief executive officer of RealtyTrac, a Web site that tracks properties in foreclosure.
www.EkLuxuryhomes.com
Saturday, April 25, 2009
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Mortgage Volume Is on the Rise
Total volume was up 5.3 percent last week compared to the prior week, with most activity coming from refinancings, according to the Mortgage Bankers Association.Read more >
Total volume was up 5.3 percent last week compared to the prior week, with most activity coming from refinancings, according to the Mortgage Bankers Association.Read more >
Low Interest Rates Delay Option ARM Resets
Grim forecasts about underwater borrowers could be abated as more lenders help with refinancing to fixed-rate loans. Read more >
Grim forecasts about underwater borrowers could be abated as more lenders help with refinancing to fixed-rate loans. Read more >
Tuesday, March 3, 2009
6 Tips for Home Owners Who Turn Into Landlords
Home owners who decide to rent out their properties need to be aware of landlord-tenant regulations and avoid liabilities. Here are some things to keep in mind.
Read more >
Read more >
Friday, February 27, 2009
Home sales up in Florida, down nationwide
Cheaper home prices and lower mortgage rates are luring more Floridians back into the housing market, but the same story isn’t playing out nationally.
Florida’s existing home sales rose 24 percent last month, the fifth consecutive month to show an increase in activity, according to the Florida Association of Realtors.
Nationwide, however, sales of existing homes fell 5.3 percent in January to their lowest levels in nearly 12 years.
In Florida 8,450 existing homes sold, up 24 percent from the 6,810 homes sold in January 2008, according to FAR.
“Many people are looking at today’s market and seeing opportunities to find the home or business they’ve always wanted,” FAR President Cynthia Shelton said.
What’s good news for buyers is bad for sellers, as foreclosures continue to depress home values.
The statewide median sales price for existing homes last month was $139,500, down 33 percent from last year, when the median sales price was $206,900.
Condos also are selling, with FAR reporting a 13 percent statewide gain to 2,556 units sold, up nearly 13 percent from 2,266 sold in January 2008. The existing condo median sales price last month was $113,400, down 40 percent from last January, when it was $190,200.
Fort Lauderdale saw home sales soar 52 percent in January, to 467 from 307 a year ago. Values continue their downward spiral, with the median price at $191,000, down 39 percent from last January’s median price of $314,200.
Condo sales in Fort Lauderdale were up 29 percent, to 531 units from 411, but median prices were nearly halved to $85,000 from $153,000 a year ago.
Miami reported a 47 percent hike in the number of existing home sales, to 407 from 276. The median price, however, fell 38 percent, to $208,100 from $336,800.
Miami condo sales were up 27 percent, to 379 units from 298. The median price fell 48 percent, to $149,100 from $284,000.
Activity wasn’t as upbeat in West Palm Beach, where January sales were up just 11 percent to 408 homes sold from 369 a year ago. Median prices were down 32 percent, to $232,100 from $343,200.
Condo sales were up 24 percent, to 375 units from 303. The median sales price was down 31 percent, to $108,900 from $157,700.
The national median sales price for existing single-family homes in December 2008 was $174,700, down 14.8 percent from a year earlier, according to National Association of Realtors.
“It appears some buyers are taking advantage of much lower home prices,” NAR Chief Economist Lawrence Yun said. “The higher monthly sales gain and falling inventory are steps in the right direction, but buyers will continue to have an edge over sellers for the foreseeable future.”
Florida’s existing home sales rose 24 percent last month, the fifth consecutive month to show an increase in activity, according to the Florida Association of Realtors.
Nationwide, however, sales of existing homes fell 5.3 percent in January to their lowest levels in nearly 12 years.
In Florida 8,450 existing homes sold, up 24 percent from the 6,810 homes sold in January 2008, according to FAR.
“Many people are looking at today’s market and seeing opportunities to find the home or business they’ve always wanted,” FAR President Cynthia Shelton said.
What’s good news for buyers is bad for sellers, as foreclosures continue to depress home values.
The statewide median sales price for existing homes last month was $139,500, down 33 percent from last year, when the median sales price was $206,900.
Condos also are selling, with FAR reporting a 13 percent statewide gain to 2,556 units sold, up nearly 13 percent from 2,266 sold in January 2008. The existing condo median sales price last month was $113,400, down 40 percent from last January, when it was $190,200.
Fort Lauderdale saw home sales soar 52 percent in January, to 467 from 307 a year ago. Values continue their downward spiral, with the median price at $191,000, down 39 percent from last January’s median price of $314,200.
Condo sales in Fort Lauderdale were up 29 percent, to 531 units from 411, but median prices were nearly halved to $85,000 from $153,000 a year ago.
Miami reported a 47 percent hike in the number of existing home sales, to 407 from 276. The median price, however, fell 38 percent, to $208,100 from $336,800.
Miami condo sales were up 27 percent, to 379 units from 298. The median price fell 48 percent, to $149,100 from $284,000.
Activity wasn’t as upbeat in West Palm Beach, where January sales were up just 11 percent to 408 homes sold from 369 a year ago. Median prices were down 32 percent, to $232,100 from $343,200.
Condo sales were up 24 percent, to 375 units from 303. The median sales price was down 31 percent, to $108,900 from $157,700.
The national median sales price for existing single-family homes in December 2008 was $174,700, down 14.8 percent from a year earlier, according to National Association of Realtors.
“It appears some buyers are taking advantage of much lower home prices,” NAR Chief Economist Lawrence Yun said. “The higher monthly sales gain and falling inventory are steps in the right direction, but buyers will continue to have an edge over sellers for the foreseeable future.”
Obama's Next Challenge: Stop Foreclosures
Daily Real Estate NewsFebruary 18, 2009
After President Obama signed the $787 billion economic stimulus plan into law Tuesday, he said now the focus needs to be on stopping the spread of foreclosures and falling home values.
"We must ... do everything we can to help responsible home owners stay in their homes," Obama said.
The challenge, say those who have been studying the problem, is to lower the amount of money borrowers must pay every month.
More than half of mortgage modifications have left borrowers with the same or higher loan payments because lenders tack on past-due principal, interest, taxes and insurance, which drives the total owed higher, according to an analysis by Alan M. White, a professor at Valparaiso University School of Law. The study looked at more than 23,000 modifications. At the same time, White says, lenders have been unwilling to reduce principal even for borrowers owing vastly more than their homes are worth.
As a result, 49 percent of borrowers redefaulted within six months after receiving a modification that increased their principal and interest payments by 10 percent to 20 percent, according to ratings company Fitch.
The re-default rate was 21 percent for borrowers who saw their payments fall by 20 percent or more.
Source: The Wall Street Journal, Ruth Simon (02/18/2009)
After President Obama signed the $787 billion economic stimulus plan into law Tuesday, he said now the focus needs to be on stopping the spread of foreclosures and falling home values.
"We must ... do everything we can to help responsible home owners stay in their homes," Obama said.
The challenge, say those who have been studying the problem, is to lower the amount of money borrowers must pay every month.
More than half of mortgage modifications have left borrowers with the same or higher loan payments because lenders tack on past-due principal, interest, taxes and insurance, which drives the total owed higher, according to an analysis by Alan M. White, a professor at Valparaiso University School of Law. The study looked at more than 23,000 modifications. At the same time, White says, lenders have been unwilling to reduce principal even for borrowers owing vastly more than their homes are worth.
As a result, 49 percent of borrowers redefaulted within six months after receiving a modification that increased their principal and interest payments by 10 percent to 20 percent, according to ratings company Fitch.
The re-default rate was 21 percent for borrowers who saw their payments fall by 20 percent or more.
Source: The Wall Street Journal, Ruth Simon (02/18/2009)
Tuesday, February 17, 2009
Fannie, Freddie to suspend foreclosure sales
South Florida Business Journal, Monday, February 16, 2009
Fannie Mae and Freddie Mac has joined the growing list of institutions agreeing to suspend foreclosures.
The two said they will suspend all foreclosure sales involving occupied single-family and two- to four-unit properties through March 6.
The suspension will give loan servicers more time to help troubled borrowers find an alternative to foreclosure.
The housing giants, which were seized by the government last fall, had said they would suspend evictions and foreclosure sales between Nov. 26 and Jan. 9, a decision affecting thousands of proposed sales.
The latest suspension does not apply to vacant properties in foreclosure.
McLean, Va.-based Freddie Mac (NYSE: FRE) and Washington, D.C.-based Fannie Mae (NYSE: FNM) own or guarantee almost half of the country's mortgages.FNM) own or guarantee almost half of the country's mortgages.
Freddie Mac said it gives lenders servicing its mortgages broad authority to provide forbearance to borrowers who are not yet delinquent. In addition, lenders can provide permanent rate reductions, mortgage term extensions, forbearance of principal or other modifications to borrowers who are already delinquent.
Fannie Mae and Freddie Mac has joined the growing list of institutions agreeing to suspend foreclosures.
The two said they will suspend all foreclosure sales involving occupied single-family and two- to four-unit properties through March 6.
The suspension will give loan servicers more time to help troubled borrowers find an alternative to foreclosure.
The housing giants, which were seized by the government last fall, had said they would suspend evictions and foreclosure sales between Nov. 26 and Jan. 9, a decision affecting thousands of proposed sales.
The latest suspension does not apply to vacant properties in foreclosure.
McLean, Va.-based Freddie Mac (NYSE: FRE) and Washington, D.C.-based Fannie Mae (NYSE: FNM) own or guarantee almost half of the country's mortgages.FNM) own or guarantee almost half of the country's mortgages.
Freddie Mac said it gives lenders servicing its mortgages broad authority to provide forbearance to borrowers who are not yet delinquent. In addition, lenders can provide permanent rate reductions, mortgage term extensions, forbearance of principal or other modifications to borrowers who are already delinquent.
Tuesday, February 3, 2009
Pending Home Sales Show Healthy Gain
The forward-looking index, based on contracts signed, rose 6.3 percent in December. Big gains in the South and Midwest offset modest declines elsewhere, according to the latest NAR report.
Read More>
Read More>
How to Find Money to Invest in Real Estate
Talk to local, rather than national, banks first. They're more likely to understand your business. Detailed documentation of the project's income potential, as well as the time, money and sweat equity you've already put in, are essential.
Read More>
Read More>
Obama Promises More Low-Cost Mortgages
President Barack Obama on Saturday said reducing mortgage costs would be a key part of his plan to improve the economy.
Read More>
Read More>
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