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Foreclosed Real Estate and Homes

As you may notice, the news is everywhere about foreclosures. Many people are taking this time to evaluate the purchase of a foreclosure property. Here you will hopefully find more information regarding foreclosures than anywhere else.

For reference , most of my work this year has been involved in foreclosures. I have worked with many large banks in foreclosures , banks like Deutche Bank , Veterans Affairs (VA), FHA/HUD , Chase , Countrywide, and dozens of other banks.

I personally live in a property that was foreclosed on several years ago , so I'm a big believer in them. Foreclosures can be a great way to get more house for the same dollar. There are also pitfalls concerning foreclosures that could hurt your pocketbook greatly.

Here I will share some information with you on foreclosures and the like.

The sections are as follows :

1. How do I Buy a foreclosure?
2. What are the prices of foreclosures?
3. Are there a lot of foreclosures right now?
4. Do I need money down for a foreclosure?
5. Are foreclosures always in bad condition?
6. Can foreclosure be avoided?
7. Are foreclosures a good investment?

Because of this, I highly suggest partnering with a REALTOR that deals in foreclosures. If you need help locating one, please let me know as I have a list of those that deal in foreclosures all across the US.

Once you find a foreclosure, your agent will have to prepare an offer for submission to the bank. Banks unlike normal sellers may take quite some time to respond. It's not uncommon for a response to take 3-4 days due to high volume.

Foreclosures are typically priced at what the bank believes it is worth. They are not always a great deal as many are led to believe. Most banks I have worked with allow a 3x mutiplier for property repairs.

Take for instance a typical 3br 2ba home that's 1200 square feet.

Everything in the property is in good condition with the exception of the carpet , it needs replaced.

The cost to replace and install the carpet is $20/square yard for carpeting.

For a 1200ft home, this comes out to 133.33 square yards.

133.33sqyd X $20 per square yard comes out to $2666.66. This particular bank allows a 3x multiplier , which brings us to a allowance of $7999.80.

They will then take this number off of the purchase price of the home.

This is how you can get a GOOD deal by buying a foreclosure. In addition to this, most banks will drop the asking price of a property every 30-45 days in order to sell the asset.

A problem can come up with the agent not factoring in a unknown problem with the home.
On a property I personally purchased, the roof was estimated to need replaced. This was factored in to the asking price of the property. However, this was not the case, so for that particular item , I saved about $6000 over a comparable home. However I saved this amount, there were several things that weren't factored in to the price, the hot water heater was bad, the plumbing needed repaired, and several gas lines were leaking. I ended up saving about $15,000 over the cost of a property similar to this one.

It is not always the rule to get a great deal on foreclosures, as they are priced the way they are for a reason.

As of my last checking, there were about 500 properties available for sale in the Pickaway County area. Out of those 500 listings, 40 of them were noted as bank foreclosures. This means that about 8.6% of properties in my area were foreclosures.

Foreclosures are not hard to find for a experienced agent, however there won't always be something you want exactly.
You will need to be flexible on your wants for a home

Many people have watched infomercials on TV concerning the "No Money Down , Foreclosures" systems. I personally have researched these systems out a great deal, and regardless of what these so-called gurus say, you do need money down to buy about 99% of the foreclosures available.

The issues lies with the way banks operate, most banks know that if a foreclosure is priced right, it will sell very quickly.

Because of this, banks will require a deposit of "earnest money" to accept an offer from a potential buyer. This varies greatly from banks, the smallest I've ever seen them ask for a deposit was $250. In that particular case, that could very well be the only money the buyer would have to put down in order to purchase the property.

I have likewise seen banks ask for as much as 3% of the purchase price of the home in a deposit at time of purchase. This varies quite a bit, but locally , $500-$1000 seems to be the norm.

Banks are usually willing to pay for your closing costs, so for most of the clients I've worked with this year, the earnest money was the only money they needed down. In some cases , the bank paid for everything, so they purchased it for $0 down.

Nope.

Foreclosures can range from caving in on themselves to absolutely pristine.
Locally we had a 12000sqft mansion on 40+ acres that was in absolutely gorgeous condition.

Absolutely!

I want EVERYONE that reads this, to know that there are absolutely ways to avoid foreclosure.

A few options available to a homeowner include :

• Deed In Lieu
• Forbearance Agreement
• Loan Modification
• A Short Sale
• Refinance

A Deed in lieu - Simply put is where you give your home back to the bank. This is the first (and in my opinion the worst) option available to a home owner to avoid foreclosure. The benefit is that the home isn't foreclosed on by the bank and judge, but it still can take a heavy toll on a individual's credit report. From a recent ask.com posting, research has shown that it can hurt a credit report by as much as 200 points.
As this is an option , I believe there are better options out there.

Forbearance Agreement - This is a option that isn't regularly pursued, but can be a good option for certain situations.
A forbearance agreement allows a mortgagor the ability to delay , or bump payments for a certain time, in order to repay the bank. In situations where a lost job , temporary loss of health , or the like, this could be a very good option.

Loan Modification - This is somewhat similar to a Forbearance agreement, but allows the mortgagor to change the way their loan works.
Currently , FHA is allowing the modification of many of their loans to 30-year fixed loans, and some times with a lower interest rate.

Short Sale This is the best option for when a mortgagor is not able to do a forbearance agreement or any of the other options (Outside of the deed in lieu).
Short Sales allow the property owner to sell the property on the market, at the current going rate, regardless of mortgage payoff. In areas where the market has declined ,and a market sale is no longer possible, this is a very good way to sell. Banks will usually pay the agent's sales commission , and in some cases, will even PAY the owner to do a short sale. Short sales avoid other legal expenses associated with a foreclosure, and because of this , banks are usually willing to look at this option. As I said earlier, this is my favorite option , as I personally have helped people get out of un-sellable properties in the past with this option. Credit score loss is less than a deed in lieu by 75-100 points, this can help a person buy a house again in a much shorter time period.

Refinance - In situations where a individual has a credit score high enough, they can usually refinance a home with favorable rates. For many home owners , this is the option they choose, about 25% of loans that are in default are 2/28 option ARMs which have high interest rates. Many times they can be refinanced with 30 year fixed loans, with low , or at least lower interest rates as compared to the indexed ARM.

In my opinion yes, I personally have bought foreclosures as investments. I would love to show you how home ownership can be a great investment.

After reading all this, you are still interested in foreclosures, I can supply you with a FREE real-time list of available foreclosures in our area. Simply fill out the form below, and I'll set up your foreclosure list!