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First Time Homebuyers- 10 Things to know when buying foreclosures

2010-04-24T06:02:00.000-07:00

It's a fact, foreclosures are popular. You can buy a home with huge savings, and with an $8000 tax credit to boot. We all see those ads where time is running out on the tax credit, and many 1st time homebuyers entering the market are going after foreclosures at a high rate. But what are the drawbacks for a first time homebuyer when buying a foreclosure?

Well for starters, many foreclosures require repairs, sometimes extensive. Almost all buyers know that. This listing on 1604 Norris Landing Dr in Snellville GA is an example of that. What most buyers don't realize until its too late is the HUGE competition for foreclosures, especially affordable ones. Buyers that were priced out of the market a few years ago now have the ability to afford many of these homes. The ones priced below $150,000 in a market that once averaged $250,000 are going fast. But when buyers have found this perfect home, they feel pressured to purchase without inspecting, just to get a good deal. But is it a good deal? Lets look at some things.

If you're a handy person, you have minimized some of your worries. Most of the cost of repairs is labor. If you have the time and patience (and I want to stress "If", please be honest here!), you will save big, especially on cosmetic repairs. The savings you keep there you can spend on other repairs that require a professional, like heating and air.
Not a handy person? Then find a professional that will accompany you on your home search, more than likely a family member. Sometimes to make a decision on wether a home is a good deal, you'll need to get a quick repair estimate of the true costs. You don't want to buy a home thinking you'll need $2,000 for repairs only to find out you need double that amount. Remember, an inspection report will tell you the things that need repairs, not how much those repairs will really cost. That's very important.
Get prequalified. I cannot stress this point enough. There are purchase/rehab loan programs out there for homeowners purchasing thier primary residence. The most popular is the FHA 203k rehab loan that allows you to get a loan for the purchase price and the cost of the repairs. If you find out how much you can qualify for, then you'll know just what kind of budget you're working with. If you happen to stumble on a home that doesn't require tons of repairs, all the better.
Always, Always, did I say Always?...get an inspection, even if the home looks great to the untrained eye. Foreclosures are sold as is. Some banks may repair items, but in most cases they wont. If the home looks perfect, there may be hidden issues in major systems like heating and air, plumbing or electrical even in new construction. Remember in new construction foreclosures, sometimes the home is not completely finished or "punched". Always get an inspection. If the bank requires an inspection before you make an offer and wont entertain an inspection contingency, it's still worth it to get an inspection.
Remember that some vacant bank owned properties are being vandalized. They are taking everything, from the cieling light fixtures to the granite countertops, kitchen cabinets and appliances. The newest trend is A/C air handlers, which are being stolen at an alarming rate, and gas meters. Who knows why they're taking these things, but it can work out as a lower priced home for you. Want to know what these things cost quickly? If you have a smart phone, visit Home Depot or Lowe's to get pricing on supplies while you're still looking at the home.
Get an offer in quickly. You know that home that peaked your interest because it's in a gorgeous neighborhood and it's priced more than 30% below current market rate? There's at least 5 more people that feel the same way you do. Gone are the days when you could view a home, think about it, view it several days later, bring your significant other to look at it, mull it over some more and then make an offer.....not happening in this foreclosure market any more. You'd better have your significant other there, or any other decision maker for that matter, and put in that offer as quickly as possible. That still wont guarantee you the contract. If, while you're negotiating with the seller, another offer comes in, the listing agent is required to then send out notifications to all offerees that there are multiple offers, giving everyone a chance to change thier offer if they choose, to make their offer more competetive.
All cash offers is not a guarantee of winning a bidding war. Many people think this, but it's not always true. The bank is looking for the highest and best. If the cash offer is not the highest, sometimes the bank may take that offer, especially on a home that does require extensive repairs. FHA loans usually require the home to be at a minimum livable standard, so if the FHA loan buyer's offer is higher, and the cash offer is slightly lower, the bank is in a better position with the cash buyer to get that forclosure sold without any "lender" required repairs, because in the case of a cash buyer, there is no lender. But if the foreclosure property is in great shape, then the highest price usually wins out, cash buyer or not.
Bidding Wars. Bidding wars are not fun. You've set your mind on a particular property after searching long and hard, submitted an offer, then find out a day later while you're in the middle of negotiations that there are now other offers coming in. Remember that the listing agent has to submit all offers to the bank, even if you are currently negotiating with the bank. What can you do if you find yourself in this position. All you can do is give your "highest and best" offer. If you're already at the highest you can go in price, try asking for less seller paid closing costs, though that will require more cash from you at the closing table. Or maybe you can change your closing date. It may make a small difference if you can get your loan to the closing table sooner. Finally, if you can increase the price do so. Remember with a bidding war the bank wants the highest net, that will require the least amount of lender required repairs, and that can close quickly.
Don't think you want to buy a foreclosure with this much pressure? Try buying a HUD home. HUD offers a much easier process when it comes to buying their homes. You have some time to take a look at the property, becuase hud will list the bid end date on all it's lsited properties. That means you know just how much time you have to do your decision making and get it an offer. HUDs bid winning process is simple - it's the highest net to HUD. You must have a lisenced agent submit your bid, homebuyer's cannot submit their own bids. To view up to the minute listings in these Georgia counties: Gwinnett, Fulton, Dekalb, Cobb, and Rockdale counties, follow each county link to our HUD site, or you can view all HUD listings at http://www.hudpemco.com/. Chapman Hall Realtors Atlanta Northeast is a Certified HUD Broker. For a limited time, HUD is offering $100 down payment on any buyer purchasing a HUD home and using an FHA loan to fund their purchase in California, Hawaii, Georgia, and Guam. If you have more questions about the HUD $100 down program, send us an e-mail. Another great source for finding HUD Foreclosures in your area, even those outside of Georgia, is HUDforeclosed.com
When buying any foreclosure, always ask the seller to pay for a 1 year home warranty. When you have a home sitting for a while, things can come up later after you've closed that an inspection may not have found. You can minimize your out of pocket cost by having this warranty. Make sure to remember to renew it each year, keep an alarm on your smartphone to remind you

These are just a few tips to help you navigate the world of buying foreclosures. Please feel free to e-mail us if you have any questions, or leave a post, we'd love to hear from you!

Selling Your Home In Today's Market

2010-04-15T04:40:00.000-07:00

Goodness knows its a tough time to sell a home if you have no equity in it...come to think of it, its tough to sell if you HAVE equity. Who wants to lose money on the sale of something as personal as a home? If you are thinking of selling your home now, and it's not a distress sale (foreclosures or short sales) then here are a few tips to successfully selling your home.

Begin by knowing the market in your area. Either you need to know it, or the realtor you hire needs to know it. If you have an idea of what homes like yours are selling for, you're off to a great start. Studies show that a home priced right is more likely to sell quickly and for more money than an overpriced home. By the time there's a price reduction 30 - 60 days later, your home will be old news, and questions will arise from buyers and Realtors as to why the home still hasn't sold. In other words, what's wrong with it!

Know that you will be competing 1st with foreclosures and short sales. It's a buyer's market and buyers are looking for a deal. But be aware that deals come with strings. Almost all foreclosures are sold as is, some with extensive repairs, your home is going to appeal to a buyer that may not want to fix anything, so think from a buyer's standpoint and compare your sale to the foreclosures in your area. If they're mostly fixer uppers, you may want to market your homes as a "move in ready " home with a warranty.....and that's of course when you get your home to move-in ready status!

Get your home in tip-top showing shape. Seems obvious, but you'd be amazed at the amount of sellers trying to sell their home without getting it ready for a sale. The biggest advice? Get rid of the stuff, AKA junk! Garage filled with ....stuff? Rent a storage space and get it out of there, trust me, it'll make your garage look bigger. Same goes for all the closets. Female buyers are going to want a large closet, make yours look that way. Get all your seasonal stuff out of there, if you're selling in the summer time, get all your winter coats and boots out. Clear out the 1001 comforters out of the linen closet that you'll never use in the next few weeks and months, keep it minimal. The rule should be: if you're not using it in the next 30 days, store it outside of the home. Need to know how to stage your home? Visit an active subdivision model home. Check out their closets, you'll never see the closets bursting with clothes, or the rooms bursting with furniture. If you don't use a dresser except to store sweaters and it's summer, store the dresser and it's contents elsewhere. Free the rooms and house of clutter, it really makes a difference.

Use the Internet. It's the number 1 spot buyers go to when looking for homes, even if they're working with a realtor. Create a twitter account for your house, create a postlets account at postlets.com to create a web page for your home, it's free. Utilize as many web links as possible, and use lots of pictures. If you're not savvy, and you have kids, get them to do it. If you're working with a realtor, make sure they advertise on the web as well, and we're not just talking about thier MLS system and realtor.com. The best agents utilize the web to the max.

Know in advance your breaking point. Buyers are going to low ball you. Its a fact in this market. Don't take it personal. Make sure you know all costs involved in the sale and then you can wiggle around from there. If you're selling a home for $250,000 and you owe $205,000 and a buyer offers $220,000, give them that price if you can negotiate closing costs and other things. The price is king for some buyers, and they most likely will sacrifice other things to keep the purchase price low, and bragging rights to their friends. They're submitting an offer because they like something about your house, but don't be fooled, there are other favorite homes they have on a list and if they can't get yours at the price they want, they'll move on. Yours just happens to sit at the top of thier list when they submit the offer.

These tips are just starting points to help you compete in this tough market. The first point before all this is do you really need to sell right now? If your answer is yes, then follow through and attack with determination, and bring plenty of patience. You will need it.

More home selling tips

Find help to sell your home, hire an agent. Find one by visiting our site at http://www.chratlanta.com/

A Buyer's Market....Really?

2009-11-07T07:34:00.000-08:00

Many think its a buyer's market....and it is. But there are exceptions. If you are a seller trying to sell your home in this market, and you have enough equity in your home to do so at current market values, you're well aware of the foreclosures and short sale's you'll have to compete with. These homes are vacant and easy to show, though not staged. But a buyer's perception of the word "foreclosure" means to them that they're getting a deal. So while your home may be priced the same as a foreclosure, the foreclosure usually gets the most attention. The buyer's agent knows that the bank that owns the property has no emotional ties to that home. If a buyer comes in with a lower offer, its all about the math for the bank. The bank does not care that new hardwood floors were installed just a year ago or the kitchen has been updated and how can they sell without recouping that cost.....not even a thought to the bank. Right now banks are losing $$ on most foreclosures and short sales.

But here's the latest thing....foreclosure/short sale homes priced below $130,000 are going under contract so fast it will give you whiplash! There are so many buyers that can qualify for homes in that price range and there definitely is not a surplus of homes in good condition in that price range. Many buyers unaware of this trend start out thinking it'll be a piece of cake to find a great deal in their price range, that the 4 bedroom basement home that was reduced to $110,000 on Monday morning will still be available Monday night. Not always the case, and buyers learn the hard way. And it's definitely frustrating. It is definitely a "seller's" market in this price range, but in this case, the sellers are not benefiting. The bank is losing on a foreclosure and a homeowner selling by short sale gains $0 from the sale. So buyers must be prepared! Here are a few tips to help you get the best deal under contract:

Know what you need: You must know exactly what you need/want in a home when you are dealing with this price range BEFORE you go shopping. You will not have time to think about it or compare;
Act quickly: You must be prepared to act quickly once you find it. All decision making parties should be present at all showings. There will not be enough time for one buyer to see the home and then the co-buyer take a look at a later time to make a decision the next day....the home will be under contract by the time you get around to deciding;
Be prepared for rehab work: The best deals come from homes that may need some work. If you are in a position to, or can do some of the work yourself, focus on homes that needs a little TLC. The homes in move-in condition in this price range WILL have a LOT of competition;
Search for new listings only: The key here is to have your agent search their MLS system. Many real estate web sites get their info from the local realtor MLS system which sometimes will update their info 24 hours after data is entered in the the local MLS system. Therefore you may see a listing as active, which may be under contract;
Be patient: Know that the listing agents cannot update the listing status fast enough. Even when your agent has a property that is showing available, it may sometimes be under contract because the listing agent has not had a chance to update the status. Let your agent do his/her work by contacting the listing agent to find the true status of the listing.

Hopefully this information will be helpful to you when purchasing your home. Also, don't forget about HUD foreclosures which are great deals. HUD is even offering buyers an opportunity to buy a home with just $100 down. Visit our site at http://www.100downforeclosure.com/ to find out the details about this program and to view HUD listings.

Short Sale Myths

2009-09-11T12:32:00.000-07:00

I wanted to talk about the myths about short sales from a buyers perspective. Short sales can sometimes take a while (an understatement) to go through the approval process. If you are in a rush to get into a home, do not put in an offer for a short sale. In Georgia the average time to complete the purchase process is between 14 days to 45 days. Short sale approvals can take up to 90 days, sometimes even longer which will extend the closing process. That's the major negative issue for most buyers. No one wants to wait that long to find out if the bank is happy with the price the buyer has offered. But short sales can turn out to be real good buys. If you are interested in buying a home that is a short sale, have an agent show you comps of homes that are currently listed or have sold in the last 6 months that are comparable to what you wish to purchase. If your short sale is at, or lower in price than the market price of other homes in the area, its a good deal, especially if the home is in pretty good condition, even better if its vacant. But here are important things you need to find out from the seller or listing agent before you put in an offer:

How many loans (mortgage liens) are on the property? 2nd mortgages usually lose big on a short sale and they can sometimes be the sticking point for a full short sale approval. The 1st mortgage company holds all the cards as the 1st lien holder. If the amount of the payoff is less than the balance of the 1st mortage, then any funds that the 2nd mortgage company will receive will come from the 1st lien holder. If the 2nd mortgage company is getting less than 10% of the balance from the 1st lien holder, they may require the property owner to bring additional cash at closing, which may kill the entire deal if the property owner has no cash to give. If there's one lien, the approval will come much smoother and faster. Once the 1st lien holder is happy with their net, there is usually no cash requirement for the property owner at closing.
Is the property a primary residence or investment property? Again it comes down to money. With a short sale, banks are much more willing to pay unpaid HOA liens, funds towards 2nd mortgage liens, etc if its a primary residence of the seller. If its an investment property, the bank may not be willing to pay any of those items to approve the short sale, and what they don't pay, the seller will have to pay to make the deal work. If the seller doesn't have the money......
When the 1st mortgage lien is a fannie mae lien, it may take a little longer to get an approval. The bank has to get an approval from the investor, and in this case, the investor is fannie mae, they have tons of short sale requests to review, it may take longer than usual.

You can find some excellent deals through short sales. I have had several that were approved in 30 days or less, it just depends on the bank. I have short sales priced at $105,000, $139,000and $159,000 all 4 bedrooms and in excellent condition.

Chapman Hall Realtors Atlanta Northeast

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