Let’s begin our discussion by defining the relevant terms. Technically, a foreclosure is a bank owned property or REO (real estate owned).  The foreclosure process has been completed and the bank now owns the property.  Next the bank lists the property with a real estate agent to sell it.  This differs from a pre-foreclosure where the owner of the home still owns it, and probably still lives in it, but is the home is in the process of being taken in a foreclosure auction (in our county is it at sheriff’s sale).   You probably have heard of short sales, in which the bank takes less than what is owned as payment in full for the mortgage.  A short sale is done on a pre-foreclosure property.  I will do another post on buying a short sale.

Here are the pros and cons of buying a foreclosure:

Pros:
Probably discount price
Possible special financing from lender

Cons:
Property is generally in poor condition
Bank processes are slow, you must have patience
May have to sign special addendums from the bank
May have difficulty getting funding

During the foreclosure process sometimes the homeowner becomes angry and damages the property or removes items that would normally remain such as appliances, light fixtures, and even kitchen cabinets (actually happened with one of my listings.)  So REO properties are generally in poor condition.

REOs can often be purchased for below market value.  When the bank puts the property on the market, it generally lists it for market value, but as time passes, the bank will instruct the real estate agent to make price reductions.  During this time the property is being taken care of by the real estate agent on behalf of the bank.  But since it is usually vacant at this point, the home is vulnerable to vandals or in winter pipes bursting.

When making an offer on a REO you must keep in mind that the bank usually will not make any repairs to the property, you are taking it strictly “AS-IS.”  So, if your home inspection shows any major defects your only choice will be to cancel the purchase, pay for the problems yourself, or try to renegotiate the purchase price with the bank.  If you do go forward with the purchase you need to be prepared to take on the problems and responsibilities of the property both the ones you can find yourself or through a home inspection and hidden problems that may not be found before the purchase. 

Sometimes the home inspector will not be able to inspect all systems if the property has been winterized or the utilities turned off.

If the properties you are considering are in poor condition it is likely you will need to make a low offer in order to make it worth your while to take on the problems that the house may have.   If you will be making low offers be prepared to have many of your offers rejected.  But keep going and you will likely find a bank who will take you up on it.

It is also worth pointing out that banks tend to take their time in making a decision as to whether or not to take your offer or make a counter offer.  You must be very patient.  Your patience is the tradeoff for getting a bargain. 

There is one other pitfall that you need to be aware of.  If the property is in poor condition it will be nearly impossible for you to get a conventional mortgage loan.  You will either have to buy the property with cash or use a rehab loan.  FHA offers a rehab/purchase loan program for this purpose.

So, if you would still like to purchase a bank-owned foreclosure in Monmouth County, NJ.  Contact me and start making offers.

If this all seems too much for you, please shoot me an email or give me a call.  There are other bargain properties that are not bank owned that may enable you to achieve your dream of homeownership.

Trust me, the report is high on my list and I will get it done and posted as soon as I can. How about I distract you with this?:

Monmouth County NJ - Inventory vs Sales

Comparing the fourth quarter of 2008 with the fourth quarter of 2007 shows average days on market is slightly higher than this time last year.  Inventory is slightly higher than this quarter last year and number of sales are significantly lower.  Median home prices have also declined, by about 10% in the last year.

2008 vs 2007 Sales Compared

We are currently at almost 17 months of inventory. This means that at the current rate of sales it would take 17 months to sell off the current inventory.  We are not at the bottom yet. 

For a detailed analysis of your town, contact me.

May your Christmas be filled with many Blessings

Happy Hanakkah

Sales are on the decline after being on the rise for the first half of the year, this is a normal seasonal trend, but shows no sign of a market turn around.

Days on marking is hovering around 94 and we are currently at 14 months inventory. This means that at the current rate of sales it would take 14 months to sell off the current inventory.

The conclusion is that prices are still coming down, so if you are planning to buy this is a great time because interest rates are also low.

If you have to sell, you will need your home to be in good condition and at a lower price than the competition.

Call me and I will help you figure it all out and get the best price in today’s market in the least amount of time, with the least amount of hassle.

*Data is compiled from Monmouth Ocean MLS.

New Jersey Realty Transfer Fee Calculator

First the good news: The number of home sales in Monmouth County has been steadily rising throughout the first half of 2008, but sales still lag behind those for the previous 6 months.  Even so, this is still good news.  We need sales to increase to reduce supply.

In addition, the Days on Market of houses that are selling has gone down slightly.  This could be related to a number of factors including:  more realistic pricing, and/or more buyers who are motivated to buy.

The bad news is that prices are still declining and inventory is still rising so the competition is increasing rapidly.  Only the homes with the best value are selling.  Buyers want more for their money (more features, more space, better condition).  If you are a seller you need to price your house so it is giving the buyer more than the comparable houses, for the same money, or if both houses are equal, your price needs to be lower to get the buyer to see value and choose your home.

Current inventory is the highest since August 2006, a staggering 4900 single family homes on the market in Monmouth County as of June 30, 2008.

Buyers are in a market of opportunity, but it won’t last forever.  With interest rates low and prices down, now is the time to buy.  When rates go up, the window of opportunity will close for many buyers.

Remember, if you want a copy of my market report for your town or would like a printable copy of these charts contact me through my agent website (link above.)

Data is complied from the Monmouth Ocean MLS. 

My daughter Rachel, age 18, is going on a mission trip to Northern Ireland to Minister to other teenagers there.  She will be there from late June to Early July.  If needs to raise another $1000 to go.  If you would like to contribute either send a check with “N Ireland - Rachel Gibson” in the memo and made out to Lincroft Bible Church. Mail your check to Lincroft Bible Church, 790 Newman Springs Road, Lincroft, New Jersey 07738 or use this ChipIn Widget to make your donation.  Even if you can’t give, please remember Rachel, all the teens, and the leaders going on this trip in prayer.

When choosing a real estate agent, you need to ask them about photography and ask to see the photos from previous listings.

On almost all of my listings, I use a professional photographer and a great virtual tour viewer.  You can see a sample at http://170ElyHarmony.com.

Here is a Mineapolis agent talking about the need for good photos on a listing: