Tag Archives: buying a foreclosure home

Questions to ask when choosing a mortgage lender to buy a home.

When deciding to buy a home, the first step is getting preapproved. With so many mortgage lenders out there, how do you choose? Many home buyers who come to me say the same thing. I just called my bank to get preapproved…they have all my information and my car loan…

Banks who are good for checking accounts or even car loans are not always stellar at mortgages, which are riskier and more complicated transactions. The right mortgage lender can be the difference between getting or not getting a home. In a competitive market where the right homes are going into multiple offers, listing real estate brokers and there sellers may evaluate offers, including which lender will get the job done. If lenders have a bad reputation, it can hurt your offer. And the wrong mortgage lender can definitely cost you a lot of time, heartache and money if they do not get the job done.

Beware – rates are not everything. Mortgage companies that cloak themselves in the best rates are not often the best to deal with. If they can’t get the job done, it won’t matter what their rate is.

So here are 6 questions to ask a mortgage lender to see who will get you into your new home.

1. What do I need for a preapproval letter? If they don’t ask you for tax returns, w2, bank statements and proof of employment income right from the start….and pull your credit report…your preapproval is not worth anything and will be worthless to a listing broker with an offer. Sellers want to know the loan will go through and so do you. They need all this information to ensure you will have a successful loan.

2. Do you do your own underwriting locally or in your office? Underwriting is the key to all loans. Underwriting is where they look at all the documentation and ensure the company/investor is satisfied with a minimal risk of default on the loan. This is very complex and involves a lot of precision but also a lot of subjectivity. If the underwriters are with another company or in another state or even another office, the loan officer will be powerless if anything is tricky with you or the house to ensure the loan gets done.

3. Who do I deal with during the loan process? Service counts for a lot. Companies where you deal with multiple people in multiple locations, states, etc. usually will delay your loan and cause you more hassles. You want a team where the loan officer, the person you start with is still involved and still your point of contact for you, your Realtor and your attorney. Companies who have you talking to a different person every time will just give you a headache and waste a lot of your time. Internet companies are famous for this, you often are pushed from person to person.

4. What are your loan fees? Of course you want to know what the loan will cost you. But just like rate, you should ask the question (and get it in writing) but that should not be the only factor considered.

5. What loans can you do? Not all banks, mortgage companies and credit unions can perform all mortgages. Renovation loans, FHA loans, various grants and programs loans with home buyer assistance at local or state level…if you are looking for a particular loan product or a few, you want to know they can do the job in house and not send out for underwriting and processing.

6. How many of your deals go through? This is a very important question. Some loan officers are salaried (many banks) while mortgage companies typically are strictly commission…they don’t eat if they don’t close loans. If they could care less if you close or not and merely are fulfilling a quota of preapprovals or applications…they are likely not the lender for you. And lenders who don’t close at least 90% or more of all loans they submit preapprovals for…that is a red flag.

What you need to know about using an Attorney in a Real Estate Closing

Many of my clients ask if they have to use an attorney when buying or selling a home. While the answer is no you don’t have to but you need to use an attorney when buying or selling a home and here is why.
1. Who is going to explain all the paperwork to you at the closing? By law in Illinois, only an attorney can explain the mountain of paperwork from the mortgage note to the deed to the closing charges to ensure that you are getting what you paid for and that you understand everything you are signing. So unless you want to just sign a bunch of papers you don’t understand, you need a real estate attorney there with you when signing.
2. If you are selling property…there are a myriad of paperwork that needs to be completed for transfer taxes and there are documents to be reviewed like the title, survey, deed. If you don’t understand every word and paragraph, how do you know it is completed properly? How do you know that your error will not put you in future litigation?
3. Dealing with the other attorney…In Illinois, most sellers use an attorney, so if you are a buyer, you would have to deal directly with the attorney on everything, inspection repairs, extensions, title problems and review? While these things are not rocket science they do require a level of knowledge and experience to be successfully achieved. If the other side has it and you don’t…you are putting yourself at a disadvantage.
4. Are you sure you are protected and getting what you are entitled to? Buying and selling a home is complicated. The deed and title need to be reviewed to ensure there are no liens. The survey needs to be reviewed. Real estate taxes and exemptions can expose you to paying more taxes out of pocket than necessary. A real estate attorney will review all these items and protect your interests now and in the future.
5. Make sure it is a real estate attorney who has experience in real estate. You would not have a cardiologist perform brain surgery. Both doctors, but specific knowledge and experience are required. Same with attorneys, there are nuances that only attorneys who practice in real estate will know and recognize. This could be the difference between preventing or solving a problem or something you will have in the future.
6. Where do you look for a real estate attorney? Your Realtor and/or lender are great resources. They work with attorneys every day and can give you a personal recommendation. Then you should talk to them and ensure you feel comfortable with them. It is important that you feel comfortable asking questions and ensure they have time to help you and will communicate with you.
7. What should I expect from my attorney? Some attorneys are the “just see you at closing types.” You are better off with someone who is with you every step of the way, not just on the day of closing. They should review all the paperwork, communicate with the Realtors, lender, title company and other attorney. They should answer all your questions and keep you up to date. They need to protect your interests and do what is best for you. And they should work well with all the parties involved to make a smooth transaction. If they seem difficult to work with, they are likely not the right choice. Real estate transactions have a lot of moving parts, all parties need to work together to ensure a smooth and successful experience. And keep in mind, while an assistant or paralegal can do a lot of the paperwork, they should not be the one answering your questions and explaining paperwork. That is what your attorney is for.

8. What should you pay for a real estate attorney? You usually pay a flat fee, not by the hour, phone call or retainer for a real estate transaction. It is paid at closing. You can negotiate the fee, especially as the seller of the property, but again it is more important to get a good attorney than save a few bucks.

Simply said. You don’t know what you don’t know. In every industry there are experts that people rely on to protect, educate and inform them. Doing it yourself you could miss something that will cost you money, hassle and more in later years. Unless you understand all the paperwork and laws…get an expert. After all, this is not only your home, but your largest investment.

Creepy Distractions that Turn Off Home Buyers when Selling a Home

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As a Realtor, I see a lot of unusual, even crazy things in people’s homes. If these silent idiosyncrasies could be explained by the home seller, I am sure they would make more sense. But in their absence and left to the imaginations of home buyers, these eclectic eccentricities can often creep home buyers out …distracting them from the advantages of the home and maybe completely turning them off.

I once entered a room with a full-sized child doll sitting in a rocking chair in the corner of the room. You could not see it until you entered the room. It surprised each and every person who came into the room and needless to say, no one really saw that room. Or the full-size “butler” statues – yes they scare you because they seem like a real person when you walk in the room. Startling to say in the least, creepy to say in the most. This goes for any personal possessions that may not be appreciated by the general public. Doll collections with eyes seemingly following you all over the room are not much lower on the creep-o-meter. Realistic stuffed toy animals of cats sitting on beds or a large tiger in the corner, are another eerie distraction.

And Taxidermy…I have seen heads of nearly every animal on the wall, as well as various skin rugs on walls and floors, horns on walls and full-on stuffed formerly live animals. While these trophies are treasured by the home sellers, to a homebuyer who may not share this hobby, they are unsettling and unpleasant. When you are blindly entering a home, it can cause children to be afraid and many times scare even adults who are not expecting a “jungle room.” Home sellers, let’s put it this way, do you want the home buyers referring to your home as the “dead animal” or even the “jungle” house after their visit. No, that will not sell your home. Put them away in storage, boxes, etc.

Marked graves in the yards for pets or urns of grandma on the mantel are another turn off. While the urn will move with you, home buyers only can wonder how many fluffy and spot bones they will inherit if they buy the home. What is unseen….is the best answer for this.

Weapons in the homes, from samurai swords and cross bows to maces and guns are more common than you would believe. Best to keep the armory put away in a closet in a box, etc. Not only are they dangerous, especially for children viewing the home, but also could be a theft temptation you don’t want to deal with and a potential insurance nightmare you definitely don’t want to deal with.

And while the Nazi flag may be reminiscent of an inside joke or historical memorabilia or something to the home seller, home buyers could easily be offended enough to ignore the home’s attributes and head for the door. Or better yet, they may never come to see the house as they see the photography on the internet and in listings.

Snakes, tarantulas, hamsters, gerbils and lizards may be in cages, but do you want to take the risk that recoiled home buyers will not enter those rooms with their slimy occupants present. If they have to stay in the room, best to cover them …. out of sight, never in mind.

And “Friendly” cats and dogs may be fine for your guests while you are around, but home sellers need to cage or remove these residents and not leave for unsuspecting home buyers…and agents for that matter. You don’t want agents and homebuyers skipping your house when they go to the door and “spot” is barking his head off at the front door awaiting them.

Real life encounters are not limited to pets. Believe it or not, more than once, I have opened a bedroom door to see a lump in the bed that was not laundry, but a real person sleeping in the bed. Both the buyers and I couldn’t get out that room or that home faster.

Again, while it is your home, it also is a product. If you wouldn’t like it in a department store, don’t put it in a home you want to sell. Remember, first impressions last forever and are not easily erased.

How to Win or Lose Multiple Offers when Buying a Home

I hear this all the time from home buyers, especially first-time homebuyers. I am tired of losing a home in multiple offers. With buyer demand, low interest rates and inventory shortages, multiple offers have been a standard in the home buying game, especially in competitive marketplaces and in the first-time buyer more affordable homes category of the market.

Home buyers never win in a multiple offer or bidding war. You don’t know what the other buyers are doing, what their financing is, how many of them are there. It can get very discouraging for home buyers. But, if you want a home and are in it to win it, you can’t be discouraged. You just need a strategy.

Timing is everything. Home buying in a competitive environment is no exception. The cream of the crop homes don’t last long. Beating other offers to the punch could make the difference between a sole negotiation with you and the seller and a multiple offer, so you need to know what is out there and go see it right away. Get into the home right away, even if it is inconvenient, do it. Keep abreast of the market by having your Realtor send you updates on the multiple listing service MLS 2x per day, morning and afternoon, that way you have the most accurate and updated listings available.

And you need to be ready to make a quick decision. Be prepared with your preapproval letter ready. Have all the decision makers attend the first showing. Waiting for your parents to come even the next day and you could be behind the eight ball. While it is important to make a wise unhasty and considered decision, you need to know your marketplace, do your homework and consult your Realtor expert so you know when the right thing comes along.

Don’t submit a low ball offer. That is the first way to lose a home to multiple offers. If you are offering on a fast-moving in-demand home, don’t try to negotiate too much and go really low. Home sellers can consider other offers up until you have a signed (not verbal) contract. If you low ball to try to get the price down, you will lose the home – guaranteed. If another offer comes in, you will definitely pay more to get the price. In a multiple offer, the list price usually becomes the rule, so you sometimes need to get right on it, close to it or over it to win the house.

Again, timing is the biggest factor. Homebuyers always need to consider the market, but not over consider. Remember, if you are getting a loan, and most people are, the home’s value will need to appraise. As a homebuyer, you can never overpay for a home. If you think the price is too high, much better to have no competition in negotiating after an appraisal than keep missing out. Yes, homebuyers do need to pay for the appraisal, so there is some chance of loss, but most times sellers will negotiate once they have a buyer. If you are not sure, have your attorney extend the inspection period and do the appraisal right away, then you can reduce potential risks and losses.

Other terms of the purchase can also be a way to win in a multiple offer. Cash maybe king, but the price is the main consideration to most home sellers. The only way to beat a cash offer is to outbid them. But if you are a cash offer or put more money down, that can be appealing to a seller. Conventional financing is usually more appealing than FHA financing.

Home seller concessions like closing costs, surveys, termite inspections, home warranties and percentage of tax proration can be another way you can beat out the competition. Down payment assistance or relative gifts can be one option other than seller paid closing costs. You can get your own termite inspection, survey and home warranty or do without them. Most financing options no longer require termite inspections and survey. Established homes with obvious boundaries do not necessarily need a survey. And unless your inspection reveals an potential issue with termites, you may not need. VA loans still however need a termite inspection, but it can be provided by the buyer.

Tax prorations are usually a small consideration, but combined with others above, it can win. Depending on the current exemptions, assessment and tax increases and since your lender escrows your taxes at closing and each month, you may not ever have a dime out of your pocket for a tax proration at 100% vs. 5 or 10% over the last tax bill.

Offering to buy the home “as is”. You should always still have an inspection and you still have the inspection contingency in place in a contract, so if you say you will purchase as is and there are deal breakers at the inspection, you can always renegotiate. With other buyers moving onto other deals by then, you may be on your own. You shouldn’t go into the deal with this plan to about face on this term, but you still have options.

There are always pitfalls with the appraisal or as is back up plan though. Backup offers could be in place, so the home seller may just go back to that, but other buyers may not wait around and move onto other homes.

Other terms like favorable closing dates or post-closing possession may suit the home sellers needs and favor your offer.

And if you are tired of the multiple offer game and don’t want to play anymore, there are other options. Very few times does a diamond in the rough have multiple offers. Could be the home a little old lady lives in that is in good condition, but is not updated, could be a foreclosure home. You can get a rehab loan to fix up the home the way you want. You still get your dream home and often a better price and less frustration.

Housing Trends…in-law arrangements in homes have made multigenerational buyers more common

Home buyers looking for in-law arrangements in homes have experienced sharp increases in demand putting sellers with the potential for in-law arrangements and suites in a great marketing position.

Parents are aging and sometimes costs of care and other complications require adult children to take them in. But on the other side of the generations, high cost of renting, divorce and difficulties finding jobs have resulted in necessity for in-law arrangements adult children and sometimes their families to live with the folks too.

In many cultures, multi-generational living is commonplace, but it is new to the masses in the US.
What multi-generational buyers are looking for are ways to have a complete or partial living arrangement for either side of the familial spectrum, while maintaining a comfortable separation, when needed.

Older parents coming out of their own living arrangements are often the most difficult to accommodate. They are used to living on their own, so “downgrading” to something less than what they had on their own can be a sore subject.

They will at minimum want as much of their own separate space as can be provided. Private bedroom with on-suite bath (usually no tub), decent-sized bedroom and closets, sometimes a sitting area and sometimes a kitchen. And usually no stairs.

While basements can often accommodate all this and more, older parents usually can’t or don’t wanted to be relegated to the “dungeon” – even with a chair-lift to handle the stairs. And they want to feel comfortable in the space to live as their own home, not like they are intruding.

Buyers looking for this kind of accommodation will likely have to do some renovation to make this happen. Renovation loans can be obtained in order to make changes, even moving walls, etc. They require a higher level of and come with a bigger interest rate, but the money in the mortgage is cheaper than credit cards. Sometimes the sale of their home can be used for this extra money. But don’t look for sellers to be ok with 2 home contingencies to buy a home. Not going to happen.

However, additions are more expensive and a lot more hassle. Looking for homes with extra 1st floor rooms, like a den, sunroom or 1st floor master bedrooms often can be a perfect in-law suite. Adjacent living rooms can be tapped to make a suite where parents can have privacy to have friends over, etc. If utilizing the 1st floor master, enough space has to be made to accommodate a 2nd master on the 2nd floor.

Many “in-law arrangements” are basement suites. While this will not often suit older parents, it is often perfect for young couple, single or young family needs. They can benefit from the proximity of parents for potential babysitting and save a lot of money with no rent payments, and sometimes better schools and area than they could afford. And they also have a completely separate retreat and living area, which both parents and adult children alike appreciate.

Depending on the family dynamic, the in law may not the final decision maker, but they may have a say in the final plan. Need to plan ahead to ensure you don’t ruin the space so it can not be reasonably reverted if necessary by a future buyer.

Sellers who have this type of feature in their homes or can even offer an idea of how it can easily be done, can certainly market that feature to capture some of these new buyer needs and put their homes ahead of others in the marketplace.

Selling and Buying a Home with Home For Sale or Close Contingencies – Facts and Fiction

If you are selling you home, do you buy a new home first or do you wait until you sell and risk two moves and being homeless. It can be a dilemma and can be exacerbated by complications of a large family or work schedule, schools, transportation, etc.

Once upon a time, buying a home contingent on the sale of your home was normal. When the housing slump occurred, sellers did not have enough confidence in the market that the buyer could sell their home to risk taking their home off the market. Since 2015, that is beginning to change. Sellers are having more confidence in the market, but not total confidence. Here are some facts for buyers and sellers about contingencies.

Buyers:
. You can not purchase a foreclosure or short sale home contingent upon the sale or close of your home. And banks will not give you months to sell and close on your home.
. A purchase contingent on sale or close is a big seller concession, they need to be compensated with a better offer price to risk losing market time.
. Best time to ask for contingent on sale or close is during the winter months. Sellers are not risking as much. . You have better chance and price negotiation on that – still no foreclosures or short sales.
. Do the inspection up front, but not the appraisal. Yes, the inspection costs money but you need to show the seller good faith that you are serious about the deal. Inspection items are negotiable and need to be done within the 1st week of any contract so no one wastes their time.

Sellers
. Never take a contingent on sale/close contract over a non contingent contract. Yes, you may get a little money more, but it is not a done deal and wasting precious market time can cost you more than you gain if it doesn’t go through.
. Your house is NOT SOLD. There are no sure things here, there is always a risk. Keep showing it.
. Your agent should do a market analysis of the buyer’s home to ensure their home is saleable or closeable to mitigate the risk.
. Don’t compound contingent on sales. So don’t you get a house contingent on sale/close when your buyer has the same situation. And don’t take a contingent on sale/close deal if the buyer’s buyer has the same. Just like dominos, too much risk, it could all come tumbling down.
. Not all sellers should consider a contingent on sale/close. Contingent on close is better, but if you are in a good market and getting tons of activity…..better not to risk it.

The property ladder can not move without someone taking a risk. Contingencies on sale/close can work, but due diligence is required to calculate the benefits and risks. Many sellers and buyers benefit from this, but both must be realistic.

The RIGHT way to look at closing costs when selling a home or buying a home

Closing costs when selling a home or buying a home seem to always be a tug of war between buyers and sellers. Buyers think that sellers should include closing costs for them. A lot of times when I show younger people their parents or grandparents always tell them “they (the seller) should include closing costs.” Sellers often oppose the idea of including closing costs for buyers, often sellers say. “Why should I pay their closing costs. If they can’t afford closing costs, maybe they shouldn’t be buying a home.” The truth is both parties are wrong. When selling a home or buying a home, closing costs become just part of the equation to make the deal happen. However, the way to look at it is not seller concessions or seller paying the closing costs…it should be seller allowing the buyer to finance their closing costs by making it part of the deal.

Many buyers need the closing costs to make the deal happen. There are a lot of people who just are not savers any more. They may good money but the down payment is about as much as they can do. But buyers need to realize that the seller doesn’t owe them anything. And while every thousand dollars costs a buyer $5 dollars a month in monthly payment, $1,000 dollars is a $1,000 to the seller.

Sellers need to realize that they don’t get to decide who gets to buy a home or who does not get to buy a home. Sellers should not care who is buying and what their financial situation is, as long as they are approved to buy the home and will get the loan and offer an agreeable price.

When buying a home, you should consider financing your closing costs. It can help you get into a home and use your savings for down payment or improvements to the home, moving, etc. it all takes money and if you can finance the closing costs, it can cost you only a few dollars more each month.

When selling a home, you should consider the request to “pay” buyer closing costs as allowing the buyer to finance their closing costs. It does not affect your net. As long as you are getting the amount you want, what do you care if they include the closing costs in their mortgage?

I often negotiate my deals based on the net to the seller. Don’t include closing costs in the initial negotiation, but let the other party know you intend to add the closing costs to the deal once a net to the seller price can be agreed upon. That way it is not an emotional or adversarial issue for the buyer or the seller. It is a non issue and you can focus on the price – bottom line to the seller.

The only time this becomes an issue is when the appraisal does not meet value. Then it becomes a little sticky. Appraisers are supposed to consider the closing costs paid on the contract, but sometimes they don’t and the closing costs become a pawn in the renegotiation.

When buying a home, buyers need to understand that sellers are entitled to get at least the value of the home, as appraised. Remember, appraisals are not always true to the real value of the home. It is based on the recent comparables, so sometimes the home’s value is more, but it is suffering from lack of comparables or neighbors who are giving away homes to get out.

Home Sellers need to understand that appraisals may or may not be indicative of the true value of the home, but the current market value depends on the comparables, nothing else. And while sometimes, the buyer can come to the table with money above the appraisal, sometimes they don’t have that extra money. And often it is difficult to get a buyer to pay above the appraisal price.

Closing costs need to be considered by both parties as a part of the deal and means to the end to make negotiations go smoother.

Buying Foreclosure Homes Reality vs Myth

You know the old saying, if it seems to good to be true – it probably is. This is very appropriate in buying foreclosure homes. I get calls all the time from people who are searching on the internet who are looking to buy foreclosure homes for very low cost $1, $10k, $20k. Too good to be true right? Usually RIGHT. I don’t blame people, if you look online sometimes it looks that way and if you watch tv either with the news or advertisements, there are all kinds of myths about buying foreclosure homes with no money or at far below market cost, to make lots of money with no money down, no experience, etc. These are merely myths or half truths and rarely if ever are correct. Here are some realities of buying foreclosure homes or buying distressed properties.

Classified online sites: Unfortunately, there are a lot of classified online sites which advertising buying foreclosure homes have become a hot bed of misinformation, scams, etc. Because there are very few requirements or filters, the scam artists have played on the misinformation about buying foreclosure homes to prey on people. Scammers repeatedly try to sell properties they don’t own by pricing them for far below market in online ads and try to get people to give them earnest money. Particularly buying foreclosure homes are often targeted because they are vacant and they can get pictures and information from legitimate online sources. If people do a little homework, they can figure out the scam or misinformation. Look on other internet sites to see if the home is listed and call the information number to double check the price you have. Look on mls feeds, which many realtors have free use of on their websites. And if all else fails, go by the house and see if there is a sign in the yard or window and call. Also, check out the recorder of deeds, public record or ask the person who you talk to for proof of ownership. If they balk, it is probably a scam.

Realtytrac
This company tracks statistics and public records of foreclosure homes put into foreclosure by bank court filings. It lists homes that are in foreclosure or preforeclosure on consumer real estate sites. They also allow subscription on their website to lists of foreclosure homes. These foreclosure homes are usually not on the for sale market at the time listed. Sometimes they will not show the address, just street and city/state and a google earth or similar aerial or other street picture. The price they show is not the market value or list price. It is the price owed on the home from the public record or taxes due. Can you buy these foreclosure homes? Many times no. But most of the time, banks must wait at least 9 months to legally get deed to these homes and then it may be longer for them to put them up for sale. Banks often hold foreclosed properties so the market is not flooded, which reduces prices. But make no mistake, when these homes are put on the market, they will reflect market value or slightly less. They are NOT given away for cents on the dollar.

Auctions
There are some foreclosure or short sale homes that can be offered for sale on auction sites that are legitimate. BUT you need to know what you are getting. First, on the listing, auction properties have a very low opening bid price, somettimes 0 or $1. Will they sell for this even if you are the high bidder – NO. This is an opening bid price, which is usually 15-20% lower than the bank reserve on the property. These are auctioned by reserve only. Banks are not going to take any risk. If the high bid does not meet their reserve, they can reject it or negotiate with you. One clue what they want is to find out the former mls list price of the home or the market value. That will give you a good idea.

Also, auction properties are not traditional sales and are not often for traditional buyers. They usually do not allow any contingencies. So no inspections. No utilities on – so you do not know what is exactly wrong with the home. Many things you can see on a visit to the home, but busted pipes, non functioning heat or ac, electric? Unknown. And with no utilities – it will eliminate most if not all of the possible loans. FHA and VA are out – they require working heat and hot and cold running water. Some conventional loans with 20% or more down allow no utilities, but most conventional loans under 20% require at least running water. And there is no mortgage contingency, which means if you don’t get the loan, you lose your earnest money, which is usually $2500 (more than most traditional sale properties). Finally, the times to close are typically hard and fast 30 day close, which is possible but not typical for most lenders.

Finally, some auctioned properties are NOT vacant. It does indicate but you need to be careful. Some properties will have the former owners or tenants still living there. If you buy it, it would be up to you to legally remove them. Which means you won’t even be able to get into the home to see it. And it also means that loan possibilities will not likely be available unless you are doing 20-25% down.

Not all auction properties require a total gut though and can be a good deal. However, many auction properties have been on the mls and did not sell. That should be a question – why didn’t it sell?

The biggest benefit of auction properties are transparency of the deal. You know the other bids, there are less manipulation and “monkey business” as there can be with buying foreclosure homes during the offer and negotiation stage. Many foreclosure homes go into blind multiple offers or are awarded to people who were not the highest bidder or even have false multiple offers to try to get you to pay more money without negotiation.

Auctions on foreclosure homes can be online or in person. Online is very easy. If you win the bid, they ask you to put down $2,500 or sometimes 3% of the bid as non refundaable earnest money. You will sign an online contract. You can use an attorney and a Realtor, but their is no attorney review contingency and they will not change their contract or make any modifications. You also will pay a buyer’s premium or fees which can be as much as 5% of the high bid. So, you should consider those when you bid.

You can do a buy it now sometimes for the requested amount to purchase the property prebid. The closing is very similar to a traditonal sale. They will usually give a title (not always so check the fine print), they will transfer deed, etc.

Sheriff’s sales on foreclosure homes are where you can buy foreclosure homes for the taxes do on the property or for the lien owed to the bank. This will be far below market. First, buying these foreclosure homes are cash only. You have to be present at the sale to bid and sometimes there are many properties in the same session, so it can take several auctions. Sheriff’s sales are cut and dry. No title, usually no prior visit of the property. There is a transfer of deed (after redemption periods), but no closing. You pay right there and sign the papers plus any transfer fees. You can get your own title and title insurance from a title company. But if you do not, you will not get a clear title and could adopt any open liens on the property. You would need to resolve those (usually pay them off) before you can sell or loan on the property. If they are sold for taxes due, you do not usually take possession or ownership of the property until after the 2 year right of redemption. Or in the case of a loan, for the statutory redemption period. But you need to pay upfront. And again, you may need to eventually legally evict the occupants.

foreclosure homes
What can you expect from buying a foreclosure home?
First, these are AS IS. You can still do an inspection, AND YOU SHOULD, but the only option you will have is either buy it lumps and all or walk away. Banks and government entities USUALLY will not make repairs to foreclosure homes. SOMETIMES they will, so it is worth an ask, but usually it is rare and only done when it is a matter of loanability. So, you can’t get a loan if this is not done.

Some foreclosure homes will not be loanable by FHA due to condition, some can do conventional and some will not be loanable period. You need to know that before you put an offer it. Consult your loan office and Realtor to see what are the pitfalls.

people with cash – what can you do?
You can buy cash and fix up and do whatever you want with the home, within village code. But be advised that the mass foreclosure and short sale barrage of the last few years has prompted some villages to require point of sale and point of occupancy inspections that require the homes be brought up to code. BUT HERE IS THE KICKER…in these towns you will NOT be able to move into the homes until they are complete, up to code, safe and livable. So you may not be able to live in it and fix up until it is at least in move in ready condition per the village.

resale sites
There are also resale sites that offer foreclosure or other properties. These can be good deals but are never prime properties. Prime properties are always sold traditionally on the open market. First, this scenario is ripe with scams. You need to check out the companies to ensure they are legitimate. You need to wire them money so you need to know it is legitimate by the better business bureau or calling the attorney general. You also can look out on the internet to see if there is anything posted good or bad about the company. There are a couple of legitimate companies. And you need to ensure they have some authority to sell. Again, they should be able to produce Sometimes you can tour them, sometimes you can’t. Sometimes they will have occupants that need to be legally removed by you – the new buyer. Again, everything is done online. Some deals can be financed through them. Sometimes this can be an option for people who do not have the best credit or who want to fix up a home while they live there. Interest rates are usually high. Again, no clear title, so unless you pay for a title, you do not know about liens. AND sometimes, even the legitimate companies do not have clear deed. They will give you back your earnest if they can not get, but that can take several months.

Buying a Home at a Home Auction

Real Estate Home Auctions have always existed from Sheriff’s sales to tax sales and the traditional “on the lawn” auction, but to buy a home at auction in today’s auction environment, there is a lot to know.

What you need to know about home auctions:
1. Advertised prices are OPENING BIDS not the acceptable reserve price – usually will sell for 30-50% more.
2. No contingencies for attorney review, inspection or mortgage approval.
3. If you don’t buy after contract, you will lose your earnest money – usually around $2,500.
4. You often will be required to pay a buyer fee or premium up to 5% of the purchase price.
5. Some home auctions will not allow any utility turn on to inspect home – buyer beware. NO FHA loans then.
6. You may not be able to see the home. Some are site unseen purchases. Appraisal could be an issue.
7. Some home auctions will have properties that the condition may not be loanable.
8. Contracts are not subject to change – again no attorney review.
9. Home auctions will not allow longer than 30 days to close. Lenders often can’t do that.
10. Some home auctions still have occupants in the home that the buyer will have to legally remove.
11. Home Auctions sell homes based on reserve prices that are minimally acceptable to the bank/seller. You will never know that amount.
12. You can bid online and there is no charge to bid.
13. After unknown reserve price is met, top bid wins.

What homes are sold at home auctions? The past 5 years have changed the way home auctions are done. Foreclosures and now even short sales are regularly put into home auctions by banks to quickly reduce inventory with market time. Each bank or government entity has their own policies and procedures, but most banks put the least marketable homes in home auctions. Some banks use home auctions for overflow houses that they want off their books quickly. So contrary to prior years, some home auctions have homes that are in decent areas and are not total gut jobs. It just depends. Some homes that are even occupied are sold at auction, which require the buyer to legally remove the occupants and purchase site unseen.

Home auctions also provide an ability for bids to increase the competition and SOMETIMES get close to market value. While deals exist in auctions, the price advertised on the internet is the opening bid, not the accepted price. Contrary to traditional home sales, the advertised price is usually 30 to 50% lower than the reserve “acceptable” price the bank will allow for the home. Banks usually want a reasonably close to market price for the homes. The past sales price and the area market values can give you an idea of what the bank will accept for the home.

Buying a home at a home auction is not a traditional sale and it does not have the same contingencies in a traditional purchase. Auctions are really designed for cash-buying investors, but it is possible for a regular buyer to buy at a home auction under circumstances but are always at a higher risk. You will have to pay a deposit at bid win and this will not be refundable. So if you don’t get a loan or if you find a dealbreaker at inspection, you lose that money. Usually minimum $2,500, so a lot to lose if something happens. And if you don’t like the contract, tough. No attorney review. You need to go in with eyes wide open and get expert help from a Realtor who understands auctions and the market to give you the best advice.

Rehab 203k loans – do they really exist?

Rehab loans exist mostly via the FHA 203k route which allow buyers to loan beyond the amount of the purchase price to either cosmetically rehab homes or do repairs that allow the home to pass FHA guidelines.

Yes, they do exist and recently more lenders are starting to carry streamline FHA 203k Rehabilitation loans to allow borrowers to loan up to $35k beyond the sales price of the home to pay for rehab work.

So, the pink or 70’s shag carpeting can be replaced, the wallpaper or white or bright walls can be repainted, cabinets updated, new tile or hardwood, granite counters installed, stainless appliances purchased, etc. And all can be done at a fraction of the immediate cost through FHA 203k Rehabilitation loans, basically $50 extra per month for every $10k. Yes, it will cost more over 30 years, but less than credit card interest rates and it will happen a lot faster and easier than if you were to save for it and wait and then live in a construction zone. And you will get a deal on a gem of an outdated house.

FHA 203k Rehabilitation loans are a great way to get immediate gratification on that home that ticks all boxes except is not updated and offers buyers a great way to get a good deal on a diamond in the rough.

These FHA 203k Rehabilitation loans; however, are considered high risk by the lenders, and if you think you have to jump through hoops with lenders on a regular deal – double the amount of time, hassle and hoops and that is what to expect.

You have to get a general contractor with experience and who is willing to do a FHA 203k Rehabilitation loans. Although you can get some things done yourself that require no skill and is allowed by the lender and their inspection liasion. Permits need to be filled out and all village codes obeyed and inspected.

You will need to get a contractor right away and they need to be willing to complete forms and comply with all the lender wishes on forms. Usually only 2 draws are allowed – 50% at closing and 50% after completion. Some contractors will not like that. Everyone needs to be licensed for work and everything has to be accounted. You can hire any contractor you want, but they need insurance and licensing, so Uncle George is not likely going to be able to do the job. They can have subcontractors who are licensed.

You usually have 30-60 days to complete the work after closing and then you can move in. You will not be able to live there during the work, that is important to note. Then the lender liaison will approve the work and you move in…. happily ever after.

However, FHA 203k Rehabilitation loans can be tricky for major repairs. Again, high risk becomes higher risk and lenders usually make it very difficult to get this done. Mold or standing water, structural repairs, electrical and sometimes plumbing repairs, or moving or tearing down walls, etc. are very difficult to get approved under this type of loan. Again, lenders try to reduce or eliminate high risks when making loans with the buyer and/or the property. For these kinds of repairs, lenders may require testing or additional inspections and definitely longer review times. This may make foreclosure sellers difficult to get additional time, etc.

FHA 203k Rehabilitation loans ARE possible, but here are a few things you need to know…

Expect at least 60-90 days to close – again, could cause problems with seller, so be prepared and don’t forget the time to close.
You can’t move walls or include pools, furniture, etc. in the streamline loan. There is another type but major reconstruction is really not advisable with a loan.
There are extra fees for the liaison/inspectors the bank will require.
You will start paying the mortgage the month after the closing, so you may start paying even more you move in.
Contractors will delay you. Some contractors don’t like this type of work because of the rules, paperwork and the strict payment and deadline terms. You need to get your contractor bid in before anything can happen, so get everything as fast as possible.
Make sure you get a lender who processed their own loans and can control the process. Lenders who farm this out lose control of the situation and add extra time.
BE patient. The process is very difficult and can be done, but it will be tedious and sometimes not make sense. Remember whoever has the purse pulls the strings and lenders need to ensure the home is worth the extra work.