buying a foreclosed home

5 Massive Mistakes Investors Make When Buying a Foreclosed Home

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While having a second home is a dream for millions of Americans, millions more invest in homes as a way to build extra wealth or earn extra income. Some of the cheapest houses on the market are the foreclosed homes that people were no longer able to pay for. When you’re thinking of buying a foreclosed home, you have a lot of little issues to consider.

Here are 5 of the most common things to consider before you buy a foreclosed home.

1. Foreclosed is One of Many Options

Buying a foreclosed home isn’t the only option that you have when you’re searching for a home to buy. When you’re looking for an investment, there are lots of homes that are available and in great shape that are the same price as a foreclosure.

Foreclosures are popular and attractive to many homeowners because they are often some of the lowest priced homes on the market. However, when you buy a foreclosure, you could inherit a lot of the problems the property has.

You could be dealing with the liens against the property, which will lead to higher costs in the end. You could also be dealing with a house that’s in serious disrepair. There’s no need to spend your first year owning the house just doing construction work.

You won’t be making any money.

Take a look at what foreclosures are available, but don’t let your search stop there. You could be missing out on some fantastic properties if you don’t look beyond foreclosures and see which could be the best house for your budget.

2. Check For Trends

When you’re looking to invest in a house, you need to pay attention to which neighborhoods are on the move. While some neighborhoods might be out of your price range, if another one is seeing a huge spike in growth, take a look at preexisting houses.

For a quick turn around, look for hot artist neighborhoods or up and coming tech hubs. Lots of tech companies and art collectives appreciate the potential of large raw spaces like warehouses and lofts. With their creative perspective, they can turn a load of abandoned buildings into a movement in a region.

Pay attention to industries that are starting to buzz in your region. Make an investment where they are or where they’re headed. You might find some great deals in a forgotten part of town that’s ripe for reinventing.

Real estate agents, small business owners, and even the chamber of commerce will be able to tell you where things are headed in the coming years.

3. Don’t Go Out There On Your Own

While you might think it’s cheaper to pound the pavement and follow up on Craigslist leads on your own, you don’t know everything. Lots of real estate agents know the complexity of an area or what’s going on with the foreclosure market.

Having someone who knows about buying and selling properties to be on your side is a huge plus. They know which properties yield the highest returns and generate the most attention.

While a real estate agent can help you to find properties that are sure winners in the market, they don’t know everything about the law. You’ll need to find someone who knows about real estate law to navigate foreclosures or the legal entanglements they can carry. While your real estate might be able to give some general advice, don’t rely on them for anything legal.

4. Know The Score

Beyond just knowing which neighborhoods are hot, you’ll need to do some additional research into what’s happening in that neighborhood. Knowing why a neighborhood is hot can help you to make a well-educated decision on whether or not to invest.

When a neighborhood has a lot of availability, that means the prices will be lower. While lower prices mean a lower bar for entry, it also could mean that the neighborhood will take some time to start climbing to become a high-profit center.

Keep an eye on what the sales numbers are as well as the prices of homes in the region. If there has been a steady increase in sales, you know that things are on the incline. If sales have dropped or remained stagnant, there isn’t a lot of growing that’s going to happen.

Hire a qualified agent and a lender to help you determine where to invest. While you’ll need to do a little work to become familiar with the process of foreclosure and all its lingo, it will reward you in the long run. You’ll have better bargaining power when you know what to look for and which pitfalls you could be avoiding.

5. Inspections Are A Must

While your home might look great and the owner might be pricing it to move, don’t move so fast. The next step will be to make sure that you hire someone to do an inspection on the home. If you fail to do a proper inspection, you could be stuck with a death trap or at least a place with a mold issue.

While your inspection can alert you of problems, it could also lower the cost of your new home. When you point out what’s wrong, the owner might knock a few dollars off the price.

Make sure you know what problems to anticipate and which you won’t have to deal with before you buy.

Buying a Foreclosed Home is an Investment

When you’re buying a foreclosed home, you’re paying a downpayment on an investment that you want to see a return on. In order to see a return, you need to have a solid grip on how the market works. Your best bet is to get to know all of your options before you commit.

If you’re interested in what a short sale listing agent does, check out our guide to understane more of how the market works.

what does funding mean

What Does Funding Mean in a Real Estate Deal?

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5.5 million homes were sold nationwide in 2017, despite the bleak economic forecasts. While the naysayers will say the real estate market is dead, many families are buying homes. This is because they’ve found ways to fund their homes.

As a matter of fact, the projected forecast is set to increase to 6.3 million in 2018.

Whether you’re buying or selling a home, you should be familiar with all of the terms associated with your transaction. If you’re wondering, what does funding mean, then you’ve found your answer.

Keep reading to learn more about the real estate closing process and how and when funds are dispersed.

What Does Funding Mean?

If you’re looking at the real estate market funding, the first thing you should do is educate yourself. Funding is the process of having the mortgage lender release funds to the escrow before closing a real estate transaction.

And since funding occurs a few days prior to the close of the transaction, the interest rate kicks in from the date of funding.

In the US, the funding process differs in every state according to state laws. For any funding to be granted, all the conditions of the lender need to be satisfied. Loan documents must be signed.

Take California for example. Buyers of new homes sign loan documents and the closing take place a few days or even a week later. This is also called a dry closing.

This is unlike other states, particularly the East Coast, where closing occurs the day the loan documents get signed. This is called a wet closing.

An example of the mortgage process is described further. So read on.

What Do You Need to Fund a Loan?

First, the TRID (TILA RESPA Integrated Disclosure) is now required by law. According to the TRID process, before you can sign loan documents, a closing disclosure is sent to the buyer. After the mandatory, three-day waiting period, the buyer is permitted to sign mortgage documents.

This may seem like a lot of paperwork, but TRID was created to simplify mortgage documentation. It was also made to make documents easier to understand, curtail fees for home buyers and prevent unforeseen issues at closings.

If you want your loan to get funded, you must sign all these documents.

Notarization of The Documents

Documents submitted for loan purposes require notarization. So, buyers will have to carry two forms of identification and sign them in the presence of a public notary.

But fear not.

Anticipating the needs of the business, many escrow employees and title company workers are also public notaries themselves. If you’d prefer, you can also get a mobile notary to come over at a location of your choice.

The Input of Underwriters

Once all concerned parties have signed the loan documents and paperwork for the escrow, they send it to the lender for review. This is where underwriters come in. They study the loan documents and assess how much risk the lender is assuming.

They consider the land, the property, and the borrower. Real estate underwriters are different from securities underwriters. These people specialize in real estate, appraise the value of the property and the credit health of the borrower prior to making their report.

Underwriters start work only after the loan conditions get satisfied. In some cases, the documents are also not drawn until the conditions get satisfied, also called “prior to the doc.” However, most of the lenders will ask for loan conditions to be completed before funding.

Varying Loan Conditions

Sometimes, an appraisal review or a receipt of all bank accounts may be requested as part of the loan conditions. There could be a clause about the installment of appliances and in working order prior to closure. You can never really know what loan conditions may be needed.

For example, an FHA loan condition stipulates that the paint chips around the house must be physically picked by a worker.

When the lender reviews the documents executed for the loan, he will get the fund ready. This translates to having the money wired to a title or escrow company. On receiving the wire transaction, the closing agent can record your file.

Sounds easy enough, except closing agents have specific times during the day when they can record a file. Some may have only one time a day, others multiple times per day.

This is important because if the fund wire comes in too late at a place with a single recording time, the transaction doesn’t close until the next day.

Getting your funds is the key to closing the sale of a home. It also adds to your interest. You can try to expedite the process of closing by asking when the loan funds will arrive and if same day closing is possible.

Caution About Fees

Various fees and charges get levied during the mortgage process. Closing costs will include these fees. These are fees for doing a title check, appraising your property, processing your loan, and any other service offered.

On the day of closing, you will have to bring in a check covering all those closing costs.

If you want to know what your estimate will be, multiply your loan amount by 3%. If you’re buying a home in a very expensive zip code, multiply that by 5%.

After applying for your mortgage loan, you will get a rough estimate of closing costs. But don’t get shocked if it ends up being much higher than the initial estimate.

If your lender estimates a 10,000$ closing cost, then you should be ready with a check for 11,000$. Talk to your lender, and find out what you need, whether that’s cash reserves or other financial details. He can help you understand the details of the funding applicable to you.

Closing

While TRID and the entire funding process seems simple enough, a mortgage professional can help you navigate through all the procedures and paperwork.

So what does funding mean for you as a buyer or seller? If you still don’t have an answer or still have doubts about funding, loans, and refinancing, you can find more information here.

buying a short sale home

A Guide to Buying a Short Sale Home for Investors

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If you are planning on investing in a short sale home, you have the opportunity to buy a home at big bargain prices. However, these great prices don’t come without the investment of a lot of time and hard work.

Making the right choice and learning how to buy a short sale can be difficult to know how to do the first time.

To make things easier for you, here’s our guide to buying a short sale home for investors.

What is a Short Sale

One way a short sale can occur is if there is a homeowner who would like to sell however they owe more money on the property than it is actually worth.

An investor will then communicate interest with the owner’s lender to purchase at a low price. They will then try to resell the property at a later date for an increased profit.

In a short sale, the seller does not own what is up for sale. Instead, they will place a sale order through the broker-dealer.

Short sales are margin transactions. This means the current amount of equity the investor has put in and its value in the market.

The reason why you should consider buying short sales is because of the potential to get the best cost due to a drop in value and the possibility of profiting from the investment in the future (a.k.a. buying low and selling high).

Generating Leads

You might find success in networking with local real estate agents when trying to find short sale leads.

Working with these real estate agents can help build powerful (and profitable relationships) especially if working out terms for the commission.

Another way to work on generating leads when buying a short sale home is to focus on online marketing. This can be in the form of starting a website to drive traffic to your services or even through social media advertising.

Look at the Terms and Conditions When Buying a Short Sale Home

If you are looking to resell your short sale property, make sure that you carefully look at your acceptance letter from the mortgage servicers.

The acceptance letter will have certain terms and conditions that you have to comply with when you purchase the home.

The terms may put certain restrictions on how soon you are able to resell the property.

These restrictions may also apply to renting out the property.

Some buyers will buy the property with plans to rent it back out to the original seller who was the borrower.

Unfortunately, this might not be a possibility if there is a requirement to sign an affidavit with everyone involved (agents, sellers, buyers) saying this will not happen.

The Buying Process

You will need to start by verifying the homeowners and understanding the circumstances that are causing them to sell.

Once this checks out, you will then be able to send them a package that explains the short sale process.

The packet will also have a checklist of things they will need to complete and information to gather. This information will be helpful for you to use later on when submitting to the lender.

You will need to add any supporting documents from your end after you get the packet back.

These supporting documents can be in the form as:

  • Values of other homes in the area
  • Any possible sex offenders living near
  • Sales information that is comparable
  • Anything that can devalue the property

Remember, you might have to send the information packet to multiple lenders depending on how many the current homeowners have.

You will then need to make an offer and make sure to verify receipt so that you can get a confirmation that the offer and proper paperwork has been received.

After this is complete, get a negotiator and a broker’s price opinion. It is then when you will be happy you have done your homework.

Overvaluing the property can quickly ruin the deal. In order for this not to happen, prepare and help out by showing other comparable home values in the area. This can help get their value of this property approximately where you want it.

The negotiator will help you work with the lender. This will help you be on the way to getting an approval letter for the short sale. You will need these from all lenders involved which can prove to be tricky.

A written agreement with the homeowner will make sure that they understand any liabilities and any other information they need to know in order to get closer to finishing the process.

Now you will need to complete the transaction by getting together the funding and working with a real estate attorney to finish the deal.

This Requires Full Disclosure

Everything will need to be out on the table in order for everything to go through when buying short sale houses.

This includes whether or not you will be using the assistance of an investor.

An investor will help contribute funds to your efforts in hopes for approval of the deal. Record any additional cash and you will need full disclosure of the investor.

Do Your Homework

If you want the deal to go as smoothly as possible, you will need to do all your homework.

This means, make sure to do research on the current real estate market in your area and most importantly always prepare in case things don’t go exactly as planned.

Although there is nothing to do to guarantee success, preparation like this will help you to the best of your abilities avoid the deal falling through after months of work to secure it.

Buying a Short Sale Home

Buying a short sale home isn’t always easy, but hopefully, this guide has made it easier to understand.

The Short Sale Blog is your one-stop shop to teach you all that you need to know about short sales.

Take a look at our blog to read up on more tips and tricks when it comes to buying and selling short sale homes.

Short Sale Process for Sellers

A Guide to the Short Sale Process for Sellers

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You are unable to pay your mortgage and haven’t been able to make payments in months. You’re facing foreclosure.

What now?

A short sale may be the answer to your problems. You may be able to prevent a foreclosure by working with your lender to short sale your home.

The short sale process for sellers can be confusing. We are going to go over how you qualify, the documents needed, and the team of people who are there to help you.

What is a Short Sale?

This type of sale happens pre-foreclosure. You will be selling the home with your lender’s permission for less than the balance that you owe on your mortgage.

Do I Qualify For a Short Sale?

It isn’t an option for everyone, but if you qualify for a short sale may be a great option. For starters, you must be ineligible to refinance or modify your mortgage.

If you were able to refinance or modify your mortgage then those options would take precedent. Both of these options would lower your monthly payment thereby making it possible for you to continue to make payments.

Are you facing a long-term hardship? The hardship needs to be a life-changing event that prevents you from paying your mortgage for the long term.

This one should be obvious, but you should be behind on your mortgage payments. This solution is for people who are facing the threat of foreclosure.

You need to owe more than what the home is worth. This often happens when the real estate market become unbalanced with extreme growth and then a crash in property values.

Homeowners will borrow a large sum to buy during the height of the market. When they go to sell property values have dropped and they must sell for significantly lower than what they paid for.

Finally, you need to show the bank that you’ve made the attempt to sell your home at a price that would cover the mortgage. These attempts have been unsuccessful, however.

Short Sale Benefits

The most obvious benefit is that you will eliminate or reduce your mortgage debt. You’ll also avoid the negative impacts of having a foreclosure on your credit history.

The smaller hit that you do take on your credit score can be repaired sooner. You can also start qualifying for a new mortgage sooner, as little as 2 years. It would take up to seven years after a foreclosure.

Short Sale Process for Sellers

Once you determine that you are a candidate for short selling your home, you will work with your mortgage company and a real estate agent to sell your home. Your mortgage company must approve of the short sale.

The mortgage company will be involved in setting the sale price based on the current market. They will collect the financial information of other lien holders and negotiate an outcome with them.

All acceptable offers will be reviewed by your mortgage company. Finally, the mortgage company will approve the final sale agreement.

Choose an Agent Who Knows Short Sales

Not every real estate agent is familiar with and knows how to do a short sale. You will want to find an agent who is experienced with the intricacies and potential pitfalls.

When looking for an agent ask how many short sales the agent has closed. Ask for references of clients who have used the agent for a short sale.

Short sales can take months, you’ll want an agent who will stay on top of the sale from start to finish. The agent will also need to be experienced in communicating with mortgage companies and look out for your best interests.

Get the Advice of an Attorney

A real estate agent is going to help you coordinate the sale, an attorney is going to look out for your legal rights. An experienced attorney will look at the original agreement, the new agreement, tax implications, and any future liabilities from the sale.

Will Your Balance Be Forgiven?

Make sure it is very clear from the beginning and in writing whether or not the remaining balance of your mortgage will be forgiven. The mortgage company is not obligated to waive the deficiency.

If you do your short sale through the Home Affordable Foreclosure Alternatives program (HAFA) then the lender must forgive the remaining balance. Lenders are not required to approve a short sale through HAFA.

If your mortgage company does not agree to relieve you of the remaining balance, you will have to pay it. If this is the case, be prepared for a bill to arrive once the short sale is completed.

Negotiate

This is where having an experienced real estate agent and an attorney can be helpful. Mortgage companies aren’t going to offer to forgive your loans, but they will negotiate with you.

You may be able to agree to pay a smaller portion of the remaining balance post short sale. This is usually pennies on the dollar or a lump sum.

Letter of Authorization

You’ll need to submit a letter of authorization to your lender. This letter lets your lender disclose you and your loan information to your attorney, real estate agent, title company, and closing agent.

The letter will include the following information: property address, loan reference number, your name, date and the effective time period, your agent’s name and contact information, and your attorney’s name and contact information.

The Documents You Need

A preliminary net sheet is an estimated closing statement. This will include estimated closing costs, unpaid loan balances, outstanding payments and late fees.

You’ll need to write a hardship letter, the sadder the better. This explains why you need a short a sale and the circumstances that led you to this place.

The lender will require proof of income and assets. Be truthful and disclose all of your assets.

Submit copies of your bank statements and 30 days worth of paystubs. If there is unusual activity on your bank statements be prepared to explain it.

The Timing for a Short Sale

A short sale can take up to 120 days. This is an average though and can take more or less time depending on your current situation and the market.

Prepare to Sell Your Home

The actual short sale process for sellers works just like putting any other home on the market. Your agent will promote the listing, have showings, and probably an open house or two.

During this time you’ll want to maintain the home and pay any HOA fees. You’ll want to get the best price possible to assist in reducing liability.

Be proactive during the short sale process, the quicker you gather the needed materials the smoother the process will go. Be honest about your situation and disclose everything.

Selling your home via short sale isn’t about getting out from under a loan. You are selling your home. This can be an emotional experience and you need to be prepared for the feelings you will experience.

what happens when a house goes into foreclosure

What Happens When a House Goes Into Foreclosure?

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Are you worried that your home might go into foreclosure?

If you’ve missed consecutive payments for your home, there is the possibility your home might go into foreclosure. Foreclosure is what happens when the homeowner fails to make their mortgage payments and eventually loses all the rights to the home.

According to national statistics, 1 in every 1776 homes in the US results in a foreclosure.

While foreclosures can present much difficulty to the homeowner, it doesn’t always have to be the end of the world. Fortunately, there are steps one can take to prevent a foreclosure from happening.

If you’re wondering what happens when a house goes into foreclosure, you’re going to want to keep reading.

What Exactly is a Foreclosure?

A foreclosed home is a home that once belonged to the homeowner but may belong to the bank.

The reason for the bank owning the home is because the homeowner simply stopped or was unable to continue making the necessary payments for the home. In these situations, the homeowner either vacates the home or voluntarily deeds the home to the bank.

In this event, the homeowner forfeits all legal rights to the property.

However, it’s important to consider in these situations that the home never technically belonged to the bank. This means that the bank does not have the ability to simply “take back” the home.

Instead, the bank must foreclose on the mortgage or trust deed and then seize the home.

Why Do Sellers Go Into Foreclosure

Sellers may stop making payments on their mortgage for a number of reasons.

If the seller is unable to pay the outstanding debt of the home or sell the property with a short sale, the property will then go into foreclosure. With this process, the property is attempting to be sold via auction. If the property fails to sell through the auction, the lending institution takes possession of the home.

While most foreclosures happen on an involuntary basis, some sellers do voluntarily fall into foreclosure. For example, during the housing market crash between 2005-2008, many homeowners simply walked away from their homes.

This was due to the fact that the value of the home had fallen so dramatically that they owed more to their mortgages than what the home was worth.

While this temporary solution had adverse effects on these homeowners, it was common during the housing crisis.

It’s important to understand that a foreclosure is the last resort for banks. And, while the specifics of foreclosure can vary from state-to-state, it’s most simple to break the process down into five stages:

1. Missed Payments

To understand how foreclosures work, remember that most homeowners need to take out a mortgage on their home. This mortgage entails making monthly payments to eventually “pay off” the home.

If the homeowner fails the make these mortgage payments on time, this has the potential to transition the home into foreclosure.

But, all is not lost if the homeowner fails to make a few payments. The reality is that foreclosures cost the bank a lot of money and headaches. Because of this difficulty, the banks want to avoid the process just as much as the homeowner.

That being said, there are options before the house falls into foreclosure. If you are in jeopardy of missing your mortgage payments, be honest and upfront about your troubles with your lender. Together, you can determine other strategies to hopefully keep your home and avoid foreclosure.

2. Public Notice

After 3-6 consecutive months of failing to make the necessary mortgage payments, the lender will record a public notice. This notice is registered in the appropriate office and indicates the homeowner (borrower) has defaulted on the mortgage.

In most states, the lender is required to post this notice on the front door of the property. This notice services as a means of making the homeowners officially aware that they may lose the rights to the property and face a potential eviction.

In other words, the homeowners are in danger of facing a foreclosure.

3. Pre-Foreclosure

Next comes a period of known as pre-foreclosure.

After receiving the notice from the lender, the borrower has anywhere from 30-120 days to work out an arrangement with the lender. These options are generally selling the home via short sale or to pay the outstanding amounts owed to the lenders. This grace period offered to homeowners generally varies from state-to-state.

If the homeowner fails to satisfy these arrangements and the default is not paid off, the process of the foreclosure continues.

4. Auction

This is when things start to get very serious for the homeowners and the period in which they are likely to lose their home.

Assuming the said default is still not remedied by the given deadline, the lender will set a date for the home to be offered for sale via a foreclosure auction. This is also known as a Trustee Sale.

The notice of the sale is posted on the homeowner’s property and is also advertised in the newspaper/online publications. Though, in many states, the homeowner has the right of redemption up to the moment the home will be auctioned off.

If the homeowner fails to come up the with the necessary cash to re-purchase the home, the home is sold to the highest cash bidder.

5. Post-Foreclosure

Sometimes foreclosed homes are auctioned for sale but with no success. In this event, if the home remains unpurchased, the lender (usually the bank) will take ownership of the property. The home, then, becomes a bank-owned property.

What Happens When a House Goes into Foreclosure

If you find yourself wondering what happens when a house goes into foreclosure, the odds are you may have missed a few mortgage payments.

If you’re worried your home might go into foreclosure, be sure to consider the many options outlined above. And, remember, failed mortgage payments don’t always have to result in irreversible damage. Knowing the facts is the best way to avoid or prepare for a potential foreclosure.

Alternatively, if you are considering purchasing a foreclosed home, be sure to acquaint yourself with the facts and how this process works. While it can present unique opportunities to buyers, it’s essential to understand the costs and benefits of foreclosures.

Are you interested in real estate? Be sure to visit our blog to learn more about how foreclosures and short sales work.

buying a foreclosed home

8 Tips for Buying a Foreclosed Home

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Are you considering buying a foreclosed home?

Buying a foreclosure can be a great way to score a bargain while househunting.

What exactly is a foreclosed home, you ask?

These are homes in which the owners default on their mortgage payments and were unsuccessful in selling their home. As a result, the lender(s) assume ownership of the home and try to sell it to recoup costs.

While foreclosures are not exactly common, they do still happen. Studies reveal that 1 in 13,000 homes results in foreclosure.

Although foreclosures do often present a unique set of challenges to buyers, there are many benefits to purchasing a foreclosed home. If you’re considering opting for a foreclosure, you’re going to want to read these eight tips for buying a foreclosed home.

Find a Realtor Specializing in Foreclosures

Just like any other real estate transaction, you’re going to want to use a realtor to guide you in your search. But, not just any run-of-the-mill realtor is going to be able to represent you in this particular search.

Foreclosures are a whole new animal when it comes to purchasing a home and a realtor is a must.

A realtor familiar with foreclosures will be able to provide you with essential information on the listing such as:

  • How long the property sat vacant
  • Whether it endured freeze and thaw seasons
  • Pitfalls associated with foreclosure homes

These are all essential elements that will help you understand if a particular foreclosure property is a sound investment.

Get a Pre-Approval Letter

It’s important for buyers to understand that although the bank might be selling the home, this is not to assume the bank will also finance the mortgage as part of the deal. These are two entirely separate entities.

Unless you are paying for the home in all cash, buyers are going to need to arrange financing with a lender. This will come in the form of a pre-approval letter from your lender. As with most pre-approval letters, it will document how much money you can borrow from the lender.

Because foreclosure homes are sometimes priced under market-value, they can move quickly. For this reason, buyers are going to want to ensure they have their pre-approval letter prior to beginning their search for a foreclosed home.

If not, the buyer is likely to lose out on the deal to other buyers who already have their financing arranged.

Budget Carefully

A pre-approval letter outlining your maximum budget should not always dictate the amount you are willing to spend. This is especially the case in buying a foreclosed home.

Remember, a foreclosed home is typically purchased in as-is condition. That being said, you’re going to want to ensure you are budging carefully for all of the required work. This could include both damages that appear to the naked eye as well as damages that are not visible to the naked eye.

Some foreclosed homes are in such poor condition they are not liveable for the first few months of the renovations. That being said, be sure to also plan your accommodations accordingly.

Hire a Home Inspector

Hiring a home inspector for a foreclosure is more important than any other real estate purchase. As foreclosures are often sold as-is, the possibility of structural damage is always a risk.

A typical home inspection report will cost $500-$600 and is worth every penny.

The home inspector will be able to give you an overall report on any damages and an estimate as to how much money it will take to make repairs. They will also check the state of the appliances, electrical, plumbing and rooftop.

Most importantly, they will be able to let you know whether or not the home is in a dire state of repair. This is an essential factor as homes in such a state may not be eligible for a conventional mortgage.

Look at “Comps”

Many buyers unfamiliar with foreclosures make the mistake of assuming the property will sell under-asking. This is often due to the belief that the bank is looking to rid of the home quickly or that the “as-is” condition of the home should minimize the asking price.

This, however, is not always the case.

The reality is, sometimes the banks price the home purposefully low in hopes of generating a bidding war. That being said, it’s important to have your realtor closely examine the recently sold properties in the neighborhood. From here, the realtor and the buyers can work together to arrive at a sound asking price.

Get Ready to Move Quickly!

While the negotiation process for foreclosures may require some added patience, the closing process is usually very quick.

What does this mean for the buyers?

This means buyers will more than likely have to close on the property very quickly. The fact of the matter is, most foreclosure properties are vacant and the banks are looking to transfer title to the new owners ASAP.

When drafting an offer for a vacant property, be sure to input a sooner-than-later possession date to stand out against other buyers. An early possession date could be what makes the bank choose your offer as compared to another.

Check the Title of the Property

Conducting a title search for a foreclosed property is essential to protecting the new buyers.

What is a title search?

A title search ensures that the seller has the legal right to sell the property. It also ensures that there are no encumbrances placed upon the property. These are things such as liens, mortgages, unpaid taxes, etc.) that could result in a nightmare for the new buyers.

Let’s consider this situation: The IRS places a lien on the property for the seller’s unpaid taxes. Rather than following the sellers, this debt stays with the property making the new buyers responsible for this debt.

Conducting a title search eliminates this risk as it gives the new buyer’s the legal details of the home.

Practice Patience

Last, but certainly not least, be sure to practice your patience with a foreclosure home. After all, buying a foreclosed home is never exactly a quick nor seamless process.

It’s important going into a foreclosure with the understanding that the process can take longer than a traditional real estate transaction.

Because the buyers are negotiating with the banks as opposed to the original owners, negotiations are bound to take a lot longer.

But, alas, the long wait is almost always worth it!

Are You Looking Into Buying a Foreclosed Home?

While buying a foreclosed home presents a unique set of challenges to buyers, it’s a great opportunity to purchase a home on a budget.

This is especially a great opportunity for first-time homebuyers or investors.

If you are in the market for a foreclosed home, be sure to read our blog and better acquaint yourself with the process.

Happy house hunting!

buying a short sale

8 Tips for Buying a Short Sale Home

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Buying a short sale home offers buyers a great opportunity. The sellers are looking to get out from under the home and will offer the sale at a discounted price just to get rid of the property.

This means that if you’re looking for a home for yourself — or as an investment property — you can save tons of money and still find the home you’ve always wanted.

There are a few things you need to consider, however, before you start looking for short sale properties. The short sale process can be tricky, so you need to arm yourself with the foreknowledge you need to find the right deal.

Luckily, we’ve got you covered with some tips that’ll help you determine whether you want to start looking at short sales and what you need to do to find a great one.

So read on!

What Exactly is a Short Sale?

A short sale is when a seller is motivated enough to take less than they owe on the home. This usually happens because the seller needs to get out from under the home quickly or to avoid foreclosure.

It sounds simple enough, but there are a few problems.

The biggest problem is that the lender has to agree to accept less than the value of the loan. Since no company wants to take a loss on their investments, you can see the difficulty in a seller convincing a lender to do so.

Again, this doesn’t mean it’s not possible. The process just may take some more time than an average home sale.

The other problem is that foreclosure is always a possibility. If things don’t go right, the lien holder will force a foreclosure and all will be for naught.

But sometimes, the possible deal is just too good to pass up trying and it’s worth the effort.

Buying a Short Sale

Let’s get into the nitty-gritty. If you want to buy a short sale home, here some the most important things you need to consider.

Find a Professional

Anytime you are looking to buy a property, you should hire an agent. it’s even more imperative to find one when considering buying a short sale.

There’s a lot more paperwork that goes along with a short sale. And there are a lot more potential problems you’ll have to face.

Finding an agent that specializes in short sales can save you headaches and the possibility that you don’t fill out everything correctly which can jeopardize the sale. That agent can also find out all of the details of the current lien, the conditions of the house, and all of the vital information on the seller you will need.

Find the Short Sales in Your Area

Your agent will obviously help you do this, but you can also do a little research yourself to find sales you like.

Many listings will say outright that the property is on a short sale, but some will not. Look for keywords such as “preforeclosure,” “must meet bank approval,” and “headed for auction,” as clues to possible sales.

Understand Your Expectations

Know what you are looking for in a short sale and tell your agent. Are you going to be living in the home or renting it out? Is it an investment opportunity to resell after some upgrades?

Understanding exactly what you are looking for in a property will help you narrow down your choices and make everyone’s life a little easier.

Get Your Budget Together

Even though you could be saving thousands of dollars when buying a short sale, you need to know exactly how much you are willing to spend and how flexible you are willing to be.

There are tons of resources online that can help you manage your money and give you a full account of what you can spend on a new home. The earlier you know your total budget, the better your chances will be at finding the perfect short sale to buy.

Don’t Expect Negotiations

Short sales are stressful for the sellers and the lenders are wary of losing too much money. This means that you shouldn’t expect the standard negotiations that come with buying a home the traditional way.

When you see a sale price on a short sale, assume that’s the best they can do. The home is already undervalued, so don’t expect any wiggle room.

This means that you need to…

Give Your Best Offer

Don’t try to lowball a short sale. It won’t work and it’s just wasting everyone’s time.

Instead, find out the most you’re willing to pay and offer it. Chances are, you’ll already be getting a great deal, so don’t let someone else swoop in and take it from you because you tried to get cute and save a few more bucks.

Go with a great offer on your first try and you’ll save time and have a great chance at landing the property.

Add a Contingency

You need to be able to walk away if the house needs more repairs than you originally thought.

Make sure you add a contingency on repairs and other possible problems on the property that gives you a way out of things aren’t as expected. This is a very common practice in real estate and should be no problem, even with a short sale.

And if it is a problem, maybe it’s time to look for something else.

Have Patience

Because of the special nature of short sales, the process will take a little longer.

Don’t let the length distract you from your goal. You set out to buy a short sale to save money, so some extra time shouldn’t hurt. Stay focused, and it’ll be worth it when you finally close.

Short Sale Knowledge

These are some of the most important tips when it comes to buying a short sale home. There are many nuances and unexpected challenges you may face, but a short sale provides a great investment opportunity.

For more information on short sales, you can visit our blog.

Good luck!

how to stop foreclosure

7 Tips for How to Stop Foreclosure on Your Home

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Every three months 250,000 American families enter into foreclosure. That harrowing statistic sheds light on the fact that a large portion of Americans struggle to make the payments necessary to keep their homes.

If you’re currently in the process of managing the possibility of a foreclosure you may be asking yourself a lot of questions.

Where will you go? What will your family do? Is there anything you can do to prevent foreclosure from happening?

Our team at Short Sale Blog understands the stress you’re under. To help give you the information you need, we’ve compiled this list of tips on how to stop foreclosure.

1) Try to Come to an Arrangement

The foreclosure process is a negative experience for the person losing their home. You may be surprised to find out that it’s also a negative experience for the bank or lending institution that owns the home being foreclosed on.

In order to alleviate stress for both parties, most lenders are open to working out an arrangement prior to foreclosure beginning.

Arrangements can take many forms but ultimately, will be some sort of payment plan. The payment plan will set a timetable for you get back on track with your mortgage.

So if you’re committed to keeping your home, you can avoid foreclosure by being honest and open with your lender and trying to work something out.

2) Explore Ancillary Income Opportunities

It may feel like a simple suggestion, but it’s worth mentioning that you should think hard about how to bridge your income gap to avoid foreclosure.

In order to identify the gap, look at what your mortgage payment is. Then, figure out how much of that figure you’re capable of paying for. For example, if you’re liable to pay $2000 dollars a month for your mortgage but can only afford $1300, then you’ve identified a $700.00 gap.

Knowing that figure lets you weigh your options. You could potentially arrange with your lender to bring down your monthly payment to what you can afford. Or, you could take up a side gig to bridge the gap.

Another thing to consider is getting rid of unnecessary expenses. Run an audit of what your monthly expenditures are outside of your mortgage. If you find that there’s anything you can cut, do it.

Common things you may be able to cut back on are costly cable subscriptions, streaming subscriptions, unnecessary transportation costs and eating out.

3) See If You Can Change Your Adjustable Rate to a Fixed Rate

If your foreclosure is due in part to your adjustable interest rate getting too high, you may qualify for refinancing to a fixed rate through government programs.

There is a program called FHASecure that will deduce your eligibility. It can be of assistance in providing you a loan option that will bring your monthly payment down and keep your mortgage consistent.

4) Consider Bankruptcy But Tread Lightly

Bankruptcy can slow down or halt foreclosure proceedings. Bankruptcy will not allow you to evade eventually making payments on your home though.

It’s also important to know that filing for bankruptcy can adversely affect your credit going forward.

It’s best to consult a bankruptcy professional prior to going this route. They will help you fully understand what your obligations are going to be during proceedings.

5) Engage a Housing Counselor

The US Department of Urban Development can hook you up with free or low cost certified housing advisors. These advisors can assess your unique situation and give you personalized advice on how to avoid foreclosure.

Housing advisors may be able to help you obtain special loan modifications which will make your monthly payments more palatable. This is part of a plan laid out via former president Barrack Obama’s Homeowner Affordability and Stability Plan.

6) Explore Refinance Options

If you owe less than what your home is worth, another lender may be willing to refinance your home at a lower rate. This lower rate may bring your monthly payment down to something more manageable which will help you prevent foreclosure.

Many factors affect the rate you may be able to receive from a lender. If for example, your creditworthiness is better now than it was when you initially financed your home, you may qualify for more favorable terms.

7) Short Sell

Even if the foreclosure process has already begun, if you get a qualified offer from a potential buyer you may present the offer to your lender. Many times lenders want to avoid the strenuous process of foreclosing your home, evicting you and then needing to resell the home themselves.

You providing them with a qualified offer that will allow them to circumvent this will likely peak their interest.

Short selling your home also allows you to avoid having a foreclosure and eviction on your record. That may help you get financing in the future should you choose to pursue the purchase of a more affordable home.

Summarizing How to Stop Foreclosure

Going into foreclosure is an intimidating process. Understanding how to stop foreclosure can help you avoid dealing with the stress it entails.

Go online and seek government assistance programs, work something out with your lender, short sell your property or exercise any of the other tips offered throughout this article to help you stop foreclosure and keep your home.

If you’re thinking of short selling your house when considering how to stop foreclosure, you’re going to need all of the information you can get.

Our team at Short Sell Blog is dedicated to providing the most up to date, well-researched information on both short selling as an investment and short selling as a means of foreclosure help.

Read all of the information we have in regard to short selling by clicking here.

You can also explore our comprehensive materials on investing, loans and more!

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Short Sale Strategies To Get You Started

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Are you looking to take up short sales as an investment or as an alternative to foreclosure? Rest assured, a short sale is a very profitable strategy for most investors.

To get you started, you need to have some short selling strategies that are guaranteed to bring you success.

Discussed below are some of the short selling strategies and reasons why you should be thinking about implementing short sale in your own real estate investing business.

Basic Short Sale Strategies

If you are new in the industry, you may be wondering what exactly a short sale is.

There is a lot of confusion when it comes to defining short selling. In a nutshell, a short sale is when a bank agrees to allow a homeowner or seller to sell their property for less than what is owed on the mortgage.

Let’s say a homeowner has a property with a mortgage on it for $100,000 and they need to sell that house but they can’t afford to pay the debt anymore.

It could be that the homeowner needs to relocate because they got another job out of state and when the time comes to sell that property, they can only sell it for $99,000.

This means that they are over leveraged because they owe more on the property than what they can actually sell it for. This brings about a short sale type situation.

The seller must have had a hardship such as loss of income, the death of a spouse or being forced to move to another location. He can apply to his mortgage company or bank for them to accept less than full mortgage payoff.

Short Sale vs Foreclosure

Comparing the two, short sale is actually the best of a worse situation.

It may be better for you as an investor to go for short selling instead of foreclosure.

Short sales can be a bit difficult but most times, a short sale is going to be a much more viable option for both the bank and the seller.

A short sale on your credit as an investor has far less damaging value than what a foreclosure would.

This is because a short sale is going to be off your credit in a couple years but a foreclosure is always going to be there. You’re always going to have it.

When you apply for credit, they are always going to ask you if you have ever applied for or have you ever been part of a foreclosure or part of a bankruptcy?

You will most likely be disqualified because of that record.

Short selling is a profitable opportunity for you as an investor as many sellers are very motivated because they don’t want to have a foreclosure.

Here are some short selling strategies to get you started.

Conduct Comprehensive Research

Your job as an investor is to locate potential sellers and make offers on the types of properties that have a higher likelihood of getting accepted than deals that wouldn’t.

Some questions you should be asking yourself are; what makes a good opportunity for a short sale? Why would a bank agree to allow a seller to do a short sale as opposed to foreclose on that property?

Investors are meant to be making offers through homeowners who are agreeable to do a short sale.

Choose a homeowner who is agreeable to do a short sale and that the property on sale is up to standard.

Get Organized

Once you are contacted by a seller who is agreeable to a short sale type situation, you need to have good agents on your team or realtors that can compile the short sale paperwork with that seller.

You also need to get a letter of authorization from the seller allowing you and the realtor to speak on their behalf with the bank about the mortgage.

You should then submit your offer along with the short sale package to the bank and the bank is going to review all the paperwork.

Fulfill All Bank Requirements

Banks or lenders are not in the real estate business but they are in the money business. They are very strategic and calculated about what they do.

They are going to look at the seller’s financials and review their financial statement, bank statements, and tax returns.

They also need to make sure that there’s an actual hardship or some type of insolvency to qualify the seller for short sale.

They will not accept a short sale for someone who has a lot of money in the bank or those who just don’t want to pay their mortgage.

Once they see that there’s a legitimate hardship, have a complete short sale package and an offer on the table, they will order a broker’s price opinion (BPO). This is an independent valuation of the property to give it a market value.

Once they find this value, the bank then compares it to the market value. As long as your offer is within a specific price range or value range, you have a higher likelihood of it getting accepted.

The value of your offer has to fall between 85 to 95 percent of the market value of that BPO.

If your offer falls somewhere in between there, you have a good chance of getting that offer accepted and once it does, then you could be well on your way to making a profit.

Gain More Knowledge on Short selling strategies

As an investor, the more educated you are in the process, the better you will be able to help someone who is in pre-foreclosure or in a short sale type situation.

There is a higher likelihood that you will be the go-to buyer for them and save their house from foreclosure.

The more you’re able to do that, the more success you will have in your investment business.

Join Short Sale Real Estate Today

There are a lot of opportunities that exist with short sales for you as an investor.

Given the state of the economy and the drastic declines in market values over the past few years, a lot of people find themselves in situations where they are over-leveraged.

You will find that more people who owe some money on their mortgage and need to sell their property prefer doing a short sale instead of going through a foreclosure.

The short selling strategies discussed will help you succeed at investing in short sale real estate. For more information, contact us.

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Short Sale Realtor: Do You Need One To Sell Your Home?

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1 in every 2000 home purchases will go through a foreclosure. When they do, it destroys credit and often lives.

On top of that, foreclosures cost banks a lot of money.

A short sale is a mutually-beneficial way to walk away from a home that you can’t afford. But should you try to navigate the process alone? Can just any realtor handle a short sale?

You need to know when it’s time to hire a short sale realtor. Let’s take a look at questions to ask yourself as you decide.

1. Do You Fully Understand What a Short Sale Is?

A short sale is when the price you’re able to sell the home for doesn’t cover obligations to the lender. The lender must agree to take the lesser amount rather than foreclosing or requiring you to pay the difference.

If the lender refuses, you don’t have a short sale. You can’t legally sell the home.

But there’s more.

The sale price must also pay your closing fees and commissions. This could amount to several thousand dollars.

Because the sale price must also cover these expenses, it may make a home that you think isn’t underwater a potential short sale.

Short sales are often a better option for those late on payments and facing foreclosure. But someone might also seek out a short sale if they purchased a home that later dropped in value due to market, damage, neighborhood problems or other factors.

2. Do You Know If You Have a Leg to Stand on?

Many people seek out short sales because they just want to get out of the house for one reason or another. They don’t want to lose the money.

But they don’t realize that if they have significant assets, it will be hard to negotiate a short sale with the bank.

You may be thinking: they can’t ask me to liquidate my kid’s college fund or retirement! But in some cases, they can.

A short sale realtor will help you evaluate your financial situation and work with lenders to make your case.

3. Do You Know How to Work with the Lenders?

A short sale realtor has experience working with the lender. They know what documents you need. They understand what a lender or lenders need to see to approve a short sale.

They understand how much money your bank loses if they have to foreclose. The realtor can use this a leverage.

Lenders will be looking for discrepancies. They’ll try to find anything in your documents that suggests that you’re not being 100% truthful. If you really can pay the difference, they won’t authorize it.

You may even be working with two lenders if you have a second mortgage.

An expert helps you navigate this complex process. You’ll have peace of mind that it’s done right.

4. Have You Explored How a Short Sale will Impact Your Credit?

A short sale will impact your credit report and score. Future lenders will be able to see that you took this option. They may be wary of lending to you soon after.

What it won’t do is keep you from borrowing money or buying a home for up to 7 years like a foreclosure would.

A short sale demonstrates that you took the initiative to understand and exercise your options. You didn’t just let the property get taken from you.

Although a short sale realtor is not a financial advisor, they will be able to further answer credit-related questions.

4. Do You Know How to Find the Right Buyers?

A regular realtor may say they handle short sales. What they may not tell you is that they’ve handled maybe 3 during their 20-year career.

This by no means makes them an expert.

But a short sale realtor is. Short sales are what they do. They understand the rules and that just any buyer won’t do.

The lender must not only approve your short sale. They have to approve the buyer when an offer is made.

Certain buyers are more appealing to the bank. Others will get almost instantly rejected like a buyer who is only putting down a 5% down payment.

6. Are You Able to Weigh the Pros and Cons of a Short Sale?

A short sale realtor will walk you through the pros and cons so that you can make the best decision for your family.

Some of the pros you’ll consider include:

  1. Your mortgage is paid in full.
  2. They can’t come back later for the money.
  3. It’s not a foreclosure.
  4. It’s less of a blemish on your credit.
  5. You’ll be able to buy a new home sooner.

Some cons to consider include:

  1. It’s very time-consuming… unless you hire a short sale realtor.
  2. It forces you to act quickly when a buyer comes along.
  3. You don’t get any money out of the sale of your home.

This only scratches the surface. That’s why speaking with an expert is so helpful.

7. Do You Know Your Rights and Responsibilities?

There are lots of laws and rules you must follow. Not knowing isn’t an excuse. You could miss deadlines that make your short-sale fall-through. In many cases, this forces families into foreclosure.

Other rules are in place to protect you from unscrupulous or negligent lending practices. These rules speed up the process which is generally good for you and the buyer.

Let’s take a look at some of the rules you need to know about:

  1. Buyers must have a pre-approval or cash in hand.
  2. Lenders must decide on an offer within 10 days.
  3. Lenders must allow a 45-day closing so you can make arrangements.
  4. A buyer can’t resell a short sale for 90 days.
  5. Banks can’t foreclose on you for a specified time.
  6. Banks can’t charge you extra fees for a short-sale.
  7. Banks can’t lower commissions after an offer is made.

It’s Time to Get a Short Sale Realtor

If your home value is close to the mortgage balance, you have a potential short sale. Navigating the short sale process can be complex. But a short sale realtor knows what to do.

They can save you time, money, stress and headaches during the process.

For more tips and information related to short sales follow our blog.