foreclosure homes

How to Fix up Foreclosure Homes and Turn a Profit

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Are you considering buying a foreclosed home?

Foreclosure homes often require extensive tender love and care. After all, if the owners were unable to continue their mortgage payments, it’s unlikely they were keeping the home in good repair.

According to national statistics, one in every 1,835 homes results in foreclosure.

While a foreclosure may be every owner’s worst nightmare, they can present a unique opportunity for buyers. Although these properties often require substantial work, they can prove to be extremely profitable for buyers.

In this post, we’ll reveal six must-know strategies for maximizing your profits on a foreclosed home. With these tricks of the trade, you can be well on your way to buying your first foreclosure home.

1. Enlist Professional Help

First things first–it’s essential to enlist the help of professionals. This is especially the case if this is your first time purchasing a foreclosure.

Hiring accredited professionals not only ensures a quality-grade job is accomplished but also helps to avoid any legal stipulations.

Be sure to utilize a real estate professional who has specific experience in purchasing foreclosures. These professionals will be aware of which neighborhoods are best to invest in and which properties are beyond-renovation.

Next, you’re going to want to hire accredited electricians, plumbers, and contractors. While hiring a professional may prove to be expensive, it’s always worth it in the end.

2. Location, Location, Location

We hear it all the time–location is key when it comes to the perfect property! The same rule applies to foreclosures.

Be sure to research the area properly before committing to a purchase. This will be a significant consideration down the line for buyers.

An important factor to note is whether or not the home is close to a public/private school. This can be a “make it” or “break it” condition for a serious buyer with a family. You also want to consider how many shops, restaurants, and grocery stores are nearby and how accessible they are.

Public transportation is also significant when it comes to a property–especially if the home is outside the inner city. Make sure transit is easily accessible, otherwise your home may not be as valuable.

Taking note of these important aspects can really affect the sale of your home down the road.

3. Focus on the Most Important Rooms

One of the most challenging aspects of renovating a home is deciding where to spend your money.

That being said, it’s crucial to decipher which renovated rooms result in the utmost profit. According to Architecture Lab, the most important rooms to focus on in a renovation are the kitchen and the bathroom(s).

When choosing your finishes, be sure to select a style that has broad appeal. Have a real estate or design professional provide you with advice as to what styles are currently trending.

This is where the bulk of your money will be spent, so it’s crucial to invest it wisely.

4. Upgrade the Interior Systems

While it may be tempting to focus on the elements of the home that are only visible to buyers, it’s equally important to focus on the interior systems.

Remember, buyers expect the home’s mechanical and electrical systems to be in good working order. Generally speaking, these are not items buyers are willing to upgrade after purchasing a turkey home.

As a general rule, be sure to focus on:

  • Heating and air conditioning
  • Water heating
  • Plumbing
  • Wiring

When it comes to upgrading these systems, save yourself a headache and enlist the help of a licensed professional. Consider that some states have legal rules and regulations stating that a professional must be used for these services.

While these upgrades may prove to be expensive up front, they’re vital to maximizing the eventual profit of the home.

5. Paint and Flooring

First impressions are everything. That’s why when you open the front door to your home, you want to feel instantly welcomed.

There are two very important factors that will aid in this: paint and flooring.

Paint can be one of the most cost-effective ways to improve not only the interior of a home but also the exterior. A fresh coat of paint can instantly brighten up your home and do wonders for the eye.

A bright, light color for the interior can immediately change the mood and feel of your home. It will update it drastically without a tremendous amount of effort or cost.

This same rule applies to the exterior. Curb appeal is everything, so make sure to freshen up the house, shutters, and deck with a complementary color.

Second is flooring. Whether it’s updating the current with a quick stain or replacing it altogether, your flooring creates a flow that should complement the other elements of your home.

Special designs or tiling can help draw the eye to key areas, such as the kitchen or entryway. This helps to add that special uniqueness for a potential buyer down the road.

6. Don’t Overinvest

While it may be enticing to pour your heart, soul, and wallet into your first foreclosure renovation, it’s crucial to limit yourself.

Yes, it may be tempting to renovate every nook and cranny of the home. But it’s important to resist this temptation for the sake of time and money.

That being said, have your real estate professional keep you updated with the property values of your neighborhood. Always ensure that you are not renovating the property above the value of neighboring properties.

While it may be nice to have the most beautiful home on the street, this often has an adverse effect on your future property value.

The Perks of Purchasing Foreclosure Homes

If you’re contemplating the pros and cons of purchasing a foreclosure, it’s vital to understand how to best profit from such a purchase. While purchasing foreclosure homes may require extensive time and money, the profit can be exceptional.

But, it’s also safe to say that not all foreclosed home are created equal. From choosing the right foreclosure in the right neighborhood to selecting which rooms to focus your restoration on, there certainly is a right way to renovate.

Looking for more tips on purchasing a foreclosure? Visit our website for our expert tips and tricks of the trade.

what is foreclosure

What is Forclosure: The Ultimate Buyers Guide

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Are you looking to buy your next home at the best price possible?

You may want to consider purchasing a foreclosed property.

Often, you can buy a foreclosure at a price that’s well below its’ actual value.

According to Home Buying Institute, studies show that buyers of foreclosed properties save an average of 27%. A 27% discount on a $300,000 home equals savings of over $80,000.

Unfortunately, many people miss out on the opportunity to buy this reduced-rate real estate because they are not familiar with how foreclosure works.

If you might be wondering “What is foreclosure?”, then you are in the right place.

Want to know “How does buying a foreclosure work?”

We’ve got the answers you need.

Read on to find out what you should know if you are considering investing in foreclosed real estate!

What is Foreclosure?

Foreclosure is what happens when the buyer (or buyers) cannot or will not pay the required mortgage payment on their real estate loan.

Often, the term homeowner is used when discussing the foreclosure definition. However, the person or people who are living in the home are not actually the homeowners because they still owe on the balance of the house.

Usually, buyers will take out a loan from a bank or other lending institution to purchase a property. Then, they will have to adhere to the terms of the mortgage loan until the house is paid for in full. While payments are being made on the property, they do not own the property outright.

Should the buyers fail to make the arranged payments, the property enters foreclosure. At this point, the house may go to an auction. At an auction, buyers will bid on the property, and the winner pays the amount offered on the spot.

If the house doesn’t sell at an auction, then the lending institution will assume ownership. This may cost the lender several thousand dollars.

The foreclosed home then is sold by the lending institution. They will attempt to sell the house at a price that will cover whatever it has cost them, but the price is usually much less than if you purchased the home off the market in the traditional way.

Why Do Foreclosures Occur?

According to statistics published by Realtor.com, one in 13,000 homes will end up in foreclosure.

There is a wide range of reasons why a house ends up in foreclosure. These include:

  • The owner lost their job and cannot afford the mortgage payment
  • The property owners abandoned the house, and they are no longer paying their loan payments
  • The owner encountered a variety of unforeseen financial hardships, such as caring for a sick family member and can no longer afford to make payments
  • When the homebuyers purchased the property, their payments were out of their realistic price range, so they are unable to keep their mortgage payments up to date
  • Someone in the family got transferred to a new area (for their job or other reasons), and the dwellers could not afford to make two house payments

Whatever the reason, when a foreclosure occurs, the mortgage payments have gone into default.

Often, when this happens, the lender will attempt to work out a solution with the homeowners prior to entering into foreclosure proceedings. If they are unable to reach a reasonable solution to avoid foreclosure, then the lending institution will move forward with foreclosing on the property.

Smart Tips for Buying Foreclosed Real Estate

Buying a foreclosed home for a great deal is possible. But, it’s not guaranteed. If you are interested in purchasing a foreclosure, there are a few things that will help ensure you’re making a wise purchase.

Don’t Expect Price Negotiations

Unlike other houses on the market, the price of a foreclosed home typically leaves little room for negotiation.

Since you are most likely buying the property from the lender, you can expect an impersonal experience. And, the price that is offered is often the price that is required so that the lender does not go into further debt themselves.

Foreclosed Properties Are Typically Sold As-Is

Although you might be scoring a great deal on the price of a foreclosed home compared with similar properties, foreclosed homes may not be in “move-in ready” condition. Often, the owners have not maintained the property’s upkeep.

You might have to deal with repairs and improvements that you would not find if you were buying another house on the market.

Find Out the Owner’s Specific Requirements for Closing

When you purchase a foreclosure, you are entering a non-standard agreement. This means that the owner may have unique, specific requirements and procedures for closing the deal.

Prior to entering into an agreement, you should find out what the owner’s requirements are for closing and be sure that their requirements are acceptable to you.

Consider Potential Baggage

Foreclosed homes may come with unforeseen baggage, such as liens against the property or extensive repairs. Avoid making the common mistake of overlooking circumstances that may influence your purchasing decision.

If you choose to go through with purchasing a foreclosure, make sure that you have carefully weighed the pros and cons and that you are comfortable with the big picture. If you intend to buy, don’t commit until you are sure that you can live with whatever unusual terms apply to the sale of the property.

Contact Professionals Who Are Familiar With the Foreclosure Process

For buyers seriously considering purchasing a foreclosed home, it’s wise to consult the pros. Short-sale and foreclosure experts can answer all of your questions, including “What is foreclosure?”, and any other questions that you may have.

Before you buy, ask for advice from the experts.

Think you may be interested in purchasing a foreclosed home?

Check out our blog to find out more about buying a foreclosure!

consequences of foreclosure

Consequences of Foreclosure: 6 Ways Your Future Could Be Affected

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Losing a home to foreclosure can be devastating. Buying a home is a part of the American dream. When the dream ends in shambles you have to pick-up the pieces and rebuild.

Foreclosure can have long-lasting effects. Being trapped in debt is a negative emotional experience that can take a toll. Unfortunately, for most people it is the last and only option when facing significant financial hardship.

Some people, once all hope is lost, will simply abandon the property. Others will decide to stay until the bank takes possessions. Either choice can be humiliating and take years to recover from.

For those going through the process now, you’re probably wondering how long foreclosure will follow you. Continue reading to learn the consequences of foreclosure on your credit.

1. Uncertainty About the Future

Ten years ago when the country was facing a recession, many homeowners lost their homes. Unemployment was at an all-time high and families faced huge financial challenges.

As the country recovered, bankruptcy courts experienced a huge backlog. Days of homeowners remaining in their homes for years after the bank filed for foreclosure, have now ended.

Today, the impact of foreclosure is felt sooner. Now families have less time to come up with a plan for new housing.

If you have limited funds or can’t qualify for an apartment or rental unit, you could find yourself homeless.

Without adequate planning, an eviction is eminent. Not only could families lose their home, but possessions could be removed from the home and placed on the front lawn.

Once you decide you do not want to fight for your home, it is best to move before the information hits your credit report.

2. Ruined Credit Tops the List of Consequences of Foreclosure

Having a foreclosure on your credit is a big deal. If you are facing foreclosure, chances are your credit has already taken a hit. Once a judgement is entered against you, expect another drop of 200 – 280 points.

Credit scores run between 300 and 850 points, with 850 considered a superior rating. Most people experiencing financial problems typically have scores in the low 600’s and below.

The impact of a foreclosure on credit scores can drop your score to the lowest point on the scale. With a score below 500, it will be almost impossible to have credit extended to you.

Lawyers believe that people facing foreclosure should consider bankruptcy, which is easier to recover from, and also quicker.

3. Foreclosures Could Impact Your Employability

More and more employers are performing background checks on perspective employees as part of the hiring process. If your credit score falls below 600, you may be disqualified.

This may not be a problem for some positions. However, it could impact your chances of getting a call back for jobs in the finance industry.

The impact of foreclosure can arise later, even if you already have a position. Sometimes employers run random background and credit checks on existing employees. You could also have issues when seeking a promotion to a finance related position.

Under the Fair Credit Reporting Act, companies are required to give applicants a pre-adverse action disclosure. This is given whenever someone is not hired for a position due to information from a background check.

4. Restrictions on Fannie Mae Loans Could Apply

Following a foreclosure, the last thing on your mind may be purchasing another home. As time passes and your financial circumstances improve, you may have a change of heart.

You will want to know how foreclosure affects your credit when it comes to getting a home loan. Regardless of the type of foreclosure or if you had a short sale, you can expect a wait of 2 to 7 years.

There may be circumstances in which a lender may be willing to offer you a second chance, sooner rather than later. Not all foreclosures are a result of poor money management. Death of a spouse, a relocation or extended illness can lead to foreclosure.

Don’t be afraid to explain your situation to lenders. Just be prepared to present supporting documentation if asked.

5. You May Still Owe the Bank After Foreclosure

The consequences of foreclosures can last well beyond the point of losing your home. If your house is valued at less than what you owed the bank, you may be liable for the difference.

On top of all you’re going through, this is the last thing you need to deal with.

It is important to know if you live in a non-recourse state when facing foreclosure. Certain states do not allow lenders to seek relief for losses on foreclosure sales. Others have specific rules on what types of loans qualify.

A deficiency judgment is an option banks have to recoup losses on the sale of your foreclosed property. This means, if you owed the bank $100,000, but they could only get $75,000, a judgment for the difference could be entered against you.

Keep in mind, it could take a while for a property to sell. So you could get the bill years later.

6. Their May be Tax Implications

You will need to report your foreclosure when you file your tax return. This may be unforeseen consequences of foreclosures.

The lender will send you a tax form 1099-A to be used to record your foreclosure on your taxes. Like other 1099 forms you may receive, the information must be entered on the return.

Depending on how many liens was on the foreclosed property, you may receive multiple forms.

The average person who has gone through a foreclosure will not face tax penalties. However, you still must record the information and go through the steps to ensure this is the case.

You Can Survive Foreclosure

Going through foreclosure is stressful, but once it’s over you can breathe a sigh of relief. The sooner you can rebuild your credit the better.

The consequences of foreclosure may seem like huge obstacles that will plague you for years to come. Shake it off and create a plan to move forward.

If you feel foreclosure may be in your future, check-out our blog explaining what happens when you are facing foreclosure.

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!