REALTOR® Ray Minyard blogs about some of the reasons why it hasn’t succeeded to date.

 

“With unemployment at around 10 percent, analysts say the home buyers tax credit aimed at stimulating home demand is doing little.

The Obama administration’s initiatives to modify loans facing foreclosure have not met with any great success so far.

Analysts fear that a huge supply of discounted homes will hit the market in 2010 and the additional supply of homes will only worsen the market situation. As the deadline for expiry of tax credit approaches, we are not seeing an increase in home demand.

‘No one is saying that they need to buy before the tax credit expires,’ said Tim Surratt, a real estate agent.

According to a survey conducted by Campbell Communications and Inside Mortgage Finance, the percentage of homeowners looking to buy a home was flat from January to February.

Some analysts say the size of tax credit at $6,500 is too small to influence buyer decision. The savings on account of the tax credit will not offset down payments and other transaction costs.

The agent’s commission for a home at the national average price of $164,000 is likely to be 6 percent or $9,840. This is much higher than the tax credit of $6,500.

‘You’ve got a really big problem that requires big guns, and the tax credit is just not big enough,’ said Roberton Williams, senior fellow at the Tax Policy Center.”

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Jonathan Osman blogs about a pattern occurring where home buyers have bought into the myth that the only good deals in town are bank-owned foreclosures, which he states, simply isn’t true.

“Having sold more than my fair share of bank owned homes over the last few years, I can personally attest that most buyers have a idealistic vision of their dream foreclosure. The home is in perfect condition (not even a scuff on the wall), all of the appliances are installed, and the home can be purchased for half of the asking price.

As things progress, that same buyer undergoes a reality check when they discover that bank owned homes have lots of deferred maintenance, the appliances are gone, and the bank is holding firm at their market value price.

Many think that auctions are the way to go, rationalizing that the banks are just unloading these properties for pennies on the dollar.

Again, having worked with a client who purchased a bank owned home through a large auction, I can say that the discount was really non-existent given the condition of the home. In fact, the auction pressured the buyer into closing whether he liked the home or not so that he wouldn’t lose his $25,000 in earnest money and up-front fees.

Since foreclosure homes are the latest rage in the market, the banks are able to use the hype to keep prices elevated for a higher return for themselves.”

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REALTOR® Dave Harris shares his Top 8 reasons that now is the best time to consider a move.

 
“1. Prices to buy are incredible

Quite potentially, there hasn’t ever been a better market to buy a home.

It’s doubtful that if in my real estate career, we will see a better buyers market this good again. As an example, in a period of six weeks, I sold four houses that were foreclosures; each of them was purchased for $100k less than the sellers had paid three years ago.

To put that in perspective, my people bought them for about 50 percent of the price from three years prior. 50 percent! Of course every situation is different, but there are truly some great deals out there!

2. Prices may get worse

So what is your plan? Stay for a couple more years and sell when the market ‘turns around?’ Not to be Debbie Downer, but things are going to be this way if not worse for 3-5 years according to most predictions.

As long as people are still out of work, and still getting laid off, we are going to see more foreclosures and more short sales. Buyers pay what the neighborhood homes are selling for.

Meaning if that foreclosure down the street sold for much less than what they paid two years ago, that sale affects the value of your home as well.

Statistics are showing that notices of mortgage defaults are on the rise. Translation is the people who are three months or more late on their mortgage.

3. Historically Low Rates!
Rates are historically low floating around 5 percent for a 30-year FHA fixed rate loan, and they won’t last forever.

Many of the ‘old timers’ in the real estate business will tell horror stories of the day that they started, rates were double digits – P.S. it wasn’t that long ago! Can you imagine?

Once the demand in the market begins to pick up, guess what will happen to the rates? Banks make money on interest rates. There is already much talk that rates are too low now and should be raised.”

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Le-Ann Vicquery blogs about what you need to know in order to decide if purchasing a foreclosure is the smartest option for you.

“Foreclosure properties have often been vacant for an extended period of time. Look for problems caused by damp conditions, such as mold.

Get a thorough home inspection before bidding on the property. Once the damage/disrepair of the home is assessed, factor this in when bidding on the home.”

While buying a foreclosure property takes patience and research, the results can be well worth your time and effort. Make sure to do your research first, and if you decide it’s the right option for you, you may be able to find a great deal.

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I submitted an offer through the listing agent for a house in pre-foreclosure. The agent says the seller keeps asking for the “gross amount.” The seller, which is a financial lending institution, is aware of the dollar amount of the offer, but seems to be looking for something in addition to it. The agent and I are confused. What does “gross amount” mean?

-Rick

There are two parts to your question. First, you mention you are buying a home in “pre-foreclosure.” This means the bank has not foreclosed on the property yet. If this is true, then the seller is the person who is in default, not the financial lending institution with whom you are negotiating a settlement. This is a very important distinction. The bank does not own the property until after foreclosure, therefore they are not the seller.

To your question regarding “gross amount;” in a short sale, the bank is interested in two numbers. First, the gross sales price, which is the offer amount you as a buyer have offered to pay for the home. The next is the “net amount,” or amount the bank will ultimately end up with at close of escrow after all fees are deducted to close the transaction. These fees can include taxes, escrow, title, real estate commissions, and other customary charges. One note, in a short sale, nothing is customary and the banks will fight tooth and nail for every penny they can collect. Most short sale negotiators find success with a “net to gross” difference in price between 6 percent to 10 percent. For example if the “gross amount” was $100,000 and you were skilled enough to negotiate a net to gross difference of 10 percent ($10,000) than the “net amount” would be $90,000 to the bank at the close of escrow.

Allan Glass is a real estate broker at ASG Real Estate Inc and a consultant in the Los Angeles market specializing in REO, foreclosures, and short sales. Over the past 17 years he has sold over $1 billion in commercial and residential real estate.

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But for as much as the foreclosure filing statistics can be astounding — over 300,000 homes were served last month alone — the prevalence of foreclosures depends on where you live.

Bob Phillips shares the statistics behind the numbers of foreclosures around the country, and what they mean to homeowners and potential hombuyers.

“Just because foreclosures are concentrated geographically, that doesn’t make them less important to homebuyers around the country.

There’s been more than 1.4 million foreclosure filings in the last 12 months and that’s a figure that can’t be ignored.”

If you want to be able to take advantage of the first-time home buyers tax credit, and you are serious about looking into foreclosures, it’s probably best to start your search soon.

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But if you are in the market for a new home, and you find a deal that seems almost too good, be sure to do your research first.

Lee Dworshak blogs about being careful when you find a deal on a house that appears too good to be true.

“What looks like a real estate bargain is not always a bargain. For potential real estate investors who have money in their pockets, today’s real estate market is full of bargains.

But be careful because what looks like a real estate bargain isn’t always what it appears on the surface. Some of the best bargains out there have foreclosure written all over them.”

Lee Dworshak reminds us to “be realistic” when it comes to house hunting, and that is probably the best bottom-line piece of advice one can give to potential homebuyers. You may fall in love with the neighborhood or the hardwood floors or the marble fireplace, but if all the pieces of the puzzle aren’t there, you may need to do some more research.

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But if you are in the market for a new home, and you find a deal that seems almost too good, be sure to do your research first.

Lee Dworshak blogs about being careful when you find a deal on a house that appears too good to be true.

“What looks like a real estate bargain is not always a bargain. For potential real estate investors who have money in their pockets, today’s real estate market is full of bargains.

But be careful because what looks like a real estate bargain isn’t always what it appears on the surface. Some of the best bargains out there have foreclosure written all over them.”

Lee Dworshak reminds us to “be realistic” when it comes to house hunting, and that is probably the best bottom-line piece of advice one can give to potential homebuyers. You may fall in love with the neighborhood or the hardwood floors or the marble fireplace, but if all the pieces of the puzzle aren’t there, you may need to do some more research.

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What exactly are the differences between each situation? Each process is complicated and complex, and as always, your best bet is to get yourself situated with a trusted and experienced REALTOR®. It also helps if you understand, at least to a certain extent, the processes yourself.

Natascha Tello clears up the confusion and clearly defines short sales, foreclosures and REO.

“Short sales, in most circumstances, are the first step to avoid foreclosure. Although the lender(s) will recover less than the total loan amount in a short sale, they may prefer this in lieu of foreclosure. The costs of foreclosing on a property may be more than the bank’s loss by taking a short sale.

Also, the property may not sell at auction and then the bank would be forced to take it back as an REO (Real Estate Owned) property, which then they would have to maintain, list and sell themselves.”

Short sales, foreclosures and REO are all feasible options if a homeowner is unable to make their monthly mortgage payments. But before you jump in and decide which is the best option for you, be sure to talk to your Realtor. The same applies for potential homebuyers looking for a great deal. These options may just be the ticket for you.

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 Would it be possible to purchase a foreclosure or short-sale home and then rent out the remaining rooms to pay the mortgage?

-Jeanette

Buying a home as a short sale or foreclosure has no impact on your decision to live in or rent the property after the close of escrow, just like a regular private sale. What will affect your ability to rent, will be the type of loan you arrange with your lender (eg. Owner occupied or investor purchase) and the laws in your town or homeowner’s association agreement.

To clarify that last statement, check the zoning laws to make sure you can rent multiple rooms, and if you live in a condominium, make sure the HOA allows you to rent the unit and does not have restrictions on doing so.

Allan Glass is a real estate broker at ASG Real Estate Inc and a consultant in the Los Angeles market specializing in REO, foreclosures, and short sales. Over the past 17 years he has sold over $1 billion in commercial and residential real estate.

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