At the post-foreclosure, the property has been foreclosed and taken back by the lender. These pieces of property are known as “real estate owned” or REO. The easiest way to buy foreclosed property is by buying REOs. These “real estate owned” homes always have a clear title, which saves time, expense and general worries about foreclosures. Also, the lender or bank will most likely pay the property taxes in arrears (an unpaid debt). The lender may either repair the property or give a discount to the buyer to make repairs.
We have all seen late night infomercials joyfully telling us how to buy foreclosed properties from banks. They explain how the banks are so eager to rid themselves of this property that they are willing to sell for much less than market value. You will supposedly be helping the bank with their real estate problems and make a “killing” in the process. Happy millionaire couples are then shown in their mansions or on their yachts which they supposedly purchased with the real estate profits they made from the banks.
Real estate property owned by banks (REO) refers to a property that has gone through the foreclosure process. The bank or loan company has foreclosed on the property and it has reverted back to the lender. Any attempt to sell at pre-foreclosure or foreclosure auction has failed.
When the bank owns the property, there is no longer an existing mortgage loan. If the property is still occupied, the bank will handle the eviction process. However, if you buy the property and wish to allow the previous owners to remain as rent-paying tenants, you are free to do so. The bank will also pay off any amount due to homeowners associations. In addition, they will negotiate with the IRS for removal of taxes owed.
However, REO purchases should not be considered free of risks. The bank may make some minor repairs but in the majority of situations, the property will be sold in an “as is” condition meaning it will remain in the condition it was in when initially repossessed. Considering that the prior owners obviously had financial difficulties for at least three months, potential buyers of REO should keep in mind that any major repairs needed would not have been done during this time.
Consequently, it is important to have the property inspected by a professional to find out its actual condition and market worth. A comparison market value should be carried out. You should also keep in mind the amount of money renovations will cost you to add to the amount of the purchase price to the bank.
Do not be fooled by the myth that REO’s are great bargains! Banks have to answer to shareholders and have no desire to quickly get rid of a foreclosed property at a low price.
If you are satisfied with the information provided by the home inspector, now is the time to make an offer to the bank. It is important to include a Section 1 – Pest Certification – to be sure there is not a termite problem on the property. The bank will probably not pay for it but if all inspections are not completed by the time you make your offer, your offer should include a contingency clause that allows you to terminate the sale if unanticipated damages are found – within a specified period of time – that the bank will not correct.
Additionally, banks do not usually provide financing on their REOs. However, it would be especially helpful to obtain bank funding if there was extensive damage to the property they are selling “as is”.
If, based on the information you have received from inspection reports, you are satisfied that the market value of the property meets your expectations and you have made an initial offer to the bank, be prepared for them to provide you with a counter-offer. The usual procedure for the industry is for the bank to ask you for a higher price than you have offered. If you are willing to pay the higher price and accept their offer, the bank will then draw up a contract. As with all legal documents, it is important to have the contract checked by your attorney.
Remember that banks are closed on evenings and weekends. They usually have a department of 3 to 4 people devoted especially to REOs and decisions are not made as quickly as we would like.
Showing posts with label Bank Owned Properties. Show all posts
Showing posts with label Bank Owned Properties. Show all posts
Wednesday, February 14, 2007
Wednesday, February 7, 2007
Just Listed Foreclosures
336 W GARLAND - FRESNO3 Bedrooms - 2 Bath
1,344 Sq.Ft. - 8,100 Sq.Ft. Lot
Built in 1950
Asking Price $266,000
Clean, updated, wood & aggregate floors, dual pane windows, huge garage with carport, lots of charm, perfect for a first time buyer more info
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2617 E NORWICH - FRESNO4 Bedroom - 2 Bath
1,188 Sq.Ft - 6,100 Sq.Ft Lot
Built in 1954
Asking Price $216,000
Needs minor TLC, mostly carpet, paint, has detached garage, wrought iron fence in front, walking distance to Fashion Fair, make a great rental property. more infoFriday, January 26, 2007
Housing defaults, foreclosures rise in FresnoMarket downturn, wide use of alternative loans blamed.
Foreclosures in Fresno County more than quadrupled in the fourth quarter from last year — a sign, analysts say, that a day of reckoning is coming for thousands of home buyers who used unconventional loans. Rising interest rates and lagging appreciation are conspiring to cause financial fits for thousands of homeowners in the central San Joaquin Valley and California, many of whom used adjustable-rate and 100% financing for their purchases. Statewide, the number of default notices — the first step in the foreclosure process — climbed a whopping 145% in the fourth quarter of 2006 from a year earlier to the highest level in eight years, according to Data Quick Information Systems, a real estate tracking service. About a third of homeowners headed into foreclosure actually lost their houses. That compared with 8% last year, when the market was hotter and homeowners could more easily get out of trouble by selling. No region was immune, and many real estate agents who specialize in distressed properties expect the numbers to grow. "This is just the first wave," said Shannon Martin of Mid-State Realty in Fresno. "Within the next few years, you'll see more foreclosures coming."
The increase in default notices ranged from 63.2% in San Francisco to 471.7% in Stanislaus County. In Tulare County, the increase in default notices was 138.5%, while the actual number of properties returning to the lender totaled 57, a 470% hike. Real estate agent Mike Schuil of Visalia said foreclosures are definitely on the upswing in Tulare County. In Fresno County, the increase of defaults was 104.4%, while the number of houses going back to the lender was 110, up 450%, DataQuick reported. Still, the numbers remain modest by historical standards. The average number of foreclosures in Fresno County since 1998 is 142. DataQuick spokesman Andrew LePage said inland California often has higher foreclosure rates because the lower home prices attract more first-time buyers and those with modest incomes. "Folks with modest means are always closer to the financial edge" and are more vulnerable to market changes, he said. DataQuick officials say they need more time before coming to any conclusions, in part because a robust real estate market last year kept numbers down. "We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said Marshall Prentice, DataQuick's president. Most of the loans that went into default originated between January 2005 and February 2006. Their average age was 15 months, and the typical borrower was five months behind on payments. Locally, real estate agents and credit counselors have seen huge jumps in foreclosure-related activity. Martin, who specializes in selling foreclosed properties for lenders, said such listings he handles climbed from 10 to 70 in the past six months. "People who bought their houses within the last year or two with zero down are at the high-water mark," he said. "As the values have decreased, they owe more than the house is worth." Martin said he has foreclosure listings in all price ranges and geographic areas. "I've got them from $640,000 to $120,000. They are all over," he said. That's because many of the families bought the houses with adjustable-rate or subprime loans. "It's no surprise," said Martha Lucey, executive vice president of ByDesign Financial Solutions, a nonprofit credit counseling organization in Fresno. "Over 60% of the loans nationally have been the nonfixed-rate type, and we've anticipated consumers running into trouble when rates adjust." The number of phone calls to her housing credit counselors has increased threefold over the past six months. Many of those families are first-time home buyers who have little or no equity in their houses. Many should have thought twice about buying the house they did, she said. "It is wishful thinking," she said. "They believe they will be earning more later or will be able to refinance into a different loan product in a few years." The story is the same throughout California and the nation. More than 1.2 million foreclosure filings were reported in the United States in 2006, up 42% from 2005. That's a rate of one foreclosure filing per every 92 households, according to RealtyTrac, an online marketplace for foreclosure properties. Those families who bought their houses within the past few years are at the greatest risk. Many can't sell them for enough to pay off principal, or are unable to refinance the loans, analysts say. As a result, the number of "short sales," where the bank allows the sellers to lower the price enough to find a buyer, has increased, said Gary Kittredge of Realty Concepts. Martin said many of the buyers obtained loans they shouldn't have. "From what I'm seeing, people were put into 100% financing loans that weren't properly underwritten," he said. Lucey said the lenders and borrowers are equally at fault. "In some cases, the consumers didn't understand their financial position or the family budget. And in other cases, the issues are with lenders who didn't help buyers understand the implications of the loan they were getting into," she said. Lucey said borrowers should call the lender when they run into financial trouble. Often, they can work out a plan where the payments are restructured until the deficit is cured.
The increase in default notices ranged from 63.2% in San Francisco to 471.7% in Stanislaus County. In Tulare County, the increase in default notices was 138.5%, while the actual number of properties returning to the lender totaled 57, a 470% hike. Real estate agent Mike Schuil of Visalia said foreclosures are definitely on the upswing in Tulare County. In Fresno County, the increase of defaults was 104.4%, while the number of houses going back to the lender was 110, up 450%, DataQuick reported. Still, the numbers remain modest by historical standards. The average number of foreclosures in Fresno County since 1998 is 142. DataQuick spokesman Andrew LePage said inland California often has higher foreclosure rates because the lower home prices attract more first-time buyers and those with modest incomes. "Folks with modest means are always closer to the financial edge" and are more vulnerable to market changes, he said. DataQuick officials say they need more time before coming to any conclusions, in part because a robust real estate market last year kept numbers down. "We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said Marshall Prentice, DataQuick's president. Most of the loans that went into default originated between January 2005 and February 2006. Their average age was 15 months, and the typical borrower was five months behind on payments. Locally, real estate agents and credit counselors have seen huge jumps in foreclosure-related activity. Martin, who specializes in selling foreclosed properties for lenders, said such listings he handles climbed from 10 to 70 in the past six months. "People who bought their houses within the last year or two with zero down are at the high-water mark," he said. "As the values have decreased, they owe more than the house is worth." Martin said he has foreclosure listings in all price ranges and geographic areas. "I've got them from $640,000 to $120,000. They are all over," he said. That's because many of the families bought the houses with adjustable-rate or subprime loans. "It's no surprise," said Martha Lucey, executive vice president of ByDesign Financial Solutions, a nonprofit credit counseling organization in Fresno. "Over 60% of the loans nationally have been the nonfixed-rate type, and we've anticipated consumers running into trouble when rates adjust." The number of phone calls to her housing credit counselors has increased threefold over the past six months. Many of those families are first-time home buyers who have little or no equity in their houses. Many should have thought twice about buying the house they did, she said. "It is wishful thinking," she said. "They believe they will be earning more later or will be able to refinance into a different loan product in a few years." The story is the same throughout California and the nation. More than 1.2 million foreclosure filings were reported in the United States in 2006, up 42% from 2005. That's a rate of one foreclosure filing per every 92 households, according to RealtyTrac, an online marketplace for foreclosure properties. Those families who bought their houses within the past few years are at the greatest risk. Many can't sell them for enough to pay off principal, or are unable to refinance the loans, analysts say. As a result, the number of "short sales," where the bank allows the sellers to lower the price enough to find a buyer, has increased, said Gary Kittredge of Realty Concepts. Martin said many of the buyers obtained loans they shouldn't have. "From what I'm seeing, people were put into 100% financing loans that weren't properly underwritten," he said. Lucey said the lenders and borrowers are equally at fault. "In some cases, the consumers didn't understand their financial position or the family budget. And in other cases, the issues are with lenders who didn't help buyers understand the implications of the loan they were getting into," she said. Lucey said borrowers should call the lender when they run into financial trouble. Often, they can work out a plan where the payments are restructured until the deficit is cured.
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