MarketWatchListings.com

Don't Overlook the "Little" Things When Buying Your New Home

Everyone buying a home can easily get caught up in the ruts and excitement of shopping and negotiations.  After all this is place you and your family are likely to own for a least several years.  During the transaction you are conducting inspections, verifying financial information for the lender and trying to pack.

However, do not forget to call the utility companies and order a start date for water, garbage and electricity.  Most first rime buyers are used to renting and many times, these expenses are covered by the landlord.  Do not get stuck without the basics your first week in the house.

Plan ahead and your move will be smooth sailing.

Silver Lining for Buyers in Down Economic Times

Yes...the economy is in turmoil, however not all sides of a real estate transaction are affected equally.  Down makets always have given buyers the upper hand in negotiations.  Just this past week, I was working with a client who is moving to the area from Oregon to be closer to her family.  She is an all cash buyer.

We wrote an offer on a nice waterview Benicia home on Mills Drive. The kitchen needed to be completely redone - it still featured the sunset yellow motiff a la 1978.  The list price was $499,000.  Recent comps showed the value in the mid $450,000 range and zillow showed a value of just $420,000.  We offered $450,000 and the sellers came back at $480,000.  We countered at $465,000 and the sellers refused! 

Undeterred we continued looking and found a beautiful home overlooking Solano Park that had been completely upgraded.  We offered $440,000 and they took it.

Buyers...don;t let unreasonable sellers keep you down.  Remember, you have to open alot of oysters to find a pearl!

Talking Buydowns and Rate Locks; SWEETENING THE DEAL ON A HOUSE

The buydown is a mortgage-financing aid in which the homebuyer or another third party (usually the seller or builder) makes subsidizing payments to the lender so that the buyer's interest rate and, therefore, monthly payment are lowered. The lower interest rate can last for the first few years (known as a temporary buydown) or for the full term of the loan. Typically, buydowns last from one- to five years after the loan is closed. One of the more familiar structures is the 3-2-1 buydown, where the interest rate is 3 percent lower than the note rate (the interest rate that the borrower agreed to pay) of the loan for the first year, 2 percent lower during the loan's second year, and 1 percent lower during the third year of the loan, after which the interest rate reverts to the note rate for the remainder of the life of the loan.

Generally, the funds for the subsidizing payments are paid at closing and placed into an escrow account, out of which payments are made to the lender over the time that the buydown is in effect. Although buydown payments are often made by the property seller, the buyer still ultimately pays in the form of a higher purchase price.

A rate lock is exactly what the name implies – it's an option to lock in a quoted rate of interest for a specified period of time after the approval of a loan application. Without the protection of a rate lock the borrower is at the mercy of fluctuating interest rates; the rate that the borrower qualifies for is not guaranteed to be the final interest rate at loan closing. Using a lock-in, the quoted rate at loan approval will be the final rate at the closing table, thereby protecting the borrower against rising market rates. However, if rates should happen to fall between loan approval and closing, the borrower may not be able to take advantage of the lower cost.

In order to remain competitive in the marketplace, many lenders offer 30- to 45-day rate locks free of charge. If the loan will take a longer period of time to close, extended lock-ins are usually available for an additional fee. A float-down provision (which states that if rates fall before the loan closes the borrower will automatically receive the lower interest rate) may also be included for the sake of competitiveness. The borrower should ensure that his or her loan contains this provision.

If a rate lock isn't automatically included with the loan, there are a number of variables that the borrower should consider before deciding on whether to lock the interest rate. For instance, if the borrower doesn't lock and the rate increases, could he or she still qualify for the loan? Of course, in this circumstance, locking the rate would certainly be prudent.

The borrower should also consider if an extended lock-in would be necessary if the loan will take more than sixty days to close. What is the fee associated with this type of rate lock? When is it paid, is it refundable, and under what conditions?

Are interest rates fluctuating, or are they trending upward or downward? The borrower can check several sources before deciding if a lock-in is advisable. Financial indicators such as the federal discount rate (the rate at which banks borrow money from the Federal Reserve), the actions of the Federal Reserve Board (which tightens or loosens the money in circulation), and the ten-year treasury note market (which plays a large part in determining short-term interest rates) should be evaluated. They can be monitored through local newspapers or by online resources such as The Wall Street Journal and Interest.com. International events also play an increasing role in the volatility of U.S. interest rates, and neither should they be overlooked by the borrower. In fact, many lenders advise that if negative world news is occurring, it's probably wise to lock in the interest rate.

Todays Top Three Vallejo Buys

The Vallejo market is experienceing a large turnover of quality foreclosures. As soon as a quality property in a nice neighborhood comes on the market and is reasonably priced, there are often multiple offers. Today I looked for homes that were built from 1980 on, with at least 3 bedrooms and 2 baths and had at least 1700 sf. I looked specifically at non-short sales. I found three homes to be priced well and in good to very good condition. Please click below to see them.

Secrets of Buying a Bank Foreclosure

 

So you would like to buy a bank owned property?

 

You’ve watched the late night infomercials and you’re ready to do the bank a “favor” and take the problem off their hands.  Plus, you expect to make “a killing” in the process.  Sounds great and it just might happen, but first you should take a look at some facts and get prepared.

 

REO vs. Foreclosure

 

An REO (Real Estate Owned – Bank Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction.  You see, most foreclosure auctions today do not even result in any bids.  After all, if there was enough equity in the property to satisfy the loan, the owner probably would have sold the property and paid off the bank.  The overleveraging of homes, where more is owed than what the property is worth is the reason why so many homes end up at a foreclosure trustee sale.

 

Trustee

Sale

 

When a homeowner falls about 90 days behind on their payments, the Mortgage Loan Servicer files a notice of default (NOD) with the County Recorders Office and delivers a copy to the home owner.  This starts a 90 clock for the home owner to

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ing their mortgage current.  If the home owner does not cure the default within that 90 day period the Mortgage Loan Servicer files a notice of Trustee Sale which is usually 21 days later.

 

At the prescribed date and time, the Trustee runs the foreclosure sale. Many times foreclosure sales are run in public on the local Courthouse steps. The foreclosure sale begins with a minimum bid that generally includes the loan balance, any accrued interest, plus attorney’s fees and any costs associated with the foreclosure process.  In order to bid at a foreclosure auction, you must have a cashiers check in your hand for the full amount of your bid.  If you are the successful bidder, you receive the property in its present as-is condition, which may include someone still living in the property - that becomes your problem to evict.  Most foreclosure buyers never get to see the inside.  It is also common for the owner to take the appliances, and strip the inside of the house.  Some times the owners destroy the inside of the home out of anger or spite.  There may also be other liens against the property.

 

Since what is owned to the bank these days is almost always more than what the property is worth, very few foreclosure auctions result in a successful Trustee Sale.  The property then “reverts” to the bank.  It becomes an REO, or “real estate owned” property.

 

 

 

 

REO Properties for

Sale

 

The bank now owns the property and the mortgage loan(s) no longer exists.  The bank will handle the eviction if necessary, and do some minor repairs.  They will negotiate with the IRS for removal of any tax liens and payoff any home owner association dues and back property taxes.  As a purchaser of an REO property the buyer will receive a title insurance policy and the opportunity to investigate the property.

 

A bank owned property may be a great bargain.  Do your home work before making an offer.  Make sure the price you pay (if you’re successful) is comparable to other homes in the neighborhood.  Consider the cost of renovations, including the time to complete them.  Don’t get caught up in a bidding war and pay over market value. 

 

How Banks Sell REO’s

 

Each bank/lender works a little differently, but they all have similar goals.  They want to get the best price possible and have no interest in “dumping” real estate cheaply.  Generally banks have an entire department set up to manage their REO inventory.

 

Once you make an offer to purchase, banks generally present a “counter-offer”.  It may be a higher price than you expect, but they have to demonstrate to investors, share holders and auditors that they attempted to get the highest price possible.  You can also counter the counter offer.

 

Your offer will probably have to be reviewed and approved by several individuals and/or companies.  Even once an offer is accepted, the bank insert wording like, “subject to corporate approval within 5 days.”

 

Property Condition

 

Banks always want to sell property in as-is condition.  Most will provide a section-1 pest certification, but not unless you include it in your offer and negotiate the point.  They will allow you to get all the inspections you want (at your expense), but they may not do the repairs.

 

Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.

 

Even though you agreed to “as is,” always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections.  Sometimes they will re-negotiate to save the transaction instead of putting the property back on the market, but don’t take that for granted.

 

Banks do not want to see a lot of property disclosures; they are exempt from the California Seller’s Transfer Disclosure Statements (TDS).  If there are real estate agents involved, wither representing you or the bank, those agents are required to provide you their disclosure statements. 

 

 

 

Making an Offer

 

Before making an offer you should ask the following:

 

• Are there any inspection reports?
• What work has the bank agreed to?
• Is there a special “as-is” form?
• How long does it take the bank to accept an offer?
• How does your agent deliver the offer?

 

Offers are usually faxed to the bank.  The listing agent needs your originals.  There is no formal presentation.  Keep in mind:  nothing happens evenings and weekends (banks are closed).

 

Since there is no face-to-face presentation to the bank, you must provide the listing agent with a pre-qualification or better yet, a pre-approval letter and buyer biography to pass along.  Make your offer easy to accept.  Since we are also Mortgage Brokers, we can handle your financing and supply a pre-approval letter.

 

Hopefully these tips will manage your expectations.  Remember that REO’s sell close to full market value and are not the deals represented on late night television.  They are also usually the most aggressively priced – lowest priced – home in the area.  As such, the bank is looking for a quick sale.  However, I have seen banks refuse many “low-ball” offers. Offers that are just way below comparable sales are usually ignored or rejected outright.

 

We reprent Buyers at Trustee Sales – CASH REQUIRED

 

If you have a minimum of $500,000 cash available, we will act as your buyer

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oker to help you find a foreclosure and bid at a Trustee Sale.

 

Foreclosure Tracking

 

We track all foreclosures in the East and North Bay Areas.

 

Short Sales and REO you can finance

 

If you are a patient person and don’t mind waiting 2-3 months after rendering an offer to purchase to find out if it is accepted, we can help you purchase a “Short Sale” and arrange the financing.  Both short sale homes and REO properties can be purchased with zero down payment.  At this time of the market cycle, REO’s are the best place to start and short sales should only be considered as a last resort.

Short sales are homes that have been purchased or refinanced in the past few years with 90% - 100% financing.  The property values have gone down and the home owner is generally (but not always) behind in the payments.

 

In order to avoid a foreclosure or simply out of necessity an owner agrees to sell their house for less than what is owed.  The seller does not receive any money in a Short Sale since more is owed than the house is worth.  The lenders generally don’t want to wait to get the house back in foreclosure and know it is likely to be in poor condition if they do foreclose.  The lender also knows they are going to lose money and would rather take the loss now, rather than later.

 

The problem is that you may not know if your offer is accepted by the lender for 2-3 months.  Lenders are inundated by short sale requests and they have a very long turn-time to respond back.  Moreover, the seller can actually present other offers to the bank which may result in your losing out on the property after waiting weeks for a response.  The process is frustrating and there are too many quality foreclosed homes on the market to bother wasting time with short sales.

 

We can send you a list of all the foreclosed REO homes in your price range and submit your offer and negotiate on your behalf.  There are a lot of steps involved in the buying process; Give us a call at 707-649-5116 and we can answer any of your questions.

 

Most real estate agents know practically nothing about “Short Sales” and how to get them approved, Foreclosures – Buying at Trustees Auctions or Purchasing REO’s directly from a bank.  Trust me, you will need all the help we can provide.  Best wishes in your home search.