What’s Behind Door Number Two:
Make money quick! Invest pennies on the dollar! NOW is the time to buy up foreclosure properties! Your buyers see these sort of messages all the time, but is it really the right thing for them? Buying foreclosures can be a bit like gambling on a game show: What’s Behind Door Number Two?
Over the course of the last few years the foreclosure market has heated up and buyers have taken note. There are many investors that specialize in purchasing foreclosure properties, but should your client be one of them?
According to Bobbi Dempsey, co-author of ‘The Complete Idiot’s Guide to Buying Foreclosures’ (Alpha). You can buy a distressed property when it’s in one of the following phases:
* Pre-foreclosure – the homeowner still has control of the property.
* Auction sale – you may be bidding against lenders.
* Real estate-owned (REO) – a lender-owned property.
* Government-owned – potentially a slower process with more paperwork.
There are many points to consider, and to make sure your client considers, prior to purchasing a foreclosure property.
#1- What does your buyer’s credit look like? Buying foreclosure property can be more competitive than other homes as many investors and buyers hoping for a deal will be in the mix. These homes are not usually good for government loans (FHA or VA) due to their condition, so your buyer will need a higher downpayment. If your buyer hopes to be the winner, they need good credit.
#2- Is your buyer prepared to take on an “as is” property and all the repairs and upgrades that entails? Foreclosed properties can have a variety of needed repairs and the lenders will seldom handle the largest ones. See #6.
#3- Is your buyer educated on fair market value? Foreclosure properties are hot right now and as such, the pool of potential buyers is deeper. Sometimes well priced foreclosures are heading into multiple bid situations. Ensure that your buyer knows what the top of fair market value for the property is so that they will not pay more than expected in a “bid off” on the home.
#4- Is your buyer looking to “flip” the property? If so they need to know current market value for the property both as it is AND after their expected repairs are done. They should have a working knowledge of how much average repairs cost and be able to execute the repairs quickly. It is helpful to give them a market analysis for the home in the condition it will be in when “flipped”.
#5- Understand your client’s timeline and educate them on how long purchasing a foreclosure can take. This is not your average six week sale time line, in many cases. Buying a foreclosure, depending on circumstances, can drag the time line out several weeks over a traditional sale.
#6- Ensure your buyer understands the inspection process and what it means to them. Often the home is winterized with no utilities. Sometimes the lender will de-winterize and turn on utilities for the purpose of inspections, but not always. Sometimes the lender will participate in repairs, but that is not typical.
#7- In many states a title search is a mandated part of the closing, but not all. Ensure that your attorney or title company is thorough in researching the liens and title issues on a foreclosure. It stands to reason that a person that lost their home due to lack of payment was also unable to pay other bills…remind your buyer to do their research prior to the closing.
#8- Your buyers are searching the internet and finding foreclosures that are long gone. Sites like realtytrac.com are popular and useful, but sometimes out of date. I have had several investors call me on properties they “found online” only to research the home and discover it sold months before.
#9- Be sure your buyer is ready to MOVE FAST if they really want to buy a foreclosure.
#10- Prepare your buyer for EXTENSIVE paperwork. There is far more paperwork involved in a foreclosure purchase than a traditional one.
Counsel your buyer that the process of purchasing a foreclosure means more homework, patience and often a good measure of luck. That being said, it can be a terrific opportunity for the right buyers and a chance for both of you to have a hands on turn at correcting the housing market.
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
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