The May issue of Money Magazine had a great little piece on tips for buying a foreclosed home and I thought I'd put them here, and expand on them a bit using the experience I have had with clients buying foreclosures.

1) Finding a Foreclosure Has Become Easier: It used to be that you would have to attend a foreclosure/bank auction or scour the newspaper for foreclosure listings. Now, they are available on many different websites and also on the MLS as well. Sites such as www.realtytrac.com and www.foreclosurepoint.com have many listings available. You can also find a real estate agent who specializes in or has dealt in foreclosures. This company has lots of experience in representing buyers of foreclosures and also banks selling their foreclosures.

2) It's Best to Buy From a Bank: I have a few clients who are buying from holding/investment companies who are foreclosure flippers. Inevitably, these deals are problems. These "cash for deed" deals don't offer you title insurance protection most of the time and leave you at risk for legal issues. Plus, these companies don't clear any liens for you. You're on your own to do the research and clear all liens. When a bank takes back a home, they usually clear all liens from the property. Plus, you can inspect the property before hand, and you can finance the purchase with a mortgage. 

3) Have an Inspection and Bring in a Contractor Before You Buy: One of the biggest mistakes people can make is underestimating the work that needs to be done. Know what you're getting yourself into. Have a licensed inspector and licensed contractor attend the inspection with you and get an estimate of what things are going to cost.

4) Bid Low: Banks are mostly listing their properties at market-value, not at fire-sale prices. So be prepared to haggle. The bigger inventory of homes the bank has, the longer the property has been on the market, the greater changes that you can get a great deal on the property. Set your initial offer about 15-20% below market price, or more if your area has a lot of foreclosures.

5) Be Prepared to Wait, Wait, Wait: Most lenders take forever to get a response on a bid. Some lenders are getting back to people within 24-48 hours, others are taking as long as three months. While you wait, someone else can come in and offer more money. Have multiple properties in mind, but be careful of getting yourself into a multiple offer situation. Follow up every week with the lender and be patient and persistent!

For all too many Americans today, the question of whether to pay the mortgage or eat is an unbearable position to be in. What to do?

Obviously there's an ethical dilemma here. That's up to you to decide. But what about the economic costs?

1) Your credit score: If you walk away from your home, and allow foreclosure, if your credit score is good, it will likely drop at least 100 points, and the mark stays on your credit for seven years! You will have a hard time buying again for a while, let alone renting anywhere. Potential employers will also check your credit as well, and sometimes even something as simple as getting a cell phone can require good credit. 

2) Tax ramifications: Always consult an accountant and an attorney if indeed you decide to walk away from your mortgage. If a lender forgives a debt, it can be considered taxable income to you for the tax year. A new law offers federal tax relief for principal residences, but if you borrowed money against the house for any other purpose with a home equity line, you'll still be responsible for the tax on that part. Also, depending on the state you live in and the type of mortgage, your lender may still be able to pursue you for the shortfall. It's uncommon, but banks are getting tougher. Consult your attorney and a tax professional. And also check the rental market in your area. You may not be saving yourself much more money by renting.

The bottom line is this: Contact a real estate professional, accountant and real estate attorney to discuss your options before making any decision.

Crain's Chicago Business published an article this week stating that home buyers are snapping up foreclosed and "short sale" properties which is a good sign that the market will start picking up for all home sales.

I am doing a lot of business on the attorney side with short sales and foreclosures, and I currently have a bank that I am doing listings for on the foreclosure side, so I'm familiar with both ends of the transaction.

According to the statistics, traditional home sales on single family (detached) homes between January 2009 and March 2009 dropped, but the foreclosures and short sales increased. Traditional home sales and sales of foreclosed and short sales properties on condos both increased. The market on traditional home sales for multi-unit buildings dropped from January to March, but increased on the short sale side.

There were 1,438 homes sold in Chicago last month, a 26% increase over February, according to the Chicago Association of Realtors. The median price on homes dropped to $289,500 in March, down from $308,625 in January and the median price on short sales and foreclosures was only $88,000.

Mortgage applications for purchases have also increased. 

For more information on  this, you can visit the Crain's Chicago Business website by clicking here.

According to Realtor.com, Public Act 95-1047 was signed by Governor Quinn on Sunday, giving homeowners facing foreclosure a 90-day grace period in which to negotiate a loan modification or additional time to pay. 

The law provides that if a mortgage secured by residential real estate becomes delinquent by more than 30 days the mortgagee must mail a notice advising the homeowner that he/she may wish to seek approved housing counseling (defined in the legislation as a counseling agency approved by HUD).

No foreclosure action can begin before mailing this notice- which is spelled out in the legislation. If, within the 30-day period an approved counseling agency provides written notice to the mortgagee that the homeowner is seeking approved counseling services, then no legal action shall be instituted for 30 days after the date of that notice. During the 30-day period the homeowner or counselor or both may prepare and proffer to the mortgagee a proposed sustainable loan workout plan (defined in the legislation). The mortgagee determines whether to accept the proposed sustainable loan workout plan. If the parties agree to the plan no legal action shall be instituted for as long as the sustainable loan workout plan is complied with by the homeowner. If IDFPR determines that the demand for counseling services in an area exceeds the number of available approved counseling agencies, the Secretary can certify other persons or entities as approved counseling agencies. These provisions will be repealed in two years and apply only to residential real estate that is the homeowner’s principal residence.

For a link to the article, click here.

 

Welcome to the launch of the website! We hope that you find some useful information here. From time to time, Rachell, the Managing Broker and Owner of the company, will be blogging about all things real estate - from tips on how to market your home, to when the market will start coming up again. Stay tuned! The blog will have something new about once a week!