Cold hard facts in Buying a foreclosure property

I work with several different Banks in helping them market their foreclosed properties and people always ask me, “What bank is selling this property” I tell them and then ask them why they wanted to know.  Nine times out of ten they tell me they want to contact the bank so they can negotiate an offer. The banks selling the foreclosed properties don’t work that way.


Banks hire Realtors to list and sell their Foreclosed properties

The banks hire local realtors to manage the properties for them, list them for sale and sell the properties. The listing agent helps the bank will all sorts of things such as getting any remaining personal property removed, paying for and making sure that all the utilities are on, paying for and coordinating any repairs or maintenance the property may need, showing the property, writing up offers and selling the property for them.  The banks typically have several hundred thousand foreclosure properties through out the United States. Can you just image a bank President in Texas trying to manage any of those items from Texas for properties in all the different states? I would think he would have other more pressing matters than talking to contractors, gardeners and people wanting to see the house.  Can you imagine the questions? Is the house on 123 Main Street still available? Is it close to shopping? I’m sure the bank president in Texas would have no idea, nor should he. That is not his job. It is the job of the local Realtor to help buyers with local information and help them see the homes.


Foreclosures are such great deals the banks are grateful for any offer. NOT!

Banks know what the market is because the local realtor that has the property listed for sale tells them. The bank also has the home appraised before it is even put on the market. Typically the bank list the house about 10 to 20 percent under what market value is because they want the home sold as soon as possible. That does not mean that they are going to give it away and sell it for 50% less. I think sometimes buyers go to these weekend seminars and come away with some really interesting thoughts or they just think the banks are desperate. Every once in a while a buyer will get a screaming deal on a foreclosed home, but it will be a home that has been on the market a very long time or the area and or condition is not that good. Otherwise, it will not happen.   


All types of homes are foreclosed homes

I have seen some homes that you have to hold your nose when you go into them so as not to breathe as it smells so bad and I have seen homes that are just pristine. There are all types of homes that are foreclosed properties. Some don’t even need any repairs at all and others have the whole kitchen missing. It just depends.


You get title insurance and good title

The title and escrow process is pretty much the same as when you buy a regular home. You get clear title. I have never heard of anyone buying a foreclosed home having an issue with title.


You need an experienced Realtor to help you with a foreclosure purchase

Yes, foreclosure purchases have a few different nuances about them and you should have a Realtor that is experienced in foreclosure properties assist you as you should when you purchase any other home. Each bank is different, so each transaction may be a little different in what the Bank will and will not do or pay for. Look to your Realtor for advise on these issues.

Don’t be afraid. You can buy a foreclosed home today and close escrow in 30 days. Just remember, typically, the foreclosed home you buy is “As Is” and the seller will not fixed anything. They are still great deals!

Buying a home and not selling your current home?

As of October 2008 the lenders have changed the way they look at rental income if you are planning on renting out your current home and buying another home. The old rule of thumb where the lender gives you credit for 75% of rental income does not apply any longer.

FANNIE MAE rules as of August 1, 2008

It is much more difficult to qualify for the loan if you are keeping your current home and going to be renting it out and buying a new home. One of these three scenarios must apply:

1. Current home pending sale

  • The lender will count both house payments, the old house and the new house in the qualifying ratios unless there is an executed purchase contract on the old house and all the lenders financing contingencies have been cleared
  • Required cash reserves after closing; enough to make 6 months house payments on both properties, less if you can document 30% equity in the home you are selling

2. Existing home converts to a Second Home

  • Count both house payments, old and new in qualifying ratios
  • Require cash reserves of 6 months house payments on both properties, less if 30% equity in home converting to a second home

3. Existing home converts to a rental property

  • Count both house payments, old and new in qualifying ratios. Rent may be used to offset payment ONLY if a new appraisal verifies 30% equity, home is leased, and security deposit is verified
  • Cash reserves after closing, enough to make 6 months house payments on both properties

Bottom line-

Anytime you are thinking of retaining ownership in your current primary residence and need to close on a new primary residence, you must qualify with both payments and you have cash reserves of 6 months payments for both properties. The only time this does not apply is if you have 30% or more equity in the property you are retaining and a lease with a verified security deposit or the home is sold with a valid purchase contract and all financing contingencies have been removed.

Be sure and speak with your lender as soon as possible if you are thinking of retaining your current primary residence as a rental and purchasing a new primary residence. Your lender can advise you as to the best way to proceed.

Exceptional customer service!

Today I had the pleasure of meeting with my Allstate representative Aaron Clift about life and health insurance. Now, I know real estate frontwards and backwards but don’t ask me anything about life or health insurance. It is just not my thing. But Aaron knows all about insurance and he will patiently answer any of your questions. Yes, I know, sometimes it is difficult to ask those questions.  You think, wow, I have had this insurance for how long and I am not even sure what I have, let alone what it covers and doesn’t cover.

I gave a binder of paperwork to Aaron and asked his opinion of what coverage I had.  Aaron explained  it all to me, and made some suggestions.

He had his laptop and input my application for life insurance right then and there and I signed it just like I sign for Federal Express on one of those signature pads where you can’t really see your signature and we were good. I am still looking at the health insurance and reviewing his suggestions. But I am sure I will be changing over to his recommended health insurance as well in the next week or so. 

I am just a regular person that purchased a very small life insurance policy but he made me feel like I was important to him and his business. He even followed up with a thank you email and advised me as to what the next step would be.  We just don’t see this kind of customer service very often and it was very refreshing. So, if you need an insurance agent give Aaron Clift a call at 916-539-0964 or email at Tell him Scarlett sent you.

Extension of $8,000 tax credit very possible!

Senators Say Homebuyer Tax Credit Is “In the Bag”

10/28/2009 By: Carrie Bay

S. Senate’s chief Democrat, Majority Leader Harry Reid (Nevada), said Wednesday that his party has reached a consensus to extend the first-time homebuyer tax credit, which is set to expire November 30.


Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) has voiced the same sentiment to the media today, as well.

But the party support isn’t one-sided. Reuters reported that the chamber’s foremost Republican, Sen. Mitch McConnell (Kentucky), acknowledged that most senators support the measure, quoted by the news agency as saying he shares Reid’s view.

Reid summed it up on the Senate floor when he said, “There has been general agreement by a significant number of senators, Democrats and Republicans, to get this done.”

As reported Tuesday, the proposal gaining the most favor among Senators was an amendment offered up by Reid and Senate Finance Committee Chairman Max

Baucus (D-Montana), which would extend the tax incentive until the end of 2010, but reduce the credit amount with each quarter.

Take two: The tax break measure has gotten yet another makeover. The latest version reduces the credit to 10 percent of the sale price, with a cap of $7,290 – as opposed to the $8,000 maximum currently in place. The benefit could be applied to home sales signed – not closed – by April 30, 2010, allowing 60 days beyond that date for closing.

It would also be opened up to buyers who have lived in their current residence for at least five years, so-called step-up buyers. The income limits for first-time homebuyers would stay the same – $75,000 for individuals, $150,000 for couples – but increase for step-up buyers to $125,000 for individuals and $250,000 for couples.

Andrew Parmentier, a managing partner at Height Analytics, a research firm in Washington, told Bloomberg Newsthat the demand for new homes and condominiums may more than double with step-up buyers as part of the equation. “You just opened up a whole new pool of people who can buy into those empty homes and empty condos that were built out,” Parmentier said – a move that would aid the existing-home market as well, as overall inventory levels are reduced.

A Senate vote on the credit extension was expected to come last night, but reportedly got entangled in legislative procedural issues. The tax credit amendment did not get attached to an insurance benefit bill, which did pass Tuesday night, as intended. Despite the red-tape roadblock, senators say a decision will be made sometime this week.

Article provided by DSN news on 10/29/09

Well, there are a couple of different options they are working on right now in the Senate so it is extremely hopeful that the $8,000 tax credit will be extended or a modification of the current tax credit. Good news for everyone! I will keep you posted as I hear more next week.

Suggestions to improve service to our clients

Can you help me? I need suggestions from potential Buyers and Sellers on how as Realtors we can provide better service to our clients. What can we do to improve as an industry?

I know one of my pet peeves are Realtors that don’t answer their phones or bother to call you back if you do leave a message.

What are your pet peeves?

What do Real Estate Brokers do to help buyers purchase a home?

Have you ever wondered what Real Estate Brokers do to help the buyers with their home purchase? There are a gazillion things that go on behind the scenes to help the buyers purchase a home that is going to work for them. Here is a list of some of the things Real Estate Brokers do. The list is not all inclusive as each transaction is different but it gives you a general idea of what is going on with any real estate purchase.

1. Explain the benefits of a Buyers Broker Agreement.

2. Determine what price range the buyer is pre approved for and type of properties that will meet the loan criteria. If buyer does not have a lender or a pre approval, provide recommendations to a lender.

3. Explain the benefits and differences of different types of financing and why one home will qualify for one type of financing and another one won’t.

4. Discuss with the buyers the type of home they would like to purchase.  What features are  important and you “must have” and what are just wish list items.

5. Determine eligible homes that match the buyers and set up appointments to show the homes to the buyers.

6. When viewing the homes with the buyers bring any defects to their attention as well as positive items.

7. Discuss with the buyers their likes and dislikes in regards to the properties they have seen.

8. If they have an interest in a particular property suggest they make an offer.

9. Work with the buyers to draft an offer on a property. Make suggestions as to terms, price and inspections contingencies.

10. Explain the offer and the contingencies to the buyer at the time an offer is drafted.

11. Submit the offer to the listing agent as well as the preapproval letter, copy of the Earnest Money Deposit check and any additional documentation requested by the listing agent or the Seller.

12. Follow up with the Listing agent to confirm reciept of the offer and continue to follow up with them until the offer has been accepted, countered or declined.

13. Keep repeating until the buyer has an accepted offer.

14. Once the buyer has an accepted offer, then set up the home inspections, termite inspection, roof inspection or any other inspection the buyer requests. If the buyer needs recommendations as to inspectors supply them as well.

15. Provide the Lender and Escrow company copies of the executed contract and set up the Escrow file.

16. Meet the inspectors at the property with or without the buyers and provide the buyers with the inspectors reports. Discuss the reports with the buyers and make recommendations at to any requested repairs.

17. Submit any requested repairs to the Seller. On Bank owned properties the Seller typically will not do an repairs. Follow up with the Listing agent to determine if the Seller will complete the requested repairs and advise the buyer.

18. Advise the Buyer that their job now is to work closely with their loan officer to provide the loan officer any follow up documentation that the loan officer may need to process their loan.

19. Follow up with the Loan Officer, Escrow Company and Buyers as to status fo the transaction. Keep all parties informed.

20. Work with the Loan Officer to make sure the appraisal has been ordered and come in at value.

21. All inspections are complete, the appraisal is complete and the file has come out of underwriting with an approval, subject to conditions. Work with the Lender and Buyer to obtain any outstanding conditions.

22. Work with the Lender when loan documents are drawn and sent to the title company.

23. Review the Buyers estimated closing statement for accuracy before the document signing appointment is set. Meet with the Buyers at the loan signing to answer any questions about the loan documents and any other final documents. Explain any items on the estimated closing statements to the Buyers and advise them of the amount of funds that need to be brought into the signing in the form of a cashiers check or wired.

24. Conduct a walk through of the property to assure that it is in the same condition as when it was purchased.

25. Follow up with the Lender to confirm the loan documents were received, everything is in order an when funding of the loan may occur.

26. The loan is funded and recorded!

27. Meet the Buyers at the property and deliver them the key to their new home.

28. Call the new homeowners within a couple of days to make sure they have settled in and are comfortable in their new home. Advise the buyers they will be receiving in the mail the HUD One Settlement Statement that they will need for their next years taxes.

As you can see there are quite a few things going on behind the scenes. It really is a happy time when the new homeowner finally gets the key to their  home.  We are helping people with a time in their lives,  not just selling them a home. I am grateful to be a part of it.

First Time Buyer frustration!

One of my clients asked me,  “Ok, what do I have to do to buy a house in this market? ” We have been looking at homes that are priced under $140,000 in Sacramento and making offers over asking prices and not getting accepted. This first time buyer is an FHA buyer that needs credits from the Seller for closing costs.

Some of the homes we have looked at do not qualify for FHA financing as the appliances are missing, the air conditioner is missing or the property is just too damaged. Then we see other homes that are beautiful! The kitchens have been recently upgraded and the paint and carpet are all new. The majority of these homes are not eligible for FHA financing for 90 days as the current owner just purchased the home and has fixed it up and is now reselling it at a profit.

What I explained to my client is in this market, the first time home buyers and the investors are competing for the same homes. If a Seller receives an offer of all cash, close in 10 days or an FHA first time home buyer close in 30 days, requesting funds back for closing costs, typically the Seller will select the all cash offer. So, it is not always the price but also the terms of the offer that make the difference.   

So, if you can reduce the amount of credits for closing costs, be ready for a quick close and offer a fair price, you will get that dream home eventually. The first time home buyer is making approximately 25 or more offers before getting an offer accepted.

 So hang in there and don’t get discouraged. There is a reason for everything. You will eventually get an offer accepted on a dream home for you and your family!

Want to buy a home but worried about your job?

Want to buy a home but worried about your job?  Well there is a possible solution.

CAR Housing Affordability Fund Mortgage Protection

What is it?

The Mortgage Protection Program offered by the California Association of Realtors provides a combination of involuntary unemployment, accidental disability and accidental death insurance protection for qualified first time home buyers.

What are the benefits?

Through the program, first time home buyers who lose their jobs or become accidentally disabled may be eligible to receive up to $1,500 a month for up to 6 months to help make their mortgage payments. A qualified co-buyer can also participate in this program for a reduced monthly benefit of up to $750 a month for up to 6 months. In addition, the program offers a one time $10,000 accidental death benefit.

How much does it cost?

It cost the home buyer absolutely nothing!

Who qualifies for the program?

First time home buyers who haven’t owned a home in the past three years, they open and close escrow between 4/2/09 and 12/31/09, purchase a primary residence, are represented by a California Realtor and must be a W-2 employee not self employed.

Sacramento County Market June 09

The current market offers a variety of low-priced, move in ready homes as well as properties that are in need of significant repairs. One thing they have in common is the people they attract: Investors. As home prices dropped over the last year, Sacramento has seen a steady rise in the percentage of cash sales. Statistics retrieved from the Metro List MLS data base show that 25.1% of sales in May 2009-467 units-were purchased with cash. Compared with last month, where April had 503 cash sales (accounting for nearly 28% of all sales) there is a 7.2% decrease. May’s cash only sales, however show a 158% increase from the 181 cash only sales (10.2%) of May 2008.

May’s statistics continue a trend; however, that has showed little movement in three months. Sales records for the last three months have shown 1,725 sales in March, 1,707 sales in April and 1,733 sales in May. From April to May, there was a 1.5% increase in sales. The 1,733 single family home sales this month is a 4.8% increase from the 1,654 sales of May 2008.

The median sales price made an unexpected move, increasing 7.7% from $167,000 in April to $180,000 this month. This increase marks the largest month to month median sales price increase recorded by the Association. Compared year over year, the $180,000 median sales price is 21.8% below the the $230,250 median price of may 2009. The total listing inventory also dropped year to year from 7,902 listings, a 35.9% decrease. This lowered inventory figure also drops the Housing Market Supply figure from 6.5% to 3.9 months in April to 2.9 months in May. Compared with last year, this figure is a 39.6% decrease from the 4.8 months recorded May 2008. This represents the amount of time-in months-it would take to deplete the total listing inventory given the current rate of sales. According to MLS data, the average home spent 55 days on the market before selling and measured just over 1,699 square feet.

All in all, it is a very active market right now with multiple offers on properties and a lot of the buyers have cash!

Why do I need a Realtor?

I met a young couple the other day and the husband said to me. The only thing I need a Realtor for is to open the door. I do all the searching on line for the homes myself. I don’t need a Realtor. I explained to him that Realtors are like the coordinators of the entire transaction. We work with the title companies, lenders, home inspectors, termite inspectors, roof inspectors, buyers, buyers agents and sellers. We make well over 100 phone calls on each file to coordinate all the players and to make the transaction as smooth as possible.