CNN is almost always a great source of accurate news and information. The below referenced article is no exception. However, CNN is not in the business of investing in Real Estate, so there are qualifications. I quote their seven items of advice on buying foreclosed properties with my own words added. Above all, do not confuse, as CNN does, short sales with REO properties. They are similar, but not the same process.
1. Don’t get caught up in a feeding frenzy
Banks put repossessed homes back on the market at cut-rate prices because quick sales help avoid the expense of upkeep, such as property taxes, insurance, heat and electricity.
I take issue with the flat statement of cut rate prices. My experience is that realtors know not much more than the lien holder about the true value of the property.
Don’t get caught up in a bidding war. Instead, carefully calculate what you want to spend and do not exceed that price.
Not quite. Calculate the value of the property, not just your budget.
2. Contact lenders directly
Smart buyers establish relations with asset managers at banks. This may reward them with inside information or first crack at new foreclosures hitting the market.
If you can find the over-worked asset manager and have the time, go ahead. Don’t be discouraged, however, if the so-called asset manager doesn’t jump at your phone calls. You’d better have all your info at hand and utilize your, and their, time wisely.
3. Get pre-approved from the lender you want to buy from
If you’re trying to buy a property from, say Bank of America, it can help to get a pre-approved mortgage from Bank of America. Doing so may cause lenders to look more favorably on your bid if it’s similar to others.
Plus, you’re not locked in if other lenders offer you better terms. You can always change your mind and get your mortgage from another source.
This is probably the best and most accurate advice in this peice.
4. Consider fix-ups
Most REOs, the industry term for bank owned properties, are sold as is.
That can be problematic today because so many foreclosed homes are in less-than-mint condition. Often, the former owners were struggling to pay their bills and may have neglected routine maintenance. Or, they may have trashed the properties before leaving. (Every property needs work. This actually works to the buyer’s advantage if you’re prepared.) CNN could have spent much more space expounding on this. The more detailed bids, the better for your budget and negotiations w/ the bank.
5. Hire a real estate attorney
Once banks agree to sales, they often want to move fast and load contracts up with legal mumbo jumbo. As a result, buyers often do not have the time or expertise to figure all the angles.
This parallels my aquired knowledge that the lender is not your friend. You are picking their pocket. They will obfuscate at every opportunity.
The solution is to hire a real estate attorney — even in states where home sales are usually completed without one. Considering you’re making a six-figure investment, the legal fees are cheap insurance against the risks.
6. Wait to make an offer
Homebuyers may be well served to wait before making an offer. Let the house sit on the market for a few days, giving others a chance to set the bidding tone. The bank thinks every property is a Taj Mahal. Give them a chance to get over their hurt feelings.
The agent may tell you he has offers at, say $300,000 and you should bid a bit higher, giving you an advantage over earlier bidders.
On the other hand, many agents will over-state the interest and traffic on a property. For all intents and purposes, as soon as you have two or more interested parties, you have an auction. As in No. 1 above, be rational and not emotional.
7. Tour properties with contractors
With so many REOs in seriously deficient shape, it’s essential to go over every inch with someone who can spot problems and tell you how much it will cost to remedy them.
A foundation crack can be a minor problem or a deal breaker, and most ordinary homebuyers have no way of telling the difference. Like an attorney, a contractor can be very worthwhile insurance.
This is where the investor wins the money war. With written bids, you arm yourself with information to gently disabuse the lender of the notion that this property is in fact the Taj Mahal.
Anyone who has negotiated with a mortgage servicer knows how much time is wasted on purchase price negotiation – even after a BPO or ARV is calculated. You might consider investing in the REST Report as a huge time-saver. The REST Report surveys the same 14 websites that the bank surveys to estimate market value. Why not beat the bank negotiator at their own game? And if you don’t agree with the software calculation, you can substitute a BPO instead. They do it all the time. They will not argue with the REST Report in a short sale purchase because it is their own software. This is a perfect tool for a do it yourself short sale.
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The internet being what it is, certain search terms need to
be empahasized so that you can find the best information.
Obviously this page concerns short sale, short sale rules,
and foreclosure alternatives. But other concerns such as
try title, quiet title, and clear title may apply. The REST
Report is best classified as loan modification software or
do it yourself loan modification. But if your reduced
income is too low, short sale versus foreclosure is the
goal. The REST Report claim to fame is that you use it to
calculate Net Present Value exactly the way the banks do,
using their software. It is the answer for a real estate
title search to decide if your mortgage servicer has the
right to foreclose on you at all. This blog is dedicated to
independant mortgage advice. If you have assignment of
title issues or need to calculate net present value, you
may have a cloud on your title which can block the short
sale rules. This blog is a resource to evaluate short sale
vs. foreclosure. There is no excuse for foreclosure other
than the treachery of your mortgage servicer.
This YouTube video explains the Broken Chain of
Title, short sale, cloud on title situation
Read it here
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Originally posted 2009-11-19 21:27:50. Republished by Blog Post Promoter
{ 2 comments… read them below or add one }
Although the REST Report is a proprietary model based on HAMP NPV Model v3.0 the input provided by the borrower and a series of property valuations the loan modification terms proposed in the REST Report should fall within the allowable tolerances of the HAMP eligibility guidelines..Your REST Report will tell you whether it is in your lender s financial interest to modify your loan by calculating the Net Present Value of a modification as compared to other foreclosure options. Based on the input provided by the borrower the terms proposed in the REST Report will fall within the allowable tolerances of the HAMP eligibility guidelines..2 If your lender or servicer should deny your HAMP Program you will be armed with the facts that will provide a basis for appealing that decision..3 If the report shows you dont qualify for HAMP you wont waste money or time chasing a loan workout for which you wont be approved but that doesnt mean you wont get your loan workout.
Comments on CNN article on seven foreclosure buying points – http://www.mortgage-mod-monster.com/?p=293