RE/MAX BRAVO - Our Agents Make The Difference - Homes and Real Estate in Fredericksburg, Virginia

Can you buy a foreclosure if you have a house to sell? If you need to make the offer contingent on the sale of your current home, will the bank accept your offer?

Short answer is - probably not. Meaning - I have never seen it happen. Banks generally like a clean deal, and most bank addendums seem to have language that discourages this sort of thing.

Not only is that the short answer; it is only today’s answer. Tomorrow could be a whole different ball game. This business changes faster than the flight schedules of a major airline.

There is an interesting article in todays Washington Post by Renae Merle regarding Foreclosure Prevention, and some new initiatives with the Hope For Homeowners program.

One of the distinctions is that, according to the article, is that “when borrowers sell their home or refinance, they may have to share a portion of the profits with HUD.”

This would seem to give new meaning to the word “vague.” They MAY have to SHARE a Portion of the profits?

Beyond that, it certainly raises some interesting questions for the future. I am all for keeping people in their homes and preventing foreclosures, but is this disinction a potential market killer? What happens to the family that goes into this program, then the breadwinner gets transferred. They need to sell, but they also need some cash to buy a new house in the new town? What happens when the stork visits and a family needs to move up to a home with more space? How do they do that with no equity?

It seems to me that we have a lot of plans, may of which seem to include ready-fire-aim.

Todays real estate market, at least here in Fredericksburg VA, is moving along at a pretty good clip. We put a home on the market Friday, and by Monday we had 10 offers. 4 of them were cash.

The next step was to get the Highest & Best offer from each potential buyer; this is pretty standard practice when selling a bank foreclosure.

We sent out the request via email, and the responses started pouring in. 7 of them. Still missing 3. Being a nice guy, I call. First agent - they were “at their job” and had not checked their email. Second agent - had not been into the office yet to check their email. Oh - this was at 4:00 PM. Third agent - no answer - I never got a call back.

So out of the 10 offers received, we get 7 responses. 3 agents - cut out right away. Missed their chance. Oh, wait a minute. It was not their chance. It was their clients chance. Their client is the one who lost. Wrote a contract on a house, and got kicked out. All because they did not answer their phone or check their email.

Todays real estate market moves in minutes, not in hours, and certainly not in days. The agent that does not have a smart phone to get email, or has “a job” and only does real estate part time is at a severe disadvantage. Their client may find themselves in an even worse position. They may lose out on a house.

Kevin McGrath - Broker Owner

          www.fredva.com

Foreclosures come in all shapes, sizes, and more importantly, conditions. When shopping for your new home, you may come across a foreclosure that is in like new, mint condition. I have been in a few that I could swear have never been lived in. But a far more likely scenario is that a foreclosure will be in some state of disrepair. Whether it be merely that it needs carpet and paint, or if there are some plumbing or electrical issues. Maybe the refregerator is missing; this is pretty common. Now, keeping in mind that real estate that falls into the forclosure catagory is generally sold “as-is”, meaning what you see is what you get, there are sometimes other options.

Let’s say you wrote an offer on a foreclosure, the offer was accepted, everyone signed, the contract is ratified (basically meaning that all parties have had a meeting of the minds, signed, and everyone has a copy). Now most banks let you do an inspection, within a reasonable period of time, which is of course spelled out in the contract. So let’s assume that all this has happened, and that you are out there on a Saturday morning, and your home inspector gives you the report which lists some roof repairs and a couple of plumbing issues. Now you are standing there thinking “oh man, this place is sold as-is, and now I have to pay for all of these repairs.” Maybe, but maybe not. Never hurts to ask, but how you ask can be the key.

Banks like it easy. Asset managers, the people who really do all the work managing these foreclosed properties, are doing all that they can to keep up with their workload. You want to make it easy for them.

#1. Get two estimates for the work needed. Make sure that they are nice clean copies.
#2. Give the seller the estimates, the inspection report, and an addendum asking for a credit at closing based on the estimates. Your Realtor will know how to handle all of this.

Now you have done a couple of things. You have provided clear information related to your request, you have provided an estimate of the cost, and you have basically said to them “I’ll take care of it if you will just help me out a little with the cost.”

Now - very important - make it a reasonable request. If you go in asking for $10,000 in repairs on a $75,000 house, I am not liking your chances. And the seller (Bank) could still come back and say “sorry - sold as-is.” But if you go in with a reasonable request, well documentated and uncomplicated, you never know what might happen, and you just might save a buck.

Kevin McGrath - Broker Owner
RE/MAX BRAVO
www.fredva.com
Licensed In The State Of Virginia

There is an interesting article in today’s Washington Post by Derek Kravitz. “Ex-Owners Turning Aggressive in Efforts to Resist Leaving”

The article talks about how many owners or occupants of homes that have been foreclosed on here in Virginia are finding creating and sometimes desperate ways to stay in the homes. I can see how this could happen; I can only imagine the steps I might take if I was looking at my family being out on the street.

The article also talks about how “squatters”  have taken up residence in many of these homes. I can see how this could happen, but I will submit that this is probably the exception, not the norm. There are certain steps that should reduce the chance of this happening. When the bank takes possession of a home at foreclosure, they send a representative, usually two, out to check the occupancy status of the property. The representative, sometimes a Realtor and sometimes a securing vendor contracted by the bank, checks the occupancy and reports back to the bank. If it is vacant, the property is secured, the grass is cut, the home is cleaned up, valuations are completed, and within a few weeks the property is on the market. During the entire process, Realtors have the responsibility as an agent for the bank is to conduct weekly checks on the properties. If there were squatters in any one of my properties, I would know about it pretty quickly.

But here is how it could happen, and I have not been able to figure out why the banks are letting this happen. All you have to do is read the paper and you can easily see that there is an enourmous number of foreclosures happening on a daily basis. But if you are a buyer in today’s market you also know that most of the inventory out there right now is not exactly the cream of the crop. This has happened for various reasons, some of which I am sure I am not privy to, but one of them is that a number of banks recently laid down a moratirium on foreclosures, meaning they ceased all action. These is one problem with this; while this moratorium may have certainly kept some families in there homes, even if only for the short term, there is a large number of these homes that are already vacant. Stopping the foreclosure process on a home that has already been abandoned does not help anyone. Not the family that used to live there. Not the community that is watching their values plummet like a stone in a pond. And certainly not the stock holders of the bank, as the bank will now spend what could amount to many thousands of dollars on a rehab and mold remediation project that might never have been necessary. For some reason, when the banks decided to enact a moratorium on foreclosures, they seemed to have done it as if there were trying carpet bomb the enemy, rather than actually attack each problem with a specific solution. In trying to come up with a plan to keep people in their homes, they also left a huge number of vacant and abandoned homes out there that are falling apart almost as we watch.

Kevin McGrath - Broker/Owner
RE/MAX BRAVO
Spotsylvania, VA 22553
www.fredva.com

Here in Fredericksburg there seems to be one constant in my day. Every day. Out of all the properties we have under contract, on any given day it seems that I am dealing with a delayed closing. Sometimes a deed is not ready, or sometimes it is due to circumstances beyond anyones control. But what I want to talk about today is when the buyer’s lender is not ready.

This can be for any number of reasons. Typically, when a contract is written, the settlement date is set about 30-40 days in the future. This is not a number set in stone; it just seems to be the average in this part of Virginia. About a month.

For this discussion, let’s assume that the borrower has complied with all of the lender requests for documents in a timely manner. I assume this because it has been two weeks since I, the listing agent, personally sent the ratified contract to the lender, and confirmed that they have received it. I have not been contacted or been informed that there are any issues that could delay closing. As far as I know, the ship is on course.

Let’s fast forward to 2 days before closing. Uh oh - rough waters ahead! I follow up with the lender to get a closing status, and I find out that we are not likely to make the closing date. Why? Oh, the lender now needs more documentation from the borrower. Now. 30 days after they got the file. 3 weeks after they got all documentation from the borrower. Now they realize “oh - we need the purple sheet.” Or whatever. My question is Mr. Lender - “whatcha been doin?”

I get lots of excuses. The loan program changed. New underwriting guidelines. Whatever. Jimmy crack corn and I don’t care. When I sent you the ratified contract, and you confirmed receipt, I assumed you at least glanced in the direction of  the cover sheet I included, the cover sheet with the closing date clearly on it. At that point, when you did not call me and say “I can’t make this close date” I took that as your comittment that you could make the date.

In todays market, this can be quite problematic for buyers. Buying a foreclosure can be a great way for a first time home buyer to get a new house, but there are certain minefields that must be navigated. One is that many, if not all, banks charge a “per diem” fee to the buyer if closing is delayed. I have seen lots of different numbers on this, but an average seems to be about $100. So Mr. Lender misses the closing date, and needs to extend for 5 days. Now the buyer is potentially on the hook for $500, through no fault of their own.

Choosing who you get your mortgage from can be very important. Critical.

If I was getting a mortgage, here is how I might proceed. Let’s assume I have already compared rates and costs, and have narrowed it down. My questions to the loan officer might be:

1. Are you a direct lender or a broker. Meaning, when I have a question, can you answer it, or do you have to make a bunch of phone calls and get back to me? Do you have to call the underwriter and leave a message, or can you yell down the hall to them.

2. How do I get in touch with you? How quickly will you respond to me when I have a question?

3. What percentage of your loans close on time?

And here is big one. When the loan officer has that contract, (or even better - before I even make the offer) I am going to ask him or her, “can you make this closing date?” If so, great. If not, tell me now. Not in 30 days. Now. Today. I want your commitment. Your word. We are going to shake hands, and you are going to email to me confirmation that you can make this happen. If you tell me now that you can’t do it; no problem. I will adjust my offer accordingly, or ask the seller for an extension now. I am all about communciation. But Mr. Lender, if you call me 2 days before closing and tell me we are going to delay because you are not ready, you and me are going to have a problem.

Talk toyour lender up front. Have an understanding. Have it in writing. It is not like it will hold up in court or anything, but you will at least get the satisfaction of having the lender on a phsycological spot if you can’t close on time. And you might even save a buck.

Kevin McGrath - RE/MAX BRAVO - Broker/Owner

www.fredva.com

Licensed In The State Of Virginia

Buying a foreclosure can be a great deal. It can also be a frustrating experience if you don’t have the right information when you make your offer.

Here are a few quick tips.

1. A larger deposit is better. The seller (bank) feels more secure. They feel like there is less of a chance that you will back out. In the end, it may not really matter as there are many ways to get out of a real estate contract in Virginia.

2. A shorter close date is better. If possible, make the close date on your offer no later than the 25th or 26th of the month. Asset Managers, who are the ones that really run the foreclosure business, get paid on closings that fund by the end of the month. If you close on the 29th or 30th, it does not leave enough time for that to happen.

3. Cash is best. Conventional Financing is the next best. FHA is next, then VA financing. Why? Cash is clean, and no appriasal is required. Conventional financing offers the next best option in terms of how easy it is to get the loan completed; there are fewer restrictions on the borrower and on the condition of the property. FHA and VA - hang on. A long list of requirements as to the condition of the property and repairs that may be required.

It may be a good idea to consider all of the above when making an offer, especially if you really love the house; if you love the Murphey’s Law may rear it’s head and someone else may love it to. Now you are in a competing offer situation, and you want to do all that you can to make your offer look better than any others.

Please be sure to consult your Realtor for more information. If you don’t have one, give an agent at RE/MAX BRAVO a call and they will be more than glad to help.

Kevin McGrath

RE/MAX BRAVO - Broker/Owner

Fredericksburg Virginia

www.fredva.com

Licensed in the State of Virginia

Here is an interesting article in today’s Washington Post regarding the red tape involved in the purchase of a foreclosed home here in the Washington DC area, and prettymuch everywhere else.

Foreclosure Sales Stalled by Red Tape

As all agents who are experienced in the selling of REO’s (Real Estate Owned) know, foreclosures do not, as a rule, seem to close on time. In the article mentioned above, I kept going back to to the section that mentioned the moving truck and how the family was all ready to move in, and how they could not get to closing on time, and how hard it was on them.

I can believe it. But either their Realtor did not properly prepare them, or they did not listen. When buying a forclosure, never, and I repeat, never put your stuff in a truck until you have closed and the deed has been recorded at the local courthouse. Buying a home that is a forclosure is different. There are a myriad of issues that can and do rise up and show themsleves at the last minute, which often means a delay in closing.

Foreclosure’s can be a great buy, but listen to your Realtor, and make sure you have the right one.

Kevin McGrath

RE/MAX BRAVO - Fredericksburg Virginia

www.fredva.com

Short Sales. Foreclosures. Which is worse on a persons credit rating?

Recently I was watching a program on one of the major news networks, and an “expert” was explaining how a Short Sale was just as bad on a persons credit rating as a Foreclosure.

Maybe, but maybe not? If a person is Foreclosed on, I would assume that it goes on a credit report as just that; a Foreclosure.

But what if it is a Short Sale? Let’s say you got it on the market, priced it right, and sold it quick. And you had good communication with the lender. You got all of this done, and you got it closed, and the owner was only 60 days behind. Or even 90 days.

Which is worse on a credit report? A Foreclosure, or a 60 or 90 day late?