House Buying 2.0 ~ Foreclosures ? Real Estate ? Buying a Home ...

House Buying 2.0 ~ ForeclosuresBy JT Steele

The stigma is long past, so what are you waiting for? Well okay I maybe oversimplifying it a bit, but lets face it. The stigma of a Foreclosure has changed over the last 5 years not only for the people that had their homes repossessed by foreclosure but for buyers looking for a new home. I have had many a client as well as agents in my training programs tell me that they didn?t want to purchase a foreclosure or that their clients were reluctant to consider them as viable candidates for their consideration. Well the tide has changed and now purchasing a foreclosure can be a great way to own a home.

Foreclosures are still increasing and are without doubt, in my opinion the best category of house to purchase that is available today. I will get into the mechanics of why in a moment but let?s not just take my word for it lets take a look at what some major power houses think of foreclosures. First how many forclosures are there? According to a recent article posted on Forbes.com ?on average nationally, there are 29 houses in foreclosure for every 100,000 U.S. residents? Please note here that they are saying ?every 100,000 residents?, not homes. Next where and what do some of these powerhouse think the foreclosure market is heading and going to do? ?? experts are forecasting Armageddon-level increases in foreclosures in overpriced markets during the next few years.?Associated Press?The current market conditions make it a perfect time for a small investor to purchase one or more foreclosure properties for their private residence, rental or resale.?MSN?Foreclosures on hom e mortgages are on the way up.?Chicago Tribune?If you?re flush and hoping to get in early on what may be a bear market in real estate, there may be an opportunity for you in all this [foreclosures].?Forbes.com

Now, you may have heard that foreclosures have slowed down during the first half of 2011. That statement needs a bit of clarification. It does not mean that the amount of foreclosures is slowing just the number of houses making it through the process has slowed. This is due in large part because first, the banks are saturated with foreclosures (they internally call them REO?s) and as I am sure you have heard by now, that especially in states where the foreclosure process is judicial, the courts are back logged with foreclosures as well as that the courts have taken a much harder line with banks and mortgage companies since the ?foreclosure mill? practice has come to light, thus slowing down the process even further. It will still take years to process all of the foreclosures in this country. Which means there will be great deals for buyers who recognize that buying a house in this category is the best value available. Let?s examine the mechanics of why this statement is co rrect. A foreclosure or REO is a property that a bank has in its possession, it is on their books as a liability. Each bank is limited to the amount of REO?s they can carry on their books, it is in direct correlation to their assets and debt service. Each bank is different but, they can only carry so many at once. This is a prime motivator for them to sell off inventory. Once a house is foreclosed, the bank will need to make it marketable to some degree by making repairs, maintaining the landscaping etc. as well as pay any outstanding fees or taxes that are due on the property. So in essence you can buy this property ?usually? without any attachments or liens. Many banks will market the property to be sold ?as-is? This should not deter you from making an offer on one of these properties. The banks are much more amenable these days to making repairs or even concessions like reducing the purchase price for defects found in the property. They have finally realized that a bird i n the hand is much better than two in the bush. In realty, they are better off fixing the house or making monetary concessions to a real, live buyer today, because the same issues may come up (many times now that they are discovered they are future disclosure items) with the next buyer down the road. The big question is when will there be a next buyer down the road and will they be willing to pay as much as the current buyer is paying? So, the banks motivation on this topic has shifted over the past couple of years. In theory, the bigger the issue or problem with the house the more of a concession or consideration you may get from the bank if you ask for it.

The last point I would like to make is that now not only has the general buying public realized that foreclosures can be great deals. There are many real estate agents who have shifted their business models to only selling this category of house. If you are interested in purchasing a foreclosure you can scan the on-line offerings of real estate and you will find numerous real estate agents who offers this service exclusively. If I were a buyer, this is definitely the route I would take. The agents that represent these houses are usually aligned with the banks and mortgage institutions that are trying to unload these properties. So they have the inside scoop on what terms, conditions and what the real selling price the bank will settle at is. One of the other major advantages of dealing directly with listing agent of a foreclosed property is that you may be able to get a further redu ction of the purchase price by having the agent make a concession on their commission. Although commissions are always something that is negotiated between the seller and agent, most agents will have room in their compensation because they may have to split the commission they receive from the bank with another agent who brings the bank a buyer. Therefore, because you are dealing direct, the agent may be willing to give up some of their commission to get the deal done, thereby lowering your total out of pocket cost to purchase the foreclosed property.

To sum it up, buying a foreclosure in today?s market is no longer taboo, is typically a better value, the property is usually in better shape without any attached liens and is a much faster way to acquire a property below market (less out of pocket) price.

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Source: http://rawbusinesslaw.com/2012/09/18/house-buying-2-0-foreclosures-real-estate-buying-a-home/

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