Tips For Buying Foreclosures

Despite increases in home prices and a stabilizing housing market, many experts say the foreclosure crisis is far from over. But buying a foreclosed home is different from buying a typical resale. In many cases:

— Only one real estate agent is involved.
— The seller wants a preapproval letter from a lender before accepting an offer.
— There is little, if any, room for negotiation.
— The home comes as-is, and it’s up to the buyer to pay for repairs.

On the upside, most bank-owned homes are vacant, which can speed up the process of moving in.

Buying a foreclosure is definitely a bit of a grind. It’s not easy. You’re getting fantastic pricing, but sometimes it takes going through a lot of houses and writing a lot of offers to get the home you want.

Get a Broker and Lender
The first two steps in buying a foreclosure should happen almost simultaneously: Find a real estate broker who works directly with banks that own foreclosed homes and get a preapproval from a lender.

First visit any site with a database of foreclosed homes. You also could look at a local real estate website that lets you filter the results to see only foreclosures. You might find the acronym REO, which means “real estate owned” (by a bank, that is). This signifies that a home has been through foreclosure and the lender is selling it.

Get a Broker on Your Side
The goal of combing through foreclosure listings is not to find a house; it’s to find an agent. Banks usually hire a few real estate brokers to handle their REO properties in a market. In a lot of cases, the buyer works directly with the bank’s broker instead of using a buyer’s agent. That way, the commission doesn’t have to be split between two brokers.

A lot of these realtors have a long-term relationship with these banks, and they know of listings that haven’t even come on the list yet. Call them about the listings that you’re interested in, but also ask them about listings that may be coming up because sometimes it may take a day or two or even a week before a listing actually comes onto the database.

In places where thousands of foreclosed properties are for sale, you might not get much one-on-one attention from overloaded agents. To prove that you’re serious about buying, right before or after you meet with the agent, meet with the lender.

Get a Preapproval Letter
Unless you plan to pay cash, you’ll need a recent preapproval letter from a lender. The letter will describe how much money you can borrow, based upon the lender’s assessment of your credit score and income.

The problem is, buyers want to find the house first, and then they think they’ll work out the financing. But the problem is, the really good deals on these bank-owned, they go quick — and the buyer doesn’t necessarily have time to try to work out the financing afterward. They need to work that out first.

Some first-time buyers make the mistake of assuming that the bank selling the home will also finance the mortgage as part of the deal. Don’t expect to get financing from the bank that foreclosed on it. That’s a totally separate transaction, and they view it that way. The people in the (bank’s) REO department are not loan officers. They are getting rid of bad assets.

Pricing Depends on Sales Pace
There’s no rule of thumb on what the bank’s bottom line is on price. Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or “comps.”

You really have to look at the comps in today’s current market conditions and write a competitive offer based on that. Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours. Sometimes it’s priced too high, and you can come in lower. A lot of times, buyers will come to me and say, We want to write offers for half price. It just doesn’t work that way.

Don’t Expect a Repair Discount
Keep in mind that foreclosed houses generally are sold as-is. Let’s say the house is listed for $200,000, all the comps are $200,000, and so the client comes in and said, Hey, look, I want to buy this house but I’ve got to do paint, carpet and fix some mold damage, so I want to take $15,000 off the price. You know what? All the other ones were in the same condition, and they sold for $200,000.

Look at the “absorption rate for your product class.” That means you should find out how quickly comparable houses are selling. In foreclosure, a 3,500-square-foot house with a pool in a gated community might sell within days or hours, whereas more modest homes might sit on the market for weeks.

If homes in your product class are selling swiftly, the best advice on a bank-owned property is to come in at your highest and best, unless the property has been sitting on the market forever with no activity. If you’re going to be upset because you would have gone $5,000 more, but you lost the property, just bid the higher price in the first place.

Dealing With An Underwater Mortgage

Back during the real estate bust, we fell behind on our mortgage and worked with our lender to get a loan modification. The lender added the delinquent amount to the end of the mortgage. Now, almost 10 years later, we have retired and are looking to relocate to a smaller house. Although our home’s value has increased, we still are “underwater” on the mortgage due to the modification. We contacted our bank, but we were told that there was no help for our fairly unique situation. There’s nothing we can do?

Your bank’s representative gave you bad information. Your situation is far from unique. You can wait it out or try to complete a short sale. In a short sale, your lender will agree to accept less than it is owed and will release you from the mortgage.

Your house has regained most of the value it lost when the bubble burst. In a few more years, as long as values continue to rise, you no longer will be underwater. You could stay in your home and possibly refinance or move to a new home and rent this one. However, being a landlord is not for everyone. Consider whether you are willing to deal with a tenant and all that goes with that.

I think a better option would be to try for the short sale. You’ll need to list your property with a real estate agent and sign a contract with a buyer at market price. Then you apply to your lender for a short sale by filling out paperwork that is similar to the loan modification process. You’ll have to follow up consistently with the lender until the deal is approved.

Many people completed short sales during the housing collapse, and many complained that the process took too long and was fraught with bureaucracy. This still would take substantial time and effort, though it shouldn’t be as hard now that fewer people are seeking short sales. And it almost certainly would be faster than waiting out an underwater mortgage.

REPOST: One the House: First-Time Homebuyers Can’t Afford to Do It Alone

(TNS)—From the glass-half-full department of residential real estate, here is a summary of the things the experts believe are blocking a full housing recovery nationwide.

The third annual America at Home survey from NeighborWorks America, a group working for affordable housing and community development, finds that, despite a growing economy, the pressures of student debt, confusion about the mortgage process and a marriage-rate decline are important factors in the slow housing market.

The survey of 1,000 U.S. adults by Widmeyer Communications, a Finn Partners Co., was conducted this fall.

It found that student-loan debt continues to grow as an obstacle to consumers’ ability to buy homes, as 57 percent of respondents who acknowledged having loans says this debt was either “very much” or “somewhat” of an obstacle, compared with 49 percent of respondents to a 2014 survey.

In addition, although mortgage rates remain historically low, a generally steady rise in home prices is outpacing income growth, leading buyers — especially first-timers — to search for ways to build up down payments.

But nearly 40 percent of respondents says they have received “nothing at all” in terms of information about down-payment assistance programs for middle-income home buyers, programs that could provide thousands of dollars to help bridge savings gaps.

Finally, the housing market is being pressured by changing demographics.

Of the respondents, 43 percent plan to purchase homes when they “got married or moved in with a life partner.”

That’s important for the housing market’s rebound, because the median age at first marriage has increased to 29.3 for men and 27.0 for women, according to the Census Bureau, up from 26.8 and 25.1, respectively, in 2000.

Consumers have trouble estimating the accurate costs associated with homeownership and general home maintenance.

Survey respondents estimated an average cost of $15,070 for home-maintenance, but the actual cost for home repairs and upkeep nationwide is more likely between $2,000 and $6,000. While those who are current homeowners estimated costs for repairs to be $12,360, current renters estimated $20,503, suggesting that they might be deterred by perceived high maintenance costs.

I knew a fellow who bought a house in which the previous owner repaired a leak in the bathroom above the living room, but decided to swirl drywall compound over the entire living room ceiling for reasons that were never really clear.

When someone suggested taking down the original ceiling and replastering, the new owner pulled $3,000 out of the air as the too-expensive cost.

The real cost was $900.

Survey respondents also say they lack adequate information on the consequences of foreclosure.

Thirty-two percent believed they would have to wait “more than five years” after a foreclosure before they were eligible to obtain new mortgages to purchase houses again.

The reality is that people who have experienced a foreclosure need wait only two years before becoming eligible for most mortgage products.

“It’s understandable that Americans looking to purchase their first home are intimidated by obstacles such as student debt, lack of a down payment, and weak credit,” says NeighborWorks America president and CEO Paul Weech.

So it’s critical “that first-time buyers have access to information and programs such as down-payment assistance and affordable loans so they feel confident in purchasing a home independently.”

©2015 The Philadelphia Inquirer
Distributed by
Tribune Content Agency, LLC.

Over 50,000 Completed Foreclosures In September

completed_foreclosureForeclosure inventory declined by 24.3 percent and completed foreclosures declined by 17.6 percent compared with September 2014, according to the recently released September 2015 National Foreclosure Report. The number of foreclosures nationwide decreased year over year from 67,000 in September 2014 to 55,000 in September 2015. The number of completed foreclosures in September 2015 is a decrease of 52.8 percent from the peak of 117,438 in September 2010.

Completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6 million completed foreclosures across the country, and since homeownership rates peaked in the second quarter of 2004, there have been about 8 million homes lost to foreclosure.

As of September 2015, the national foreclosure inventory included approximately 470,000, or 1.2 percent, of all homes with a mortgage compared with 621,000 homes, or 1.6 percent, in September 2014.

It also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due, including those loans in foreclosure or REO) declined by 21.2 percent from September 2014 to September 2015 with 1.3 million mortgages, or 3.4 percent, in this category. This is the lowest serious delinquency rate since December 2007. The foreclosure rate (defined as the share of all loans in the foreclosure process) was at 1.2 percent as of September 2015, which is back to the December 2007 level.

The largest improvements in the foreclosure inventory continue to be in judicial states on the East Coast such as Florida and New Jersey, while the overwhelming majority of states are experiencing declines in their foreclosure rates, four states experienced small increases compared with a year ago.

The rate of delinquencies continues to drop back closer to historic norms powered by improved economic conditions and tighter post-recession underwriting standards, as we head into 2016, based on almost every major metric, the fundamentals underpinning the housing market are healthier than any time since 2007.

Additional highlights as of September 2015:

  • On a month-over-month basis, completed foreclosures increased by 49.5 percent to 55,000 from the 37,000 reported in August 2015. The one-month surge in foreclosures was partially the result of an annual public auctioning of thousands of tax-foreclosed properties in Wayne County, Mich., of which Detroit is the county seat. As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.
  • The five states with the highest number of completed foreclosures for the 12 months ending in September 2015 were: Florida (91,000), Michigan (45,000), Texas (32,000), Georgia (26,000) and California (26,000).These five states accounted for almost half of all completed foreclosures nationally.
  • The four states and the District of Columbia had the lowest number of completed foreclosures for the 12 months ending in September 2015 were: District of Columbia (69), North Dakota (310), Wyoming (498), West Virginia (593) and Hawaii (690).
  • Four states and the District of Columbia had the highest foreclosure inventory rate in September 2015: New Jersey (4.6 percent), New York (3.7 percent), Florida (2.6 percent), Hawaii (2.5 percent) and the District of Columbia (2.4 percent).
  • The five states with the lowest foreclosure inventory rate in September 2015 were: Alaska (0.3 percent), Minnesota (0.4 percent), Nebraska (0.4 percent), Arizona (0.4 percent) and North Dakota (0.4 percent).

32 States Have Increased Foreclosure Activity

Notice of ForeclosureThere were a total of 327,258 U.S. properties with foreclosure filings in the third quarter of 2015, down 5 percent from the previous quarter but up 3 percent from the third quarter of 2014, according to the Q3 September 2015 U.S. Foreclosure Market Report™.

The annual increase in the third quarter marked the second consecutive quarter where U.S. foreclosure activity increased on a year-over-year basis following 19 consecutive quarters of year-over-year decreases.

A total of 133,811 U.S. properties started the foreclosure process in the third quarter, down 12 percent from the previous quarter and down 14 percent from a year ago to the lowest level since the third quarter of 2005.

There were a total of 123,040 U.S. properties repossessed by the lender (REOs) in the third quarter, down less than 1 percent from the previous quarter but up 66 percent from a year ago, the largest year-over-year increase in bank repossessions since the tracking of quarterly foreclosure activity began in the first quarter of 2008.

The widespread rise in foreclosure activity in the third quarter compared to a year ago is the result of two starkly different trends taking place. In states such as New Jersey, Massachusetts, and New York, a flood of deferred distress from the last housing crisis is finally spilling over the legislative and legal dams that have held back some foreclosure activity for years. That deferred distress often represents properties with deferred maintenance that will sell at more deeply discounted prices, creating a drag on overall home values. On the other hand, in states such as Texas, Michigan and Washington, the third quarter increases are a sign that the foreclosure market has settled into a normalized pattern close to or even below pre-crisis levels, and in those states the overall housing market should easily absorb the additional foreclosure activity with little impact on home values.

New Jersey posts top state foreclosure rate, Florida rate drops to second highest
New Jersey foreclosure activity increased 27 percent from a year ago, boosting the state’s foreclosure rate to the nation’s highest foreclosure rate: one in every 171 housing units with a foreclosure filing during the quarter — more than twice the national average of one in every 404 U.S. housing units with a foreclosure filing during the quarter. New Jersey foreclosure starts were down 28 percent from a year ago, but scheduled foreclosure auctions increased 61 percent, and bank repossessions jumped 351 percent.

Florida foreclosure activity in the third quarter of 2015 decreased 17 percent from a year ago, but the state still posted the nation’s second highest foreclosure rate: one in every 186 housing units with a foreclosure filing. Florida foreclosure starts decreased 28 percent from a year ago, and scheduled foreclosure auctions were down 46 percent year-over-year, but bank repossessions in Florida increased 34 percent from a year ago in the third quarter.

Nevada foreclosure activity in the third quarter of 2015 increased 13 percent from a year ago, with the third highest foreclosure rate in the nation — one in every 194 housing units with a foreclosure filing. Nevada foreclosure starts decreased 14 percent from a year ago, and scheduled auctions were down 14 percent, but bank repossessions in Nevada increased 255 percent from a year ago in the third quarter.

Maryland’s foreclosure rate ranked No. 4 highest among the states despite nearly a 7 percent year-over-year decrease in foreclosure activity in the third quarter, and the Illinois foreclosure rate ranked fifth highest, despite a nearly 5 percent year-over-year decrease in foreclosure activity in the third quarter.

Other states with foreclosure rates ranking among the top 10 highest in the third quarter were South Carolina (one in 311 housing units with a foreclosure filing), New Mexico (one in every 322), Ohio (one in every 334), Georgia (one in every 337) and Indiana (one in every 353).

Atlantic City posts top foreclosure rate among metros
With one in every 97 housing units with a foreclosure filing in the third quarter, Atlantic City, New Jersey, posted the nation’s highest foreclosure rate among metropolitan statistical areas with a population of 200,000 or more.

Five Florida cities posted third quarter foreclosure rates among the 10 highest: Jacksonville, Fla. at No. 2 (one in every 153 housing units with a foreclosure filing); Deltona Beach, Fla. at No. 3 (one in every 155); Tampa, Fla. at No. 4 (one in every 162); Miami, Fla. at No. 5 (one in every 162); Lakeland, Florida Fla.7 (one in every 176); and Ocala, Fla. at No. 8 (one in every 179).
Trenton, N.J. posted the nation’s sixth highest metro foreclosure rate: one in every 172 housing units with a foreclosure filing in the third quarter of 2015. Albuquerque, N.M. (one in every 181) and Las Vegas, Nev. (one in every 187) take the final two top spots.

11 of nation’s 20 largest metro areas post annual increases in foreclosure activity
Eleven of the nation’s 20 largest metro areas posted a year-over-year increase in foreclosure activity in the third quarter of 2015 compared to a year ago: St. Louis, Mo. (up 113 percent), Boston, Mass. (up 55 percent), Dallas, Texas (up 39 percent), Detroit, Mich. (up 39 percent), New York, N.Y. (up 33 percent), Seattle, Wash. (up 14 percent), Houston, Texas (up 12 percent), Minneapolis-St. Paul, Minn. (up 11 percent), Atlanta, Ga. (up 5 percent), Philadelphia, Penn. (up 1 percent) and Washington D.C. (up 1 percent).

Among the nation’s 20 largest metro areas, those posting the biggest decreases in foreclosure activity in the third quarter of 2015 compared to a year ago were Riverside-San Bernardino in Southern California (down 21 percent), Los Angeles, California (down 21 percent), San Diego, California (down 20 percent) and Miami, Florida (down 16 percent).

U.S. foreclosure activity increased slightly in September
A total of 109,130 U.S. properties had foreclosure filings in September 2015, down less than 1 percent from the previous month but up 2 percent from a year ago. U.S. foreclosure activity has increased on a year-over-year basis in six of the last seven months.

43,358 properties started the foreclosure process in September, the lowest level since November 2005.

States bucking the national trend with the biggest increase in foreclosure starts in September compared to a year ago included Louisiana (up 468 percent), Missouri (up 131 percent), Virginia (up 70 percent), Massachusetts (up 60 percent), and Texas (up 21 percent).

Lenders repossessed a total of 40,308 properties in September, up 10 percent from the previous month and up 76 percent from a year ago. Bank repossessions increased year-over-year for the seventh consecutive month in September.

States with the biggest increase in REOs in September compared to a year ago included Nevada (up 844 percent), New York (up 580 percent), New Jersey (up 401 percent), Georgia (up 186 percent), and North Carolina (up 183 percent).

September Saw Shift To Buyer’s Market

buyers_market_shiftWith month-over-month declining prices and increased time on market, the September housing market has transitioned into a buyer’s market, according to®’s ‘Advance Read of September Trends.’ This means that it’s now easier for buyers to purchase a home than it has been any time so far this year.

“The spring and summer home-buying seasons were especially tough on potential buyers this year with increasing prices and limited supply,” says Jonathan Smoke, chief economist for®. “Buyers who are open to a fall or winter purchase should find some relief with lower prices and less competition from other buyers. However, year-over-year comparisons show that fall buyers will have it tougher than last year as the housing market continues to show improvement.”

Housing demand is in its seasonally weaker period, and as a result, median list prices are continuing to decline from July’s peak. Likewise, inventory has also peaked for 2015, so buyers will see fewer choices through the end of the year.

According to®’s ‘Advance Read of September Trends,’ which draws on residential inventory and demand trends over the first three weeks of the month:

  • The national median list price is $230,000, down 1 percent over August and up 6 percent year-over-year.
  • The median age of inventory is now 80 days, up 6.7 percent from August, but down 5 percent year-over-year, reflecting the seasonal trend for fall listings to stay longer on the market as the day becomes shorter.
  • Listings inventory will likely end the month down 0.5 percent from August.

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Full Price Recovery Reached for More Than Half of U.S. Housing Markets

housing_price_recoveryAmong the nation’s top 300 markets, 166 or 55 percent have now achieved full price recovery, 24 more than the 142 markets reported in June, according to®’s recently released July 2015 Local Market Index.

By July, 50 of the nation’s 100 largest markets experienced a complete price recovery, one more than the prior month. Additionally, 116 out of 200 midsize markets saw a complete price recovery, 23 more than reported in June.

July saw 16 of the top 100 markets post a decline in their three-month averages. The long-term view remains robust though, with all 100 markets continuing to post year-over-year gains.

“We’ve reached an important benchmark in the U.S. housing market with the majority of the nation’s top 300 markets recovering at least their peak prices. Most homeowners in these markets have now regained lost equity from the housing crash, and we’re seeing good progress toward restoring equity to the remainder of the nation,” says David Mele, president of

Southern Markets Lead Recovery; West Remains Dominant in Annual Gains

As of July, 50 out of the top 100 markets had shown a complete price recovery. Richmond, Va., rebounded at 100.18 and became the 50th market among the top 100 to achieve that status.

Of the 200 midsize markets, 116 have now achieved a complete price recovery. The most recent midsize markets to reach rebound status include Grand Junction, Colo.; Hattiesburg, Miss.; Springfield, Mo.; Charlottesville, Va.; Olympia-Tumwater, Wa.; Niles-Benton Harbor, Mich.; Dalton, Ga.; Tupelo, Miss.; Dothan, Ala.; Athens-Clarke County, Ga.; Muskegon, Mich.; Montgomery, Ala.; Eugene, Ore.; and Fayetteville-Springdale-Rogers, Ariz.-Mo.

Of the top 100 markets, the markets with minimal price declines from peak prices before the housing crash have achieved an average rebound of 109 percent. The average rebound of the moderate price decline markets was 101 percent of the prior peak price. Of the severe price decline markets, the average rebound was 84 percent.

The South continued to dominate recovery among the top 100 markets in July, with 23 markets recovered, followed by the Midwest with 11 markets fully recovered. Both the West and South had eight markets each that have achieved rebound status.

National Summary – West Continues to Dominate Annual Gains

Boise City, Idaho, edged out Denver-Aurora-Lakewood, Colo., and San Francisco-Oakland-Hayward, Calif., in July for the top spot with an annual percentage change of 7.09 percent. Strong progress continues in the West where nine of 10 of the top performing markets are located. However, that was one fewer than in June, with Grand Rapids-Wyoming, Mich., making the list. Within the West, California continued to dominate with four of the 10 top markets.

Bridgeport-Stamford-Norwalk, Conn., posted the largest three-month average gain in July at 0.59 percent, followed by other markets in the Northeast, including Springfield, Mass., which had the second highest increase at 0.52 percent, and Providence-Warwick, R.I.-Mass., and Worcester, Mass.-Conn., that occupied the fifth and seventh places, respectively.

From a regional perspective, the market with the largest three-month average gain of 0.59 percent was located in the Northeast. This was followed by the West at 0.48 percent. The Northeast also had the worst performing market in July at -0.19 percent.

Largest Markets Summary

Western markets continued to lead the recovery among top 100 markets. Markets with the highest rebound percentages were Dallas-Fort Worth-Arlington, Texas (115.43 percent); Denver-Aurora-Lakewood, Colo. (113.41 percent); Austin-Round Rock, Texas (113.32 percent); Houston-The Woodlands-Sugar Land, Texas (112.84 percent); and San Antonio-New Braunfels, Texas (112.76 percent).

Large markets trailing the national rebound were those that suffered large numbers of foreclosures and price declines during the housing crash. The bottom five markets by rebound percentage were Deltona-Daytona Beach-Ormond Beach, Fla. (72.49 percent); Palm Bay-Melbourne-Titusville, Fla. (71.72 percent); Cape Coral-Fort Myers, Fla. (71.21 percent); Stockton-Lodi, Calif. (70.61 percent); and Las Vegas-Henderson-Paradise, Nev. (68.47 percent).

On a year-over-year basis, the West also dominated. The top five markets achieving annualized gains were Boise City, Idaho; Denver-Aurora-Lakewood, Colo.; San Francisco-Oakland-Hayward, Calif.; Seattle-Tacoma-Bellevue, Wash.; and San Jose-Sunnyvale-Santa Clara, Calif.

Top performing markets by region were Bridgeport-Stamford-Norwalk, Conn.; Stockton-Lodi, Calif.; Toledo, Ohio; and Augusta-Richmond County, Ga.-S.C.

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