Archive for October, 2008
The Truth about REO’s and Repairs
A common misconception regarding the purchase of REO or foreclosure properties is that all sales are “As-Is” and no repairs will be performed by the seller. It is true that these properties are advertised that way and generally you will be asked to sign an “As-Is Addendum” as part of the contract, but what exactly does that mean? On the face of it you would think it meant just that, no repairs. Because of this many buyers, and quite a few agents, pass on homes that might be the ideal choice. The fact is that Banks are open to performing repairs if the request is properly made and the reasoning behind the request is documented in a compelling manner.
It’s a bottom line business with banks. Most don’t care so much about the structure of the contract as much as the eventual net sales price after all costs are deducted. If that includes some repairs that are reasonable in order to close escrow many asset managers would prefer that over putting the house back on the market. How that goes often depends on the listing and selling agents willingness to work towards a positive outcome for all concerned.
Because many REO homes are put in contract well below what they will appraise it is not unheard of to make some negotiated adjustments to price that include seller repairs necessary for financing. Every situation is different and the important thing is that your agent is willing to look at creative solutions to expand your housing options.
Short Sale Checklist
I think everyone knows what a foreclosure is and by now most people are familiar with the term “short sale” and understand that it is a way to sell a home and avoid foreclosure. Why choose one over the other?
Whether you sell your house via a short sale or lose your home to foreclosure be prepared for a credit score reduction of 200 to 300 points. Either way you are going to have rebuild your credit and that will take time.
The primary advantage of a short sale vs. foreclosure is the amount of time you will need to wait before buying another house. Current Fannie Mae guidelines require only 24 months of seasoning before buying a new home vs. up to 72 months for those who lose their homes through foreclosure. With that in mind many people decide that selling via short sale is their best option.
Keep in mind that with a short sale there is the potential for a deficiency judgement on the difference of the loan amount and the amount paid. In California, purchase money (original) loans are not subject to deficiency judgements but many other forms of financing are. This is something that you should discuss with a real estate attorney or CPA prior to making your decision.
If you decide that a short sale is the right choice for you here are some of the things you will need;
1. Authorization to Release Information to Agent. This will allow your Agent to talk with the lender on your behalf.
2. Handwritten hardship letter showing compelling need to sell.
3. Short Sale Listing Agreement.
4. BPO of comparable sales from Listing Agent.
5. Last 2 years W2 Forms all borrowers.
6. Last two years tax returns all borrowers.
7. Last two months bank statements all borrowers.
8. Last two pay stubs all borrowers.
9. Borrowers financial statement. Be sure to accurately list all expenses, as unaccounted discretionary income can be an issue with lender.
10.Detailed estimate for any repairs needed.
11.Fully ratified Purchase Agreement.
11.HUD 1 statement or NET Sheet showing the lender what their NET figure will be and any other expenses owed on the property.
Sphere: Related ContentRacing Under a Yellow Flag
Racing fans have all heard the term “Racing back to the yellow flag”. This was the practice of taking advantage of a caution flag to pass other drivers who backed off during a wreck on the track. Many a race was won by drivers who accelerated when everyone else was braking. What does that have to do with real estate you ask? Well………..everything!
With all the uncertainty of our economy most people have “hit the brakes” and are taking a yellow flag approach to their finances. Nothing wrong with that I suppose. In fact, that is probably a reasonably safe way to make sure that you fall behind at the same rate as everyone else. Hold your position and when things turn around you might be right back where you were a year or two ago. If that’s where you want to be then its a great strategy.
There is another option. Right now may be the best opportunity you will ever have to leap frog ahead in life. The uncertain economy has forced housing prices dramatically lower and buyer competition has been significantly reduced. Because of this you are in position to make a move that would place you far ahead when the economy turns back around. For first time buyers this truly may be the chance of a lifetime. Some will hit the brakes and some will hit the gas. Which one will you be?
Local Band Hits it Big - Returns
Looking for something to do in Redding? The band “The Myriad” will be performing Saturday Oct. 4th at the Cascade Theatre. The Myriad was crowned MTV champions of the 2007 “Dew Circuit Breakout”. Check out their music video filmed at Redding’s historic Cascade Theatre.
Sphere: Related ContentThe Credit Crunch and The First Time Buyer
As Lenders become increasingly selective about issuing loans it is more important than ever that you know your credit score.
One of the most important things you can do as you prepare to buy your first home is to obtain your free yearly credit report from www.AnnualCreditReport.com. Be sure to look it over carefully for mistakes and contact the credit reporting agencies to dispute any errors. The three credit reporting agencies, Equifax - www.equifax.com , Experian - www.experian.com and TransUnion - www.transunion.com are required to remove unverifiable negative credit from your record. Once you have made sure that your credit report is accurate there are a number of steps you can take to raise your credit score. It’s not an overnight process so even if buying a home is a ways off I would encourage you to start today. Here are some tips for boosting your credit score;
- Pay your bills on time. As this can count for one third of your credit score it is very important that you avoid late payments. Payments that are 60 days late will be reflected in your credit history and lower your score.
- Avoid opening new credit. That 15% discount offered if you apply for a card at your local retailer may cost you a bundle. Too many inquiries and too much available credit can have a negative impact on your credit score.
- Keep older credit lines open. Accounts with a long history tell lenders that you are a good credit risk. Use them regularly and pay in full each month.
- Use Credit Responsibly. Keeping a few active credit lines open with timely payments will go a long way to boost your score.
- Reduce your balances. For many this will be the biggest challenge. Avoid making just the minimum payment on your credit cards. It is critical that you work towards getting your cards payed down to no more than 20% of available credit. This may take some time but with discipline and planning will pay big rewards. Not only is a full one third of your credit score determined by this factor if you are making only the minimum payment you are losing incredible amounts of money that could be saved for a down payment.
I can’t stress enough the importance of checking your credit to remove errors and look for cases of identify theft. These are much more common than you might think. Don’t fall for any of the “Fix your Credit Fast” scams that charge you a fee to repair your credit. This is something you can do yourself. Feel free to Contact Us to learn more about getting ready to buy your first home.
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Our Customer Satisfaction Rating, based on an independent survey, exceeds 97%. This is reflected in our 2008 "QUIE" Award recognizing the TOP 10 REAL ESTATE COMPANIES in NORTH AMERICA! REP/GMAC in #2.
