Keep On Giving

As promised, I am continuing to give 2% of net commissions to Housing Assistance Corporation. What can you do?

Anatomy of A Foreclosure

Although not a cheery holiday subject, foreclosure presents itself as an opportunity for some and a tragedy for others at any time of year. The new Administration may soon rework all of the regulations relating to foreclosures and short sales, so stay tuned. The following is from one of my professional organizations, REBAC and is appropriate at this time. The best advice is still, “Don’t try this at home!” or without a qualified Buyer’s Representive. It’s a nightmare for even the most seasoned professional, I promise. Your state laws may vary. More information to follow, and keep and eye on the new Housing Secretary.

Foreclosure Process

Foreclosure is a process that occurs over a period of time, involving three major stages. Interested homebuyers can make a purchase offer and potentially acquire property at any point in the foreclosure process. However, there are different variables to consider at each stage, and different parties involved, depending upon how far the home has proceeded down the path towards foreclosure.

Stage 1: Pre-foreclosure
When homeowners default on their mortgage, their property is considered to first be in a state of pre-foreclosure. Lenders are typically quick to respond to that first late payment, with phone calls to the borrower.

How the foreclosure process actually proceeds from this point forward varies greatly from state to state. It’s important to know, for example, how your state determines property ownership prior to foreclosure, since this largely dictates which steps will be taken and how long each step will take.

Buyers may find that properties that are in the pre-foreclosure period are attractive investments. While it’s unlikely that a highly discounted price can be negotiated, especially for desirable properties, there are several advantages to purchasing at this stage.

First, there may be less competition from other buyers before the property is put up for public sale. Also, if your agent approaches the current homeowners with sensitivity to their situation, you’ll improve the odds that a cooperative agreement can be reached, eliminating many of the problems and uncertainties that make purchasing foreclosure properties in auction sales a risky business.

Stage 2: Sale/Auction
If the lender and borrower are unable to work out a solution during the pre-foreclosure stage, the lender will take steps to sell the property to new owners. Following a notice of sale, a foreclosure property is typically listed for sale at auction. The timing and procedures of these sales vary by state and, to some extent, sales terms will be determined by the lender. For example, an auction can occur through a public sheriff’s sale, or through a private party. Some lenders may even opt for a short sale, which means the property is sold for less than the amount of money owed, simply to remove a non-productive asset from the books.

Frequently, the best bargains in distressed properties can be found at auction sales, although numerous pitfalls can be encountered. First, it’s fair to say that you probably won’t have complete information about what you’re purchasing. Because defaulting homeowners frequently still occupy the home at this point, and are not likely to open their doors to show you around, you won’t be able to see beyond the exterior, much less bring in inspectors. In this type of sale, there are no requirements to disclose flaws; properties are sold “as is,” without any warranties.

It may also be difficult to determine if there are any old debts that could surface later as liens on the title. For example, you may become obligated to settle with the contractor who put a new roof on the home, but was never paid. And if the old homeowners still occupy the home, you’ll have to contend with the awkward business of evicting them, facing the additional risk that they will damage the property before they vacate.

Another challenge can be paying for the home. Usually, public sales require cash payments, meaning that your financing will need to be in place well in advance of the auction.

Stage 3: Real-Estate Owned (REO)
If a foreclosure home does not successfully sell at auction, it moves into the lender’s inventory and is considered a real-estate owned (REO) property. Generally speaking, lenders don’t like to hold non-performing assets, especially ones that require upkeep and maintenance, so they may be motivated to sell. At the same time, lenders still want to maximize their profits and are unlikely to accept deep discounts.

Buying foreclosure property at the REO stage is typically the easiest and most straightforward approach. Many of the risks that are present at the auction stage have now been eliminated. However, the potential return on your investment has also been reduced. On the other hand, expenses such as taxes and liens, that aren’t generally covered in an auction sale, may be covered by the lending institution in an REO sale.

If the home is held by a smaller bank, you and your buyer’s rep may be able to negotiate a purchase directly with the lender. It’s more likely, however, that you’ll be working through an outside real estate representative who has been retained independently by the bank.

2008

Welcome to the new year! I’ve always liked New Year’s Day. Not much for the evening before, but the first seems so fresh and clean, the new calendar hung and all those new pages to look forward to. I have been cleaning and organinzing my home and my business, planning for a busy year with both. The Boy, a leap year baby, will have his first real birthday this year as he turns four so that will be exciting. To friends, family and colleagues far and near a healthy and prosperous year ahead.

Life with the Beach Bag Always Ready

April has nearly become July. All is well here, real estate is going on fine and busy. The Boy is growing and learning and enjoying his life on the beach. Real beach weather only recently arrived and today, our 7th marriage annivarsary, is a perfect specimin. This week we found handfuls of sand dollars on Mayflower Beach, and visited the Museum of Natural History in Brewster. There is a special exhibit there on the life of Rachel Carson, an amazing woman. I saw the biopic on Edith Piaf’s life, another amazing woman. And I read the book A Walk on the Beach by Joan Anderson, reflecting on her friendship with Joan Eriksson, two other amazing women. All this week! So I am full of woman-pride and feeling myself ready to take on a new challenge. I have moved to ERA Martin Surette Realty’s West Dennis office to work for a terrific woman, Amy Surette Greene. So a new adventure begins for us. Wishing you all a wonderful Independence Day!

Arts and Culture Council Appointment

I am proud to begin service on the Dennis Arts and Culture Council, through 2009.  I hope to participate in bringing wonderful programs to the Town.  If you are a resident and have questions feel free to contact me at lisa@capecodera.com.  Stay tuned for reports on Town goverment goings-on!