19
Jun
By First Rate Financial Group
Real Estate

Buying A Home In Foreclosure

Buying A Home In ForeclosureForeclosure is a process that happens over many months. There are various opportunities to acquire real estate that is in a different stage of foreclosure, including before the foreclosure process completes. This short guide identifies the different stages and the opportunities that may exist to acquire a property at a discounted price.

Get The Money Lined Up First

To acquire a property at any part of the foreclosure process requires cash or pre-approved credit. Have the full amount of cash available to pay for the transaction or have a recent pre-approval letter from a reliable lender. The letter shows the amount of mortgage financing available and approved for buying a foreclosure.

Pre-Foreclosure

Before a lender forecloses on a home, to take legal possession of it, they must go through a legal process filed with the courts. All those legal filings are public records.

The borrower, who is in default on the loan, gets a legal “Notice of Foreclosure” that gives a date when the foreclosure will occur. There are subscription services that collect these dates from the court records and assemble a database of information about the properties coming up for foreclosure.

Up until the foreclosure date, it is possible for the homeowner to make a deal to sell the home, which pays off the lender and that stops the foreclosure.

Sometimes the existing loan can be acquired and the past-due payments brought up to date and that is all that is needed to satisfy the lender. In other cases, the outstanding loan must be paid off entirely or refinanced by the new owner.

To find an attractive deal in this stage of the foreclosure, a real estate investor looks for a property that has significant equity and the loan(s) on the property are far below the market value of the property.

If the home continues to foreclosure then the existing owner will lose all the equity they have in the property. This makes the owner very motivated to sell the property at any price, even at a steep discount, which helps them to not lose everything.

Foreclosure Auction Sales

Some lenders immediately put a property up for auction right after foreclosure. An investor with an interest in these foreclosed properties, bids with other bidders at the auction. The highest bid wins.

All that is needed is to get on the mailing list to be informed of upcoming auctions and have a cashier check in hand for the required deposit at the auction to be able to bid.

REO Properties

Other lenders take ownership of foreclosed properties and then sell them off through authorized broker/dealers who work for the lender. Some lending systems, like HUD, for example, maintain a public database online that shows all the foreclosed properties that are for sale and their minimum offer price.

Creating personal relationships with the bank/lending officers who manage REO properties is a terrific way to get leads. It helps to have the first chance to buy a foreclosed property, which is recently added to a lender’s REO system, that other investors may not yet know about.

Conclusion

Foreclosed properties may create significant opportunities; however, there are also serious risks when buying these properties because they are sold on an “as-is” basis. This type of investment is definitely a “buyer be aware” opportunity. It can be lucrative, yet investors need to be careful as well.

If you are interested in trying to find a foreclosed property, one of the most important steps is getting your financing pre-approved. Be sure to contact your trusted home mortgage professional to discuss your current financing options.

18
Jun
By First Rate Financial Group
Real Estate

The Benefits Of Adding An In-Law Apartment To A Home

The Benefits Of Adding An In-Law Apartment To A HomeOne renovation that may add value to a home is an in-law apartment. Even if a homeowner does not have any relatives, an in-law apartment makes wonderful guest accommodations. It is possible to rent it when unoccupied to earn some money.

Homeowners who rent out part of a home need to check with their insurance agent to upgrade insurance to accommodate commercial use of a part of the home.

Additionally, a person staying in an in-law apartment, who is not a member of the owner’s household, may need to get renter’s insurance to cover any personal property kept in the in-law apartment.

Renovation Plans

An in-law apartment may be in a basement or attic. Creating one is possible as a home addition, a garage makeover, or as a tiny house in the backyard.

Check the building regulations for the area where the home is. It is wise to get the proper building permits needed for the construction. Work done without permits usually does not add value when reselling because it creates a liability.

Some people make an in-law without having to do major renovations if partitioning the house is possible. It may be possible to separate an area to create an in-law apartment if the house has an extra bedroom with a connected bathroom.

If no existing part of the home is suitable for remodeling, then adding an addition is an option. A better choice for a backyard that usually increases the resale value is building an in-law cottage rather than investing in installing a swimming pool. Some people may prefer having in-law accommodations when compared to the cost of maintaining a swimming pool.

Multiple Uses For An In-Law Apartment

Almost everyone has a use for an in-law apartment. This is why they are attractive to potential home buyers. Children can stay with parents as they become adults. Elderly parents can live with their children. Couples without children can use the room as a home office. Single people can rent out the space to help pay the bills.

Use of the space may change over time, so be sure to think creatively about the space. The value-added for having this space is the privacy it allows. Living together is normally easier when the parties also have some privacy.

Having a private bathroom, a separate entrance, and a kitchenette in the in-law apartment covers all the needs. This allows the space to be self-contained.

Summary

Consider adding an in-law apartment for the convenience, potential improvements in the resale value of the home, and to reduce the expense of supporting family members who live elsewhere and pay rent for an apartment to others.

If adding additional space for in-laws or guests sounds like a good fit for your family, you may want to consider accessing some of your home equity funds to cover the cost of renovation. Be sure to contact your trusted home mortgage professional for current financing options.

13
Jun
By First Rate Financial Group
Real Estate

How To Buy A Bargain Home As A Short Sale

How To Buy A Bargain Home As A Short SaleA short sale is when the mortgage lender(s) agrees to sell the property for a lower amount than the loan-balance remaining.

During the worst moments of the 2006 to 2008 real estate crisis, homes sold as short sales for a fraction of their value. Lenders had so many properties with loans in default that they could not manage the ones that they had in foreclosure.

Foreclosure is an expensive legal process that causes a lender to lose more money on a property. This is one of the motivators that encourages lenders to accept a short sale because sometimes through a short sale the foreclosure process is avoided.

Are Short Sales Still Available?

The number of short sales peaked in 2012. The inventory of homes available for a short sale transaction is much lower than the massive numbers caused by the 2006 to 2008 real estate crisis; however, they still do exist.

Short sales are still worth exploring as long as a qualified buyer has enough cash on hand or is pre-qualified with home-purchase financing that is acceptable for a short sale transaction.

A short sale may be a bargain; however, the buyer must be careful because there are some pitfalls to avoid in short-sales transactions.

The Challenging Dynamics Of A Short Sale

There are three (or more) parties in a short-sale transaction. They are the seller, the buyer, and the lender(s). All must agree to the closing sales price of the home and the terms and conditions of the sale in order for the transaction to succeed. The lender(s) forgives part or all of the mortgage loan that is secured by a lien on the property and agrees to take a loss on the sale.

A short sale only occurs when the home cannot sell for the amount of the mortgage loan(s) on the property. The home is considered to be “underwater,” which is a colloquial term for a home, with a loan(s) that is more than the home is worth.

Short sales do not close quickly because the paperwork is complicated. If there is more than one lender on the property, the process is even slower. Buyers in short sale transactions need to be patient. They must be approved for financing and also approved by the existing lien-holder(s) on the property that is for sale by making a successful short-sale application.

A buyer may need to make a “good faith” security deposit to initiate the short sale application process. The deposit, which is refundable, may sit in a trust account for quite some time before the deal is approved.

Even with proper planning, a short sale deal can still fall apart. Buyers must also take on the risk that the property may need significant repairs and buy the property “as-is.” Homeowners who cannot pay their mortgages usually are not very diligent at taking care of their properties.

Summary

Short sales are an important strategy to consider when searching for a bargain property. Buyers must have cash or significant financial strength and be willing to complete the complex process for the transaction.

To reduce risk, a buyer needs to get careful inspections of the home and have a very clear idea of the costs to bring it up to a nicely-repaired condition, in order to profit from this strategy.

Be sure to get your financing pre-approved before starting any negotiations. Your trusted home mortgage professional is ready to assist with this process and discuss all available financing options.