Answer: This is a more complex question then anyone might believe, but allow me to offer a brief overview.
We know there are a huge number of foreclosures in the U.S. and that the numbers are rising. For instance, the foreclosure listing service RealtyTrac.com reports that in October foreclosures were up 94 percent over the same month last year.
The difference between fair market values and the sale price for distressed properties is called the "foreclosure discount" and some of the homes listed by RealtyTrac sell at enormous price reductions. However, in some markets there is little or no discount. Thus the size of the discount depends on local market conditions. In general terms, the more distressed homes available for purchase -- the larger the percentage of foreclosures and REOs relative to all homes being sold in a given market -- the greater the foreclosure discount.
Homes which have been foreclosed are sold at auction. The lender typically bids the amount of the loan in an effort to recapture the value of the principal, but this is not always the case. If the property does not sell at auction then the lender has made the winning bid and takes title to the property as "real estate owned" -- a REO.
Is it better to buy at auction or from the lender? The answer depends on the local market and the lender. In some markets, you can buy REOs in big numbers, say 100 or 1,000 at a time, and with significant discounts. In other cases, you can buy foreclosures one-by-one.
In considering foreclosures and REOs you have to look at more than price. Yes, there may be a discount, but what repairs will be required? Will you have to evict former owners? Squatters? In some cases foreclosures will be a bargain even with expenses, but not always.
If foreclosures seem interesting, you want to check the listings with care, work with an experienced broker and attorney, and have cash available for acquisition, repair and retention. Foreclosure professionals try to turn over properties as quickly as possible to reduce carrying costs, maintenance and security expenses, generally in six months or less -- and sometimes in just a few days if the property can be wholesaled to a contractor or investor for repair.
Question: I purchased my home in March. Everything has worked fine until now -- when the heat pump went out. I called my home warranty company, who -- slowly -- called a heating professional to come out and take a look. Two weeks later I still don't have a working heat pump! First the part wasn't in stock. Then that part wouldn't fit. Then the part wouldn't work -- the heat wouldn't shut off! And finally, one of the experts pointed out that the part wasn't the same one being replaced -- it was a cheaper, less effective version.
I have sat home numerous days -- from work -- and evenings either waiting for the guy to show up, or waiting for the next guy to come and fix what the first, or second, or third guy couldn't. Is this my home warranty company's fault? What rights do consumers have in these situations?
Answer: If you're in a cold climate then waiting several weeks to get the heat fixed is not acceptable. It surely would not be acceptable for a landlord and it is not acceptable for a warranty company either.
If the property is old enough then it may well be difficult to get a proper part. As to your "expert" and their "expert," once you get into the world of dueling experts you'll likely need a third one to referee.
Check with your warranty company to see if they have a complaint department or a supervisor. If not, call the consumer affairs department of your state attorney general's office. Beyond that, check with them to see in the future if you can simply have repairs made and then send the bill to them, arguing that a bum heater in cold weather is a threat to health and hearth.
Take a look at HomeWarrantyReviews.com for additional information.
Question: I've been saving money for the last decade to build my dream house -- and now the time is finally here! As far as location, I'm pretty flexible. I rent in the city of Portland metro area now, but would like to be further out from the city center. How would you recommend going about choosing a builder? Are there certain certifications I need to look for?
Answer: I look at home building as a craft. One "builder" and a second "builder" with equally wonderful credentials may well create homes with vastly different levels of quality and cost.
I also view building as a localized business. Once you have identified where you want to build, go down to the building permits office and see which builders are active in your area. Drive by projects, see which ones look interesting, and then speak with builders. Ask builders if you can speak with recent clients in the area -- ask about their experience.
Or if you like a particular home, send a note to the owners and ask if they would recommend their builder.
Question: My husband and I are considering moving back East to live near my family. We aren't in any real rush, but want to move in the next year or so. Is there a certain season that's better than others for selling?
Answer: I have a view regarding this question which is probably different than a lot of brokers: I say any time is the right time to sell. Here's why:
Many areas have active real estate "seasons" when most transactions occur. If you think about this you realize that to have these transactions you need both buyers and sellers. In slower times you simply have fewer buyers and fewer sellers -- however, if there is balance between those who want and those who have then selling times should be about the same.
Of course, if there's a particular time of year when your home looks great, maybe because everything is in bloom, then the opportunity to market in such a favorable environment should not be overlooked.
Question: I've been a landlord for years, but recently I rented out to some tenants who constantly have loud parties -- bothering neighbors with whom I generally have a good rapport. I'm also concerned that the home may not be being taken care of. Do I have any recourse?
Answer: How loud is loud? Some police departments and environmental health agencies actually have meters to measure such things -- if someone is above the limit they can get a citation.
You need to ask if the neighbor's complaints are reasonable -- say band practice on a week night. If yes, then perhaps the best approach if you know the tenants and have good relations with them is to sit down, explain your concern and alert them to the possibility that the neighbors could seek help from the police or local government.
If the neighbor's concerns are not reasonable, then you should still sit down with the tenants and discuss the complaints anyway so they know what's going on. It may well be that noise concerns are a pretext, the real issue is some other matter with the neighbors.
A common lease provision includes language which says an owner can deem a tenant "undesirable" and terminate a lease if the tenant, his family, guests, or employees cause annoyance to neighbors. Check your lease for such language and then ask an attorney if it's actually enforceable. If yes, then perhaps a gentle warning letter to the tenants would be appropriate.
Question: A few years ago I purchased a home with a subprime mortgage. I put no money down and have been making interest only payments. I am getting worried, as I don't think I'll be able to make the new, higher payments when they start up next year. I don't want to move out of my home. I love it here! Any advice?
Answer: Yes, refinance now with a conventional loan or the FHASecure program. However, check your loan papers to assure that you do not set off a prepayment penalty -- if there's one in your loan then if possible you'll want to wait until the penalty period ends before refinancing.
What you have -- to be polite -- is a toxic loan, what lenders describe as "nontraditional" financing. It will be difficult if not impossible to get another interest-only loan with nothing down in many markets. Thus you will need either equity in the home or cash to reduce the mortgage balance when you refinance.
Given your situation it would be a good idea to start saving now so that you can carry the property at a higher monthly cost if that is necessary for a few months to avoid the prepayment penalty. Make a point of paying all bills in full and on time to maintain your credit standing. Speak with lenders now about replacement financing.
Question: I'm looking to become a real estate agent. I love the idea of helping people find their dream homes! Is there a way I can take classes and still keep my full-time job? Where do I go about finding out more about school.
Answer: This should not be a problem. Hundreds of thousands of newly-minted salespeople enter the real estate market each year, so there are plenty of classes available.
Educational requirements vary by state. For specifics, speak with your local Realtor association, individual brokers and check the phone book (does anyone do that anymore?) for real estate schools. You may be able to find night and weekend classes that will qualify you to take the licensure exam.
Have a real estate question? Send your inquiry to Ask Realty Times. Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here. For past columns, please press Ask Realty Times.
This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.
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source: realtytimes.com
