Chatterbox on Real Estate

The Obama administration laid out final guidelines on Monday that should make it easier for some financially troubled borrowers to sell their homes.

The guidelines are designed to encourage the use of short sales, transactions in which the borrower with lender approval sells the home for less than what is owed on the loan. The program also makes it easier for borrowers to voluntarily transfer ownership of properties through a “deed in lieu of foreclosure.”

Short sales can result in higher prices than foreclosures and can be less damaging to local neighborhoods, in part because homes aren’t left vacant and exposed to vandalism. But these transactions are often difficult to complete.

Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government’s loan-modification program, but don’t end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.

The short-sale program is the latest addition to the Obama administration’s $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.

Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments. Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (404) 939-3731 or AndreAllen@kw.com.

More often than not, when a Buyer decides to make an offer on a bank foreclosure, they feel they should discount the list price by the amount of money the Buyer thinks it will take to restore the property to “live-in” condition.

First, each Buyer defines “live-in” condition differently.  Granite counter-tops and brushed nickel fixtures are upgrades, not necessities.  Secondly, in determining a list price for each property the banks are now taking the condition into consideration.

In many cases they are pricing below, and sometimes well-below, needed repairs to bring the property up to “live-in” condition.  It is your decision, as a Buyer, to make what you consider to be a fair and equitable offer, but understand that you may risk the bank accepting another offer over the one you submit because that other offer was higher.

A REALTOR® can perform a market analysis on your behalf to help you determine what a property would be worth once it has been restored to “live-in” condition.

Make sure you hire a REALTOR® to represent you with your next Real Estate purchase or sale. Read a previous post on “Don’t buy a foreclosure without a REALTOR®”.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (404) 939-3731 or AndreAllen@kw.com.

Over the past few weeks I have been posting my thoughts, opinions and information on the “system” of purchasing a foreclosed property.  I listed 10 Things You Need to Know, but I am going to share #0.  Don’t buy a foreclosed property without a REALTOR®.

Purchasing a foreclosed property is a long and winding road and it should be traveled with an “experienced” driver.  Most real estate agents are familiar with the twists and turns, so this is not something you should attempt to navigate without representation.  The listing agent for a foreclosed property is obligated to the bank to help them recoup as much of their investment as possible.  As a Buyer, you want someone to represent you and your interests.  Working with a qualified REALTOR® is the best way to do that.

Before working with any real estate agent, ask them about their experience in working with foreclosures.  The answer received should help you determine if they will be successful assisting you in the transaction.  If you receive the look of a deer in the headlights, this agent may have been run over a time or two by the “experienced” driving agent.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (404) 939-3731 or AndreAllen@kw.com.

10. The Foreclosure System is Currently Overworked

With the onslaught of foreclosed properties in housing markets around the county, Real Estate Professionals are experiencing problems they’ve never seen before.

The increased volume and never ending Seller demands has stretched listing agents beyond their capabilities. As a consequence, phone calls are not returned on a timely basis, the multiple listing service is not updated regularly and often times the information is wrong.

The foreclosure departments at the banks are overloaded as well and their response to offers can be slow. This process can be very frustrating to a Buyer.

Patience is a virtue in this purchasing process, so be prepared and understand that you are working within a “system” (The Bank Sets the Rules). Unlike you as a Buyer, banks have no emotional attachment to the properties on their books so don’t be offended if you have not had a response according to your timeline…it’s not personal.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (404) 939-3731 or AndreAllen@kw.com.

9. Penalties

There are stiff penalties for every day the closing is delayed, beyond the date specified in the contract, by the Buyer or the Buyer’s Lender.

A typical penalty is $100 per day, and there can be a minimum fee if you request an extension.  It is imperative that you, as the Buyer, cooperate fully with your lender in providing documentation in order to ensure your loan makes it through underwriting so you can close on time. If a delay in closing is experienced as a result of some action not taken by the Seller/Bank, there is no penalty assessed.

Time is of the essence if you want to eliminate penalties. As a Buyer, communication with your real estate agent, lender, inspector and appraiser are essential. Don’t give back money when you don’t need to.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (404) 939-3731 or AndreAllen@kw.com.

8. Banks Select the Closing Attorney

In most transactions, banks have their own attorneys and will require you use them. Although there have been plenty of successful negotiations to select an attorney you or your real estate agent may have a relationship with, this allows the bank to control the transaction.

There is a relatively small group of attorneys that typically handle foreclosed properties for the lenders in Metro Atlanta. They are well-versed in the bank’s process and will be best prepared to ensure a smooth and timely closing.

Because of the current volume of foreclosed properties, these law firms are on very tight deadlines and may “appear” to not be cooperating with you as a Buyer. You therefore have the option to obtain your own attorney to represent you at the closing and this may be at your own expense.

If you would prefer to close with a particular law office it does not hurt to ask. You may be surprised and get what you ask for.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (678) 252-2959 or AndreAllen@kw.com.

7. All Properties are Sold “AS IS”

The bank has already lost a significant amount of their investment in these properties and are not willing to negotiate repairs. There are usually no allowances for carpet, lighting, paint or other issues with the home.

All buyers are advised to have a home and termite inspection to determine the condition of the home. There is also a pre-negotiated “due diligence” period in which that inspection must take place. (See yesterday’s Blog on “Time is of the Essence“) Banks are seldom willing to extend that period, so you must complete your inspection within that allotted time. It is after the inspection that the buyer can make an informed decision about whether or not to purchase the home “as is”.

Eventhough banks are not in the “real estate” business and would prefer not to have distressed properties on their books, they are also not in the home improvement business. So trying to negotiate repairs could make your offer appear less attractive than other presented on the property. Asking for “less” could get you “more”.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (678) 252-2959 or AndreAllen@kw.com.

6. Time is of the Essence

Once, the contract is “binding” meaning both sides have agreed to the terms and signed all documents, time is of the essence. The bank will typically allow 7 days for the buyer to inspect the property.  This is called the “due diligence” period. If the buyer wishes to terminate the contract during this period, earnest money will be returned.

The bank can also specify a time period in which the Buyer is required to obtain a “commitment letter” from their lender. This means that all inspections must be completed, as well as the appraisal. If this letter is not provided by the specified date, the bank can choose to terminate the contract. It is your responsibility to make sure your lender is aware of this contract provision.

When your offer becomes binding, this is where the rubber hits the road.  Everyday of your due diligence period has to count and be purposeful or it can cost you your earnest money and the contract. The team of your real estate agent, lender, appraiser, inspector, insurance agent and closing attorney needs to be communication for scheduling activities in order to meet (I prefer beat) deadlines.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA.  Contact me at (678) 252-2959 or AndreAllen@kw.com.

5. The Bank Sets the Rules

Making an offer on a bank owned property requires that you submit “proof of funds” for cash offers, or a “pre qualification” letter from either the bank specified lender or your lender of choice. Additionally, the bank can require that you be pre-qualified by their specific lender. That does not mean you have to borrow money from them, it just means that they want to be sure that you have the means with which to purchase the property.

As an example, if Wells Fargo or Bank of America holds the property, then they may want a pre-qualification letter from a Wells Fargo or Bank of America lender, specified either in the listing or in the bank contract. This is done for two reasons: 1. They trust their own lending guidelines; 2. They want the opportunity to generate more business. While the seller(the bank) cannot legally insist that the buyer use a particular lender, they still want an opportunity to compete for the business.

Always keep in mind that the bank sets the rules. If you would prefer to kick sand in their sandbox, rather than play within it, you run a higher risk of your offer not being considered or just simply rejected.

If you are thinking of buying or selling a home, contact Andre Allen, REALTOR® with Keller Williams Realty – Atlanta Partners servicing the real estate needs of Metro Atlanta, GA. Contact me at (678) 252-2959 or AndreAllen@kw.com.