Creative Plan to Help Home Owners

Posted on May 5 - Filed Under shortsale-foreclosure-reo | Leave a Comment


As the foreclosure problem continues to worsen, many cities are attempting to be proactive in the fight against the unsightly blight that occurs when many of the abandoned and foreclosed homes sit vacant, not to mention the tragedy that afflicts the affected families. I recently wrote about the city of Brentwood’s “Downpayment Assistance Program” (DAP) as a means of cleaning up the inventory of unsold homes. Another city that may be taking steps to help homeowners avoid foreclosure is Menlo Park. As reported in today’s edition of the San Francisco Chronicle, the city of Menlo Park is considering a plan to help distressed home owners. It’s called the “Foreclosure Prevention Program”.
The program targets owner-occupied homes with mortgages more than 90 days past due. The program managers would approach banks that hold the mortgages and ask them to sell the mortgages, at the current market value. The banks would receive the same amount if the bank foreclosed on the home, but without the expenses and less time involved.
A local bank would then refinance the mortgage for about 70 % of the market value of the home. The city of Menlo Park would provide the cash balance of 30% as a “silent second” or equity position as an investment. This would leave the home owner with a mortgage that could be half of the original cost! The city would be repaid when the home sold and would also receive half of the appreciation above the current market value. If the home sells for less, the city could stand to lose part of all of its investment.
The Los Gatos for-profit company called EARN is teaming with the non-profit Northern California Urban Development group to develop the program and is looking for cities to serve as testing areas.
If this works, it could help stabilize the real estate market, in particular, through lower inventories, and the communities in general as fewer people are displaced. More on this soon.
Mark

Home Purchase Tax Credits & Down Payment Assistance

Posted on Apr 29 - Filed Under Featured, shortsale-foreclosure-reo | Leave a Comment


We are in a market that is flooded with bank owned/foreclosure/REO properties. It appears that this will get worse, not better any time soon. Banks are “hiding” or withholding perhaps some 600,000 foreclosed properties from the market nationwide. About 80,000 are in California. If they were all released to the market at once, a very difficult market would become disastrous. In light of this the U.S. government and many state and local governments are offering programs to help buyers, thus helping to alleviate the glut of homes on the market.

For instance, the U.S. government is offering an $8000 tax credit to firstl-time homebuyers. The following link details the program: http://www.federalhousingtaxcredit.com/2009/home2.html

The state of California is offering a $15,000 tax credit to new home buyers. The credit is limited and buyers should act quickly to participate. Details can be found at the following link: http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml

Also, many cities are offering down payment assistance. I will be offering a list of cities that are offering this in the following posts. The one that I am most familiar with is the city of Brentwood. I am currently working with the city for two buyers. The city requires that buyers work with specific lenders to qualify with for the program. Details can be found at http://www.ci.brentwood.ca.us/pdf/new/comdev/housing/dap_brochure.pdf (PDF)
These programs in concert with the standard mortgage and property tax deductions currently make home purchases very desirable.

Contact me for a list of homes or visit www.bay-area-reo.com .

Mark

Foreclosure vs. Regular Purchase

Posted on Apr 24 - Filed Under Featured, Market Insight, shortsale-foreclosure-reo | Leave a Comment


Buying a Foreclosure vs. Normal Transaction: If you are considering buying a foreclosed property you may be wondering, “How is this different from a normal home purchase?” Some of the main differences are; lack of disclosures, generally there are no presale inspections, longer time frames, and you have to get pre-approved by the seller’s lender even if you are already pre-approved. If you are using FHA financing then there are even more issues that pertain.

Since this is a “bank owned” property, the bank is not obligated to provide a Transfer Disclosure Statement” or any other typical seller disclosures. The agent for the bank must do an “Agent’s Visual Inspection Disclosure” and supply it to the buyers. If the property is a condominium or part of a “Common Interest Development” then HOA documents are required to be provided as well as a Title Insurance Notice and “Flood Insurance for Disaster Relief Assistance”. Also, what I call the “safety” disclosures are required; such as Lead Paint Hazards, Megan’s Law, Material Facts, Meth Lab Clean-Up Order, Smoke Detectors disclosures.

The common practice of providing pre-sale inspections is typically not adhered to in an REO sale. The buyers should acquire their own inspections such as a full home inspection, wood destroying pest inspection, roof, masonry (chimney), and any other pertinent inspections the buyers deem necessary (such as pool/spa, mold, etc.)

You will generally experience delays in receiving answers or signatures from the banks as they have so many properties that they are dealing with. If the seller’s agent is capable and proactive the delays should be minimized.

Many banks require that buyers go through the pre-approval process with them. This is done for a couple of reasons; to be sure that buyers are actually able to complete the transaction, (so the bank does not have to return the property to the market), and it gives them an opportunity for more business, particularly since they have lost so much on the foreclosure. If you are using FHA financing, the process may take even longer as FHA has other requirements.

If you really are considering the purchase of an “REO”/foreclosure home, be forearmed with the proper knowledge and have excellent guidance from your agent. Good luck!