Buying a Foreclosed Home: Info You Need to Know

If you’re looking to score a deal while house hunting, you may have considered buying a foreclosed home. These are houses whose owners were unable to pay the mortgage or sell the property. As a result, the lender assumed ownership and is now trying to sell it to recoup some of its costs.

While foreclosures aren’t as common today as they were during the height of the housing crisis in 2008, they do still happen. Currently, according to RealtyTrac, 1 in 13,000 homes ends up in foreclosure. In states with the highest frequency, such as Maryland and New Jersey, that ratio shoots up to 1 in approximately every 550 homes. That’s a lot of foreclosed places.

While foreclosure is hardly a pretty story for the home’s previous owners, it can be a bargain bonanza for buyers. Since banks are often eager to unload these properties, they aim to break even with an asking price that’s typically the sum of the remaining mortgage note plus interest, lawyer fees, and penalties. On average, this ends up totaling about 15% below the home’s actual value—and homes often sell for less than asking price.

But buying a foreclosed home does come with risks, so buyers should proceed with caution to see if the gamble is worth it.

Tips on buying a foreclosed home

To find foreclosed homes, you can peruse listings of foreclosures on realtor.com®, which may also be marked as “bank owned” or “real estate owned (REO).” If you spot a home you like, contact the real estate agent on the listing as usual.

The biggest caveat when buying a foreclosed home is that it is typically sold as is, which means the bank is not going to fix any problems. And there may be plenty of them, considering that many foreclosures have been slowly crumbling into disrepair due to the previous owner’s financial strain. And unlike a normal home sale, in which disclosure requirements force owners to reveal a home’s every flaw, there’s no such legal stipulation in a foreclosure. What you see (or don’t) is truly what you get.

That’s why foreclosed homes risk costing buyers a ton of money to renovate that could negate their supposed savings. This is why Eric Workman of the Chicago-based residential rehab lender Renovo Financial suggests that buyers take extra precautions such as the following before making an offer:

• Research how long the home sat vacant, whether it endured freeze and thaw seasons unattended, or experienced anything that may have caused significant structural damage. Homes in a dire state of disrepair won’t be eligible for a conventional mortgage.
• Hire a home inspector to thoroughly check out the home for major problems. Have the inspector give you an estimate of how much money it will take to make repairs.
• You can try to add financing and inspection contingencies to your offer. That way, if you do encounter problems with the home or attaining a mortgage for it, you can back out of the deal without losing your deposit. Just keep in mind that asking for contingencies does not mean the bank will accept them; they’re not the norm with foreclosures.
• Also hire a professional to conduct a title search, says Ben Niernberg, executive vice president at Northbrook, IL–based Proper Title. This may allow you to avoid all kinds of nightmare scenarios—sometimes the bank will clear the liens, but it isn’t required to do so. For instance, let’s say the IRS has a lien on the property for back taxes. That debt doesn’t follow the owner once he sells. Instead, the lien sticks with the property, making the new owner responsible for repayment.

If you find out the home has problems, you will want to carefully weigh whether it’s worth all the extra work. In some cases it will be; in others, it may be more prudent to walk.

Source: Realtor.com, Margaret Heidenry
http://www.realtor.com/advice/buy/buying-a-foreclosed-home/?iid=rdc_news_hp_carousel_theLatest

Vacant "Zombie" Foreclosures Decrease 30 Percent in Second Quarter 2016 Compared to a Year Ago

Top States for Zombie Foreclosures are New Jersey, New York, Florida, Illinois, Ohio;
1.4 Million Overall Vacant U.S. Residential Properties Up 2.7 Percent From Previous Quarter
Investment Properties Account for 75 Percent of all Vacant Properties Nationwide



Source: RealtyTrac
http://www.realtytrac.com/news/foreclosure-trends/q2-2016-u-s-residential-property-and-zombie-foreclosure-report/

Mortgage Payments When You Are In Financial Trouble

None of us can appreciate -- nor anticipate -- the future. Although we always believe it will never happen to us, once in a while, calamity strikes, and then we have to address these very hard and difficult questions.

You own a house, with a sizable mortgage. Suddenly, you (or your spouse) lost their job, and you cannot make the monthly mortgage payments.

There are a number of options you should immediately consider. However, the very first thing you should do is to talk with your lender. Don't just discuss your issues with a low-level employee. Try to go as high up the corporate ladder as you possibly can. And don't be afraid to be honest. Legitimate mortgage lenders will try to work with you, since they don't want to evict you and have to own and carry your house until they sell it.

Here are some of the options which are available to you.

1. Temporary indulgence. Here, the lender, at your request, may grant you a short period of time -- usually not more than three months -- in order to cure any delinquency. However, this is merely temporary relief, and by the end of that short period of time, the borrower must be completely current.

2. Repayment plan. Here, the borrower is given a fixed period of time -- usually not to exceed one year -- in which to bring the mortgage current by immediately making and continuing to make payments in excess of the monthly mortgage payment. It is important to get this repayment plan reduced to a written document, signed by both the lender and the borrower.

3. Special forbearance relief agreement. Here, the regular monthly mortgage payments are suspended or reduced for a period of up to eighteen months from the due date of the first unpaid monthly installment. At the conclusion of this relief period, the regular payments must be resumed; additionally, a comprehensive plan must be agreed upon for the repayment of the amount that has been suspended.

In this case, the lender will make a determination that the default is curable, and based on the current financial and appraisal data, the lender must be satisfied there is a likelihood that the borrower will be able to comply with the repayment plan. Clearly, the burden will be on you to document and justify the plan, so as to satisfy the lender's requirements.

If you are in the military, the Soldier's and Sailor's Relief Act provides various forms of relief, but you should check with your military or civilian lawyer to determine your eligibility under that Act.

4. A short sale. Here, the lender will authorize you to sell the property for what it is really worth, and the lender will get all the proceeds. Let us look at this example. The house can probably be sold at $395,000, but the mortgage is $425,000. The lender may allow you to sell the property for $395,000, giving a real estate broker a commission. The lender gets all the remaining sales proceeds; you get nothing from the sale. However, under this "short sale" approach, you will be relieved of your mortgage. In some cases -- depending on your financial situation -- the lender may want you to pay a portion of the mortgage shortfall; this depends on the lender and is clearly negotiable.

5. Deed in lieu of foreclosure. This is another remedy that may be available to you. Under this arrangement, you deed your property to the lender (or to whomever the lender designates) and this is in lieu of (instead of) foreclosure proceedings. This arrangement is an acceptable and customary procedure when, for example, the borrower is deceased and the estate is willing and able to transfer the property, or the borrower has filed Chapter 7 bankruptcy, and the trustee has abandoned interest in the property.

6. Foreclosure. Here, the lender will sell your property at auction (or in some states at the Courthouse), and you will lose your home and your credit rating (whatever is left of it. Legitimate lenders do not want to foreclose. and they will reluctantly start the process if all else has failed.

7. Bankruptcy. Your final option, of course -- which should be used only as a last resort -- is for you to file bankruptcy. When someone files for bankruptcy, there are many protections that automatically apply from the day the bankruptcy petition is filed with the Bankruptcy Court. The most important protection under the bankruptcy law is known as "the automatic stay." If you are in bankruptcy, no legal action can be taken against your house unless the lender requests the Court for permission to "lift the stay."

You cannot ignore your financial problem, hoping you will win the lottery or find some other immediate source of funds. The level of your cooperation is the most significant aspect that will determine how willing the lender is to similarly cooperate.

Source: RealtyTimes, Benny L. Kass
http://realtytimes.com/consumeradvice/mortgageadvice1/item/43937-20160420-mortgage-payments-when-you-are-in-financial-trouble

Foreclosures Finally Return to Pre-Housing Crisis Levels

For those who associate foreclosure signs, shuttered homes, and idling cars overflowing with family possessions with the deepest, darkest moments of the subprime mortgage housing crisis—and that means pretty much all of us—there was some good news this week. The numbers have been tabulated, and it turns out that U.S. foreclosures fell to their lowest levels last year since the housing crisis began, according to a recently released report.

Foreclosures plummeted almost 27%, from 603,028 in 2014 to 476,000 in 2015, according to CoreLogic.

“We’re finally through the worst of it,” said Dan Hammel, a professor of urban geography at the University of Toledo.

He credits the stronger economy, which has translated into more homeowners with steady jobs, for the recovery. Other factors include increasing housing prices and banks tightening their lending criteria.

However, these same factors are hindering many would-be home buyers from securing financing. Call it a classic double-edged recovery.

And some states remained harder hit than others. There were 79,109 completed foreclosures in Florida in 2015—by far the most in the nation, according to the CoreLogic report. The Sunshine State was followed by Michigan, with 48,865, and Texas, with 29,815. Ohio and Georgia were neck and neck with 24,456 and 24,239, respectively. Those five states accounted for nearly half of the country’s foreclosures.

Washington, DC, boasted the fewest, at 81, followed by North Dakota, at 220, and Wyoming, at 541. West Virginia was close behind with 560, and Alaska had 700.

Florida is still reeling from the housing crisis, because prices were driven artificially high in the mid-2000s as investors rushed to purchase multiple homes, said Jack McCabe, CEO of McCabe Research & Consulting, which focuses on South Florida’s real estate market. Some of those properties were purchased with toxic, adjustable-rate mortgages. So when the rates swung up, many of those investors defaulted, he said.

“Prices in this state have rebounded well over the last three years,” he said. But they are still down about a third from pre-2006 levels.

McCabe is also beginning to see a slight uptick in foreclosures over the past few months from those who qualified for government-subsidized loans. The mortgages often require down payments of just 3.5% of the price of the home. Many of the buyers who qualified for the loans are first-time buyers or veterans who can afford the monthly mortgage payments—but don’t have the cash needed for the traditional 10% or 20% down payment.

The top reasons that banks repossess homes is still because owners lose their jobs or their income is cut, said Douglas Robinson, a spokesman for NeighborWorks America, a Washington, DC-based affordable housing organization.

Lessons have been learned since the foreclosure tsunami swept across the U.S., he said. Those struggling to make their mortgage payments should seek out assistance as quickly as possible; denial and wait-and-see mindsets are dangerous. Sometimes a mortgage modification or refinancing can resolve the problem. Even a short sale can be preferable to a foreclosure.

“The sooner [they] understand all of their options, the better chance the homeowner has to save their home,” Robinson said.

As we saw at the height of the crisis, the impact of foreclosures can quickly spread through communities, bringing down neighboring home values.

Harder-to-obtain mortgages are also hurting the recovery of some of the neighborhoods that suffered the most from foreclosures, said the University of Toledo’s Hammel.

These days, working- and middle-class buyers with poor credit—or young buyers with no credit—are struggling to obtain mortgages.

“Banks aren’t lending in low- and moderate-income areas where there were a lot of foreclosures,” he said.

However, as the national economy and housing prices continue to improve, “we expect to see foreclosure and [mortgage] delinquency rates continue to decline in 2016,” said Frank Nothaft, chief economist at CoreLogic.

Source: realtor.com, Clare Trapasso
http://www.realtor.com/news/real-estate-news/foreclosures-down-in-2015/?iid=rdc_news_hp_carousel_theLatest

Here's How Underwater Homes Are Dragging Down Entire Housing Markets

Negative equity – the percentage of homeowners who owe more on their mortgages than their homes are worth – continues to cast a pall over the U.S. housing market, even though more underwater homeowners are surfacing all the time.

The Zillow Negative Equity Report for the third quarter of 2015 found that just over 13 percent of homeowners with a mortgage are upside down. Last year, it was almost 17 percent.

Abnormally high rates of negative equity are hard on homeowners who can’t sell or refinance, but Zillow found that high negative equity rates also affect whole communities. All homes sell more slowly in areas with a high negative equity rate.

The homes most likely to be underwater are entry-level properties, restricting supply and making it hard to buy a home in those markets, as well.

Here are the large metros with the highest percentage of homeowners underwater. Las Vegas has topped this list for four and a half years.

Largest share of underwater homeowners

• Las Vegas – 22.1 percent
• Chicago – 20.6 percent
• Atlanta – 18.6 percent
• St. Louis – 17.6 percent
• Baltimore – 16.9 percent

Read the full report on Zillow Research.

Source: Zillow Blog, Emily Heffter
http://www.zillow.com/blog/negative-equity-q3-2015-187723/

What are Investors Purchasing?

Buying Property That Is About To Be Foreclosed

Question: A person I know has been trying unsuccessfully to sell his condominium. He bought it for $260,000 and owes approximately $180,000 on his mortgage. He has advised a close mutual friend that he plans to "walk away" from it. I'd like to buy it -- maybe for $160,000. What is the best way to do this? Do I write the mortgage holder (a bank) that I have an interest in it at a certain price?

Answer: It is a sad state of affairs when people want to "walk away" from their home. Everyone is a loser. The "walker's" credit rating goes down even further than it currently is, and the lender has one more property to dispose of from their ever growing portfolio.

There are several things you have to do. First, meet with the current owner to make sure he is willing to sell his unit. Next, you have to find out exactly how much the lender is owed. Normally, because of privacy concerns, the lender will only provide this information if specifically authorized by the borrower, so you should get a letter of authorization signed by the condo owner.

You also have to determine if the owner has any other debts that would "cloud his title". For example, is there a second deed of trust? Has the Internal Revenue Service filed a tax lien against the property? Have the real estate taxes been paid? Is he delinquent on his condominium fees? Most of this information can be obtained through a title search, and you should consult a real estate attorney as early as possible.

Once you get the payoff information, you have two choices. If you are willing to pay the exact amount the lender is currently owed, you should enter into a real estate sales contract with the condo owner and arrange for settlement. Your contract must contain language that it is contingent on the seller being able to convey free and clear title to you, and that there are no other liens or encumbrances other than the first deed of trust.

You do not need the lender's approval if you plan to pay the outstanding loan in full. However, you have indicated that you would like to buy the condo for approximately $20,000 less than seller owes the bank. Now, you will need the lender's approval.

This is known as a "short sale". You will enter into a real estate contract with the seller, which is contingent upon the bank approving the sale. If there is a real estate agent involved, make sure the contract spells out the amount of the commission and who pays it.

Once you have a signed contract, it must be sent to the current lender with a cover letter, requesting their approval. Because lenders are still swamped with short-sale requests (and foreclosures) -- and despite procedures requiring prompt action -- it may take a long period of time before you get a response.



I suspect the lender will ultimately approve, especially if they understand that the alternative is foreclosure. There are two main reasons why legitimate lenders do not want to foreclose on residential properties. First, in today's economy, they may end up owning the property and then they will be stuck with having to pay the real estate taxes and the condominium fees. And in many States and the District of Columbia, if the condo owner is behind on his condo fees, the lender is legally obligated to pay the condominium up to six months of any delinquencies. In fact, the DC Court of Appeals (as well as other State courts) recently ruled that this six month payment requirement is a "priority" and if the condo forecloses, it will literally wipe out the lender's first trust. That is yet another reason why the bank may be willing to let you get a discount on what they are owed.

Second, at all levels of government, lenders are being told they must work with their borrowers rather than take legal action against them.

Since you are considering buying into a condominium, you are entitled to receive what is known as a "resale package" from the association. This will include the current legal documents (Declaration, Bylaws), the Rules and Regulations), as well as the current operating budget for the association and the most recent auditor's report.

Read these documents very carefully. Make sure that the condominium has adequate reserves, especially if it is an older building. Also inquire from the association property manager as to the level of delinquencies. If there are too many owners who are not paying their condo fees, you do not want to buy into this association.

One final thought: ask yourself this question: "if this is such a good deal, why isn't someone else interested? Why is it coming my way?"

Source: RealtyTimes, Benny L. Kass
http://realtytimes.com/consumeradvice/buyersadvice1/item/37372-20150812-buying-property-that-is-about-to-be-foreclosed

Where 'Zombie' Foreclosures Still Lurk

A "zombie" foreclosure is a property in which the homeowner walks away from the property without paying the mortgage and the property eventually gets foreclosed. I haven't seen one of these here in the Silicon Valley in quite some time, but I thought this article interesting enough posts for your reading enjoyment.



The share of "zombie" foreclosures are falling, but these owner-abandoned properties still lurk and are contributing to neighborhood blight in pockets across the country.

About 24 percent of all active foreclosures – or 127,021 – nationwide have been vacated by home owners prior to the foreclosure being completed. These so-called zombie properties will likely wind up as short sales, foreclosure auction sales, or bank-owned sales in the future, according to RealtyTrac's second quarter Zombie Foreclosure Report.

Still, zombie foreclosures fell 10 percent nationwide in the second quarter compared to a year ago.

"A growing number of states and cities have enacted public policy measures to combat the problem of zombie foreclosures, and we are seeing the results of those efforts in the overall decrease nationwide as well as in several hard-hit markets such as Chicago, Miami and Cleveland," says Daren Blomquist, vice president at RealtyTrac. However, "as banks push through long-deferred foreclosures that are more likely to be owner-vacated this year, we are seeing a somewhat surprising increase in zombie foreclosures in markets with overall low foreclosure rates such as Los Angeles, Houston and Boston."

The average estimated market value of an owner-vacated foreclosure is 22 percent below the average estimated market value of an owner-occupied foreclosure. "These zombies are contributing to blight in neighborhoods across the country," Blomquist says.

The highest rates of zombie foreclosures among 183 metros analyzed were in:

1.) Atlantic City, N.J.: one in 130 housing units
2.) Trenton, N.J.: one in 166 housing units
3.) Tampa, Fla.: one in 218 housing units
4.) Binghamton, N.Y.: one in every 260 housing units
5.) Ocala, Fla.: one in every 262 housing units

Some markets have seen large increases of zombie foreclosures in the past year, according to RealtyTrac's report. Notably, the following markets have seen the largest spikes in zombie foreclosures from a year ago: New York (up 38 percent), Los Angeles (up 39 percent), Houston (38 percent), Philadelphia (up 19 percent), and Boston (up 14 percent).


Source: RealtorMag Online
http://realtormag.realtor.org/daily-news/2015/06/11/where-zombie-foreclosures-still-lurk?om_rid=AAFmZk&om_mid=_BVeejGB9CnYC8V&om_ntype=RMODaily

Remember those sellers who lost their home to short shale or foreclosure - well about them. . .

In 2011 and 2012, many of the real estate deals I was involved with were short sales and bank owned homes. I reached out to these homeowners who were about to lose their home and I worked hard to help them sell their home before losing it the hard way. 

Anyhow, according to a new survey by the National Association of Realtors many of these same former home owners are are now in the market to buy. Of course some of them still can't buy due to poor credit, but apparently his is not the case for everyone and they are now looking to buy. 

1.5M Buyers Are Coming Back

Foreclosure Rates Near a ‘Significant Milestone’

Foreclosure Rates Near a ‘Significant Milestone’



Foreclosures continue to fall across the country and the return to normal levels may be on the horizon for many places, according to a new report.

Foreclosure filings fell 4 percent in February, reaching the lowest level since July 2006, according to RealtyTrac’s U.S. Foreclosure Market Report. Foreclosure filings reflect the number of default notices, scheduled auctions, and bank repossessions. The U.S. foreclosure rate now stands at one in every 1,295 homes that received a foreclosure filing in February.

"Given that August 2006 was the peak of the housing bubble, this eight-and-a-half year low in foreclosure activity is a significant milestone and a sign that nationwide foreclosure activity is on track to return to historic norms this year — and is possibly even headed below historic norms given the skinny-jeans-tight lending standards over the past five years," says Daren Blomquist, vice president at RealtyTrac. "In markets where foreclosures were processed more efficiently we are seeing foreclosure numbers now below pre-crisis levels in some cases. Conversely, the cleanup of deferred distress is continuing in markets where a logjam of in-limbo foreclosures is still lingering from the housing crisis — as evidenced by rebounding foreclosure activity in those markets."

24 states posted year-over-year increases in foreclosure activity. Activity was most elevated in Massachusetts (up 53% year-over-year) and New York, up 19 percent.

States With the Highest Foreclosure Rates

The following states posted the nation’s highest foreclosure rates:

1. Maryland: 1 in every 564 housing units received a foreclosure filing in February (foreclosure activity has fallen 1 percent compared to a year ago there, however)

2. Nevada: 1 in every 569 homes received a foreclosure filing (a 12 percent rise from a year ago mostly from a rise in foreclosure starts)

3. Florida: 1 in every 570 housing units (despite a 35 percent decrease in foreclosure activity compared to a year ago)

4. Indiana: 1 in every 871 housing units

5. Idaho: 1 in every 877 housing units

6. New Jersey: 1 in every 895 housing units

7. Illinois: 1 in every 906 housing units

8. Delaware: 1 in every 957 housing units

9. Ohio: 1 in every 1,000 housing units

10. North Carolina: 1 in every 1,088 housing units


Source: RealtorMag online
http://realtormag.realtor.org/daily-news/2015/03/20/foreclosure-rates-near-significant-milestone?om_rid=AAFmZk&om_mid=_BVDGcuB9AGT$$W&om_ntype=RMODaily