Month: January 2023

Should You Buy a Home That Has Been Foreclosed?

Buying a foreclosed home comes with risk but can be a great deal. Foreclosed homes are inundating the real estate market and can be a fantastic opportunity. Before you dive into the foreclosure market, you need to manage your expectations and know what you’re doing. It is always recommended to work with an experienced team of professionals, especially if you’re new to the process, to ensure you have a positive and profitable experience.

Get an Inspection. Foreclosed homes are sold “as-is” and are owned by banks that don’t and won’t make repairs to the property. It must be understood that in most cases these homes have been poorly maintained as the owner often vacates the home because they could not make their mortgage payments. The maintenance and condition can be an issue because of the circumstances under which the owner had to move out and the amount of time the house has been unoccupied.  Some people are forced into foreclosure and are very bitter about it thus taking out their frustration on the home before the bank repossesses it. For example, they may remove appliances and fixtures. 

Not every bank-owned property needs repairs – but many do. While you can’t get the bank to fix the problems the inspector finds, in many cases, you can use it to negotiate a lower sales price. An inspection helps you to know exactly what you are getting into.

Get a comparative market analysis. Never assume that a foreclosed home is listed below market value. There is a common misconception that buyers will get a good deal on foreclosed properties. The bank’s goal is to recoup as much of its money as it can and will put the home on the market for more than it is worth. A good realtor can help you learn what prices of other homes in the neighborhood are selling. Knowing this information coupled with the inspection results, you will be better able to determine what price you will pay for the home.

The process to close on a foreclosure can take more time. The offer you prepare to make will go to a bank, not to an individual seller. There are many layers of approval that the offer must go through. Foreclosed homes more times than not run into title issues, such as uncovered liens on the property that can further delay and complicate the situation.

The Bottom Line:  It’s possible to find foreclosed homes that are being offered at below-market rates. These homes are sold “as-is” so due diligence is extra important. Work with the best realtor that will be able to explain both the pros and the cons of buying the home. The amount of risk and potential reward of buying a foreclosed home can vary depending on which part of the foreclosure process the home is in.

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Buyers: What to Expect From Your Realtor

Hiring the right Realtor for the job is critical when buying or selling a home. Without experienced professionals by your side, the entire process can become a nightmare. The three main factors that will sell a home are price, condition, and location. No one can change the location, so if a home is priced correctly according to its condition, then it will sell. A good Realtor should properly research the market, and advise you to list the property at a price that will bring offers. Unfortunately, if the price advised is too high, in order to simply get the listing, you won’t know until months later when your house remains unsold.

The right realtor for you might not necessarily work at the largest brokerage, close the most transactions, or make the most money. Real estate professionals have a saying that 20% of the agents do 80% of the business. Your goal is to find one among that that 20% to work for you, and it’s not as challenging as you might think to find the best one.

Since your house is one of the biggest investments you’ll ever make, it makes sense to be a little choosy about whom you hire to help sell or buy it. Find an agent whose philosophy and methods align with your preferences. And be prepared to interview at least two or three agents to find the right person. Asking the right questions will help you gain insight into the agent’s capabilities and personality. 

A real estate agent will walk their clients through each step of the transaction onto closing. The following are some of the things you should look for when searching for the best realtor:

  • Endless Knowledge of the specific area that you are hunting. It’s important that the realtor know the good and the bad of each neighborhood and if she does not know it, will be able to find good and useful information. She needs to be able to give you research on the schools, the crime rate, upcoming development plans, and any other situation that might impact your decision.
  • It’s wonderful when the realtor is active in the community. By being a part of local organizations, charities, and events, they should have good relationships with other involved professionals in the area such as loan officers and home inspectors.
  • The realtor should be up-to-date on industry news and trends as well as take classes in continuing education programs. Having someone by your side while you look for a home that is knowledgeable is important. And, if they don’t know something they know where to get the information immediately.
  • Ask friends, family, and coworkers who they know or who they have heard about. Get recommendations. Check online reviews. Learn more about them from their social media.
  • The realtor you choose should make you feel like you are their only client. He should be available to answer any questions and address any concerns. you should be able to access them easily by phone, email or text and their response should be timely.
  • The best realtors are proactive and help find properties to see easily and quickly. They should know of price adjustments as they happen and proved you will any information on sales activity so that you have an idea of what is going on in the area you are interested in to help set an expectation on how much you may have to pay for a property.
  • The role of the real estate agent for a buyer when negotiating the offer is to communicate with the listing agent and/or seller on your behalf to negotiate the best price and terms. When preparing the offer you should be provided with a comparative market analysis (comps), a list of recently sold properties, active comparables, and expired listings and then should advise you on how differences in properties affect value. They will understand the market trends and advise you on an offer strategy.
  • Your realtor should have the ability to know what is normal or not with a home that might not be visible to you on the first showing. She will carefully inspect the property disclosure statement to determine if there are any red flags. An extra step she might take is getting the monthly cost for heat, water, and electricity.
  • Your realtor should be ready to help finalize, tie up loose ends and help answer any questions to be ready for closing. The deposit needs to be handed in on time in trust, documents including mortgage information need to be sent and so much more. To be sure it all goes smoothly and that you don’t get lost in the process, you’ll need an experienced realtor.

The Bottom Line: The home buying process is always complicated, whether you’re moving to a new state or buying your first place in your home state. Who you choose to work with is essential to the success of your house hunting and having the right realtor by your side can make a huge difference.

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Disclosure Examples

Disclosure laws in general require sellers to say upfront whether their property has certain known issues that could impact the buyer’s health or safety. These laws vary by state but are meant to protect both the buyer and the seller. Disclosing any issues about major home components, systems, and conditions puts the buyer on notice—and prevents the seller from being held liable for future problems.

The following are some of the most common disclosures required.

Lead

Federal law—the Residential Lead-Based Paint Hazard Reduction Act passed in 1992—requires the disclosure of any lead-based paint or chipped paint in any housing built before 1978. Under the law, homebuyers also have a 10-day period to conduct a paint inspection or risk assessment for lead-based paint or related hazards.

Asbestos

The health hazards of asbestos are well-known in the workplace; the U.S. Occupational Safety and Health Administration sets standards for asbestos testing and disclosure in work environments. Although residential disclosures vary by state, many require disclosures about asbestos on houses built before 1975.

Plumbing Issues

Many problems with plumbing aren’t readily apparent. If you’re aware of plumbing and water related issues such as leaks, old and potentially cracked pipes, consistent issues such as clogged drains, or issues involving access to water shutoffs, broken faucets, or other water related problems that aren’t immediately noticeable but you’re aware of and fail to disclose, can potentially open yourself up to litigation for failure to disclose these problems.

Structural Damage

When homes are built and remodeled, they’re often built correctly, however, unseen defects in construction can often be discovered right after you move in or take some time to notice. In instances such as these, a homeowner may have noticed cracks in their foundation and has made repairs to close the cracks, hydro-lifted portions of the foundation, or other repairs to address these issues. These are very important issues that must be disclosed because they address the integrity of the property.

HVAC Concerns

This may seem like it can be a rather cut and dry issue that is addressed during an inspection, however, we have encountered instances where a home is inspected in the wintertime and the air conditioner isn’t inspected, only to find out that the AC doesn’t work in the spring. These types of failures to disclose the HVAC operative capacity, as well as the condition of these items, can leave a seller open to potential litigation.

The Bottom Line: If you are unsure about what to disclose, meet with your realtor to discuss. From state to state there are some interesting and unusual real estate disclosure laws. There is a legal obligation to disclose the information to buyers, it simply is not optional. There is, however, an advantage for the homeowner that comes with disclosing all pertinent information: The owner removes the risk of a lawsuit and all future liability with their properties after they sell.

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Should I Sell or Rent Out My House?

The question of whether you should completely sell your home or rent it out to future tenants is a big decision. Both options have positive and negative effects that must be carefully considered before making such a big decision.

  • How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations?
  • Because of the economy, many homeowners can no longer make their mortgage payments. What percent of tenants do you think can no longer afford to pay their rent?
  • Have you interviewed a few experienced eviction attorneys in case a challenge does arise?
  • Have you talked to your insurance company about a possible increase in premiums as liability is greater in a non-owner-occupied home?
  • Will you allow pets? Cats? Dogs? How big is the dog?
  • How will you actually collect the rent? By mail? In-person?
  • Repairs are part of being a landlord. Who will take tenant calls when necessary repairs arise?
  • Do you have a list of craftspeople readily available to handle these repairs?
  • How often will you do a physical inspection of the property?
  • Will you alert your current neighbors that you are renting the house?
  • How much time do you have? When you rent out your home, you still have obligations as an owner. You need to make sure that you’re able to meet your tenants’ needs, such as repairs or emergencies while following all landlord and tenant laws. It helps to contact an experienced lawyer to learn more about these laws, too.
  • Are you financially prepared? Can you cover the cost of the mortgage if a tenant misses rent or if the house sits unoccupied for a few months? What about the cost of emergency repairs?
  • How much do you need to charge? You may want to charge enough rent to cover the cost of your mortgage, taxes, and insurance. If it’s feasible, you might want to set a rent that can partially cover repairs and earn extra income. Make sure that you’re able to ask for enough to prevent it from costing you money — and ask a real estate agent about fair market values in your area. If your rent amount is above fair market value, you may not find a tenant.
  • Can you afford the upkeep? Before putting your house up for rent, make all the needed repairs. Take care of any other minor improvements that make the home presentable and allow you to get the rent amount you want.

The Bottom Line: There’s no right or wrong answer when it comes to deciding whether to rent or sell your house. Meet with your Realtor and evaluate your unique situation and make the choice that’s right for your needs and your financial future

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