Posts Tagged ‘REO’
Tuesday, August 21st, 2012
The Federal Housing Finance Agency’s bulk sales plan, whereby certain banks will allow third party institutional investors to purchase multitudes of bank owned (REO) loans in bulk, is moving ahead at full speed, and is doing so quietly.
Against pleas from members of Congress, the California Association of Realtors (C.A.R.) and others involved in the real estate industry, this program does not offer much for the market nor for individual communities and neighborhoods. In allowing institutional lenders (the identity of which is not being disclosed) to purchase this lender “shadow inventory” (that inventory that is owned by the lenders but not yet on the market), there are several threats to the housing market that are concerning:
• It could bring comparable prices down. Just at the time when home prices are starting to come up, and when demand is high with low inventory, selling large numbers of bank owned homes at discount prices could have significant effects on neighborhoods.
Also alarming, current market data may not have been used. According to C.A.R., old market data may have been used to value the homes that are being sold. With a market that is moving upwards this could create a big problem in some areas, establishing lower sales prices for homes, which in turn bring down the values in those neighborhoods. I know that if it were my neighborhood, and all of a sudden 10 homes sold in the area for way under current comparative market value, I would certainly not be happy. This could be a big problem in areas such as the Inland Empire (Riverside County).
• Increased losses to taxpayers. If these bank owned properties are sold in bulk at discount prices, the burden will fall upon us, the taxpayers, via increased losses on the sale of these homes.
The solution is to put these homes on the market as traditional lender-owned sales. With the market prices trending upwards and the lack of inventory, this is a perfect time to do so. It seems asinine to not consider such an option, as it will save taxpayers, keep the market moving, and keep prices moving up instead of down. And we can’t forget that if these properties sell at higher prices, the lenders also benefit as well!
If you agree that bulk REO sales should not be allowed in California, please contact FHFA:
Federal Housing Finance Agency
400 7th Street SW
Washington D.C. 20024
Graphic courtesy of Dreamstime
Tuesday, January 17th, 2012
I have had several clients recently ask how to purchase a foreclosure property, and it is a great question. Oftentimes buyers do not differentiate between the purchase of a foreclosure, a pre-foreclosure, and a post-foreclosure. Let’s take a look at the different ways to purchase property in various stages of foreclosure:
1. Auction (the one true way to “buy a foreclosure”). If you want to buy a foreclosure this is the typical way to do so. Auctions are definitely tricky and you need to understand the process and what you may be getting into. There are several things you really need to understand before going to auction – for explanation read this article. I usually do not recommend auctions to my clients, as there are some caveats (oftentimes you cannot inspect the property first, you do not receive any disclosures, you may be bidding against experienced auction-goers, etc.) If you do decide to go to an auction make sure you are well prepared.
2. Short sales (aka pre-foreclosures). A large percentage of foreclosure-related sales are sold via short sales or lender owned listings. Purchasing a short sale can be a good way to get a better price on a home, but the buyer has to have no aversion to waiting to close escrow – sometimes as long as 3-6 months. The good thing about a short sale is that you will get to inspect the property, and usually you will be provided with disclosures from the owner. For more information on short sales and how they work, you can visit the short sale information tab on my website. I have also written numerous blogs about short sales.
3. Lender-owned/REO (aka post-foreclosures). REO (real estate owned) properties are those that are owned by the lenders who hold the note. They have already gone through the foreclosure process and are now active in the market. Most often, these properties are priced below comparable sold homes, and often the price is reduced every so often if the property has not sold. Post foreclosure properties can also be owned by “flippers,” who purchased the property at auction, did some work, and are reselling it for profit.
The good news then is that many of these homes can be purchased at a savings. The not so good news is that buyers will not likely receive disclosures, as the bank obviously never lived in the property. However, the purchase process is like that of a normal sale – buyers are able to view the property, obtain inspections and reports, and exercise due diligence to their satisfaction with the property condition.
What about all those foreclosure websites? Foreclosure websites can be helpful, but honestly if you have an experienced agent s/he can do the research for you, saving you money in subscriptions. If you are focusing on a particular neighborhood, your agent can research the neighborhood via the public records, and find out who is delinquent, and which properties have notices of default or auction dates filed. If the property is not yet listed as a short sale your agent can see if the owner is open to doing so, allowing you to write an offer and have it presented to the bank. You can also find out auction dates (which often get postponed – the new dates do not necessarily list on the public records, but your agent can do further research). If you are a skilled auction attendee and purchase a lot of foreclosed properties this way, subscribing to one of these sites is a good idea.
There is no magic bullet that will get you a screaming deal on any of these properties. But if you do your homework you can likely acquire nice home at a savings. If you are not afraid of the challenge these can all be great ways to buy your next home. Make sure you have an experienced agent to help you if you are buying a short sale or REO property. If you have any questions about foreclosure please do not hesitate to post them in the comment section below, or email me at Rachel@LaMarRealEstate.org.
Monday, October 24th, 2011
There has been plenty of recent housing news that could effect the value of your home, so here are some of the latest updates:
Bill to allow visas to foreign home buyers. Congress is considering a bill that would allow foreign homebuyers to purchase residential property in the U.S., in an effort to stimulate the housing market. Buyers would need to spend at least $500,000 to obtain the visas, and would be allowed to split the money and purchase more than one home, as long as one property was at least $250,000. The buyers resident visa would be in place for as long as the buyer owned the home, and the buyers will have to live in their U.S. home for at least six months out of the year.
Mortgage rates may be lowered. The Federal Reserve is considering lowering the mortgage rates again, as the current low rates do not seem to be stimulating housing and the economy. They plan to purchase more mortgage backed securities, with the goal that banks will be able to help homeowners with refinancing and stimulate purchasing, without causing inflation. Since most of the problems with refinancing involve problems with fees or restrictions, will this really help? This could create more mortgage rate risk for the Fed, and realistically how many people will it help? It certainly won’t do anything for the millions of underwater homeowners. It seems to me this is digging a deeper grave, but I am not a mortgage expert so I will leave this to those who are, but my gut feeling says this is not the best solution.
Next generation of homeowners have little confidence in housing. A new study released by Federal Reserve Bank of Boston has found that the younger generation is less willing to purchase homes. Older respondents seemed to be more confident about homeownership after large declines, while younger participants felt opposite. Older respondents saw the drop in the market as cyclical, with the expectation of recovery, whereas their younger peers view the current situation as more permanent. Could this have an effect on housing in the long term?
Study says bank owned property sales may not peak until 2013. The latest study claims that we will see a lot more foreclosures, and therefore many more bank owned homes, until 2013. Bank of America Merrill Lynch analysts claim that although we will not see price drops as steep as those of 2008, we could see a 10% increase in these REO (bank-owned) properties from 2012 to 2013. For more details of the study click here.
State court voids home sale…could this happen across the country? A Massachusetts state court recently ruled that a home recently sold post-foreclosure was improperly sold, as the lender did not hold the title. The sale was found to be void. So what happens to the new owners? Certainly there will be a big lawsuit against the title companies. But if this becomes the standard who is going to want to purchase a post-foreclosure home? Home buyers rely on title companies to convey clear title…so isn’t this punishing the purchasers and not just the bank? After all, if the title company certifies title is clear and escrow closes, how would a homeowner have any reason to know that there was a problem with the title? I’m not even going to speculate as to how badly this would fare for housing and the economy in general.
HUD homes for only $100 down: In the spirit of stimulating housing purchases, HUD has decided to offer buyers the chance to purchase a HUD REO (lender owned home) for only $100 down…yes, you read that right, one hundred dollars. Of course there are restrictions: the home must be a HUD home (a home that is the result of a foreclosure on a FHA home loan), the sale must be for list price, FHA guidelines apply (you have to qualify for a loan), and the state of your purchase must be one that is listed. To find out more search the internet for HUD’s $100 downpayment program orvisit their site.
Friday, June 17th, 2011
Recent studies indicate that foreclosure filings are down across the nation, but what does that really mean?
Several theories have been discussed in the media about what will happen next. One is that things are improving, albeit slowly, and lenders are embracing foreclosure prevention measures (like loan modifications and short sales) more heartily. The other is that we are witnessing the calm before another storm of foreclosures.
Some lenders, such as Wells Fargo, are taking taking steps toward strengthening home ownership and preventing foreclosures. Wells just announced that it will no longer provide reverse mortgages for elderly homeowners. The lender is also working with the U.S. Mayors council to help homeowners stay in their homes. These proactive solutions will have an effect on the future of home ownership, and hopefully more lenders will follow the example.
Judging from published numbers (RealtyTrac reports foreclosures were down in May 20% from the same time last year) it appears the worst is behind us. But there is still a lot of shadow inventory out there – homes owned by lenders post-foreclosure that have not yet been listed on the market for sale. This inventory will keep housing prices down until it is all sold; if home values go down there will likely be more homeowners underwater, which could lead to more foreclosures – a vicious cycle. The job market will also play into the equation.
Focusing on the big picture I do not believe we will see another foreclosure storm the likes of what we have witnessed in the last several years, and I think improvement is ahead but we will have some hurdles first with shadow inventory and the job market. We do need to focus on selling the distressed properties so that we can start climbing back toward a more normal and stable housing market.
Tuesday, April 12th, 2011
Fannie Mae just announced that it will help buyers purchase REO (lender owned) properties by providing up to 3.5% in closing costs through the HomePath program. In order to qualify buyers must submit their initial offer on or before April 11, 2011, with a mandatory closing date before June 30, 2011.
The main restriction for this new program is that the home being purchased must be the buyer’s primary residence, so no lenders can get in on this deal. A few states are even offering small bonuses to buyer’s agents if they close escrow on one of these properties by June 30.
By offering this incentive Fannie Mae is recognizing that we need to stimulate the housing market in order to bring it back to a normal stabilization. It also helps to get the amount of lender-owned inventory off the market. Typically these properties are priced well, usually lower than the comparables; and in most situations the lender has gone in and spruced up the home, oftentimes with new paint, carpet or appliances. This really is a good deal for buyers to get a home at a good price with financial assistance in closing costs.
To see which properties are Fannie Mae properties in your area visit HomePath.com for a complete list. Many of these properties also qualify for special mortgages through HomePath Mortgage and HomePath Mortgage Renovation financing–these could provide an opportunity to complete your purchase with as little as 3% down.