Residential Real Estate in SW Washington State

Residential Real Estate Services with Passion, Integrity, Knowledge

10 Tips to Buying an REO Listing

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houseboarded10 Tips to Buying an REO Listing for first-time homebuyers

Working with first time homebuyers makes bank-owned (referred to as REO … Real Estate Owned) properties seem like an attractive purchase opportunity. These properties on which foreclosure has been completed are now owned by banks (think Wells Fargo, Chase, Bank of America, etc.), HUD, VA or government backed investors (GSEs) such as Fannie Mae or Freddie Mac. They’re attractive to homebuyers because transactions involving such properties typically close fast, unlike short sales that can drag on for months.

Some REO properties have had some “fixing up” completed — the grounds have often been cleaned up, sometimes critical missing appliances like the range have been replaced, carpets have been cleaned, and rooms and exteriors painted.

Other properties, however, require fixing and updating, meaning buyers must have funds to present all cash offers or financing with significant down payments. These properties, in particular, are attractive to investors who are looking for investment properties they can fix up and re-sell (flip) or rent.

In addition, often REO properties are priced aggressively, meaning they’re subject to multiple offers.

First time homebuyers, however, often come to the purchase table with a financing goal of asking for closing cost contributions from a seller while using a rehab loan to complete the purchase. That can be tough when buying an REO listing.

What’s a first time homebuyer to do? They often don’t have deep enough pockets to be tremendously aggressive in pricing offers, nor do the REO folks (the Seller) like to wait the additional 2-3 weeks needed to close a transaction where the buyer will use a rehab loan.

Here are 10 Tips to Buying an REO Listing:

  1. Absolutely be preapproved before writing an offer. You  need to know what you qualify for and you’ll need to prove it to the Seller.
  2. Shop below your top financing approval number.  Understand that you may be involved in a multiple offer situation. You may need to offer MORE than the list price in order to “win” the purchase.
  3. Cash is king. Use your available cash to increase your down payment, thus perhaps enabling you to use conventional financing rather than an FHA or VA loan. If you have a 20% down payment,      conventional loans won’t require mortgage insurance, which can save you a couple hundred dollars a month.
  4. Check with your lender to see if you can include your closing costs inside your purchase loan. Sometimes it can be done, although it may increase your interest rate slightly.
  5. Understand and be prepared to try for several homes and lose several before you’re the accepted offer in a transaction. It’s a learning process and the more houses you see and tries you make will enable you to move more quickly each time you see a desirable house.
  6. Experience counts: Work with a lender and an agent that both thoroughly understand and have experience with Rehab loans and purchases. You’ll need every advantage in order to close quickly.
    1. An experienced agent can eyeball a house and know whether or not it will qualify for standard financing or whether a Rehab loan will be required.
    2. An experienced lender should be able to close a streamline FHA rehab purchase within a 45-day window.
  7. REO properties often have a window or so where only owner-occupant offers will be considered. You need to present your best offer right away, and then be prepared (if multiple offers are received) to present your “highest and best” offer again.
  8. Move quickly. If an intriguing property is listed, you need to see it as soon as possible. Some REO properties receive multiple offers within hours.
  9. Remember that the holder of an REO property is looking at a combination of the NET number (your purchase price less any concessions you’ve asked for), a quick closing, and their assessment of      whether you qualify for the purchase.
  10. Finally, be sure your agent has evaluated the pricing structures commonly used by the various Sellers. For example, Fannie Mae tends to price homes a bit higher at first, and then reduce prices slightly if no offers are quickly forthcoming. However, Chase aggressively prices properties, gathers multiple offers, and ultimately closes sales for more than list price.

Auburn, Kent, Algona & Pacific REO sales 2/7/2013-4/8/2013

Mediation?–Yes, You’re Entitled!!

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debateYesterday I posted information about what to do as soon as you fall behind in your mortgage payments. As a second step in the foreclosure process in Washington State, the Foreclosure Fairness Act stipulates that if your loan is through one of the big banks, after receiving notice that a Notice of Default has been filed, you’re entitled to have your situation formally addressed through Mediation. The purpose of Mediation is to determine whether there is any alternative to bank foreclosure of your property.

Ideally, the outcome of mediation might allow you to restructure your loan, save your home, or agree to sell it as a short sale. In fact, a decision maker for the bank is required to be present at the Mediation meeting – at least by phone. Of course, if no agreement is reached, the ultimate outcome might be to allow your home to proceed through Foreclosure.

This mediation step is a bit more complex than the informal meeting to which you are entitled right away (see yesterday’s post). Mediation must be requested by an attorney or housing counselor within 30 days of the bank or Trustee filing of the Notice of Default and must be held within 45 days of the referral to Mediation by the attorney. You’ll also be required to pay your half ($200) of the cost of Mediation hearing ($400).

Prior to Mediation meeting, both you, as the owner-occupant, and the bank will need to assemble a list of documents – yours will include financial documents such as tax returns, pay stubs, and so on. It’s an extensive list, but not difficult. Since you will be working with an attorney or counselor, they’ll assist you in determining exactly what documents you’ll need.

Note that the Foreclosure Fairness Act took place on July 22, 2011. If you received a Notice of Default prior to that date and foreclosure of your home has not yet been completed by the bank, you are also entitled to Mediation. You’ll want to contact an attorney experienced in the Foreclosure Fairness Act as soon as possible! Doing so can delay a scheduled auction!

As usual, you should also contact your Realtor© so that you are fully aware of your options and for the name of an attorney that is experienced in Foreclosure work.

Just Open the Mail!

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reading mailIn Washington State, folks that get behind on their house payments have options as described in the Foreclosure Fairness Act. The Act prescribes a series of steps to which a homeowner is entitled prior to any auction of their home.

One of the first steps a lender must take for a home in Washington is to send a letter to the homeowner describing their options – the first of which is the right to request an informal meeting with the lender before a Notice of Default is filed.

But here’s the thing … the homeowner has to make the request within 30 days from the date of the options letter.

  • So … open every piece of mail that comes from your lender.
  • Read it carefully and then  exercise your option to meet with the lender to discuss the situation.
  • Do it by phone and ask insist that they confirm your request in writing.
  • Follow up with a letter to them in writing — maybe even registered mail so that you have a record of your request.
  • Keep copies of anything and everything you send and notes about every conversation you have with them.
  • Get the names of the people with whom you talk … and write down the phone numbers and dates you make any calls.

and finally …

Engage an attorney to represent you at the meeting. Talk everything through with him/her … and with your real estate agent so that you know what your options truly are.

But first … Just Open the Mail!

Fix the Housing Market = Fix the Economy

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I know … I’m often considered naive in my “political” opinions. Probably rightly so most of the time. After all, I’m just a hard-workin’ self-employed real estate broker out here in south King County, home of the working folks. Most of us go to work every day doing whatever it is that needs to be done and worrying about how to make our next house payment.

Like many folks, I’ve watched my house values erode drastically over the last couple of years. Perceptually, that fall in value seems to be speeding up .. or perhaps it’s just that now we’re all aware of what buyers truly are willing to pay for things. I’ve also watched, from the sidelines, interest rates fall drastically.

More disheartening, however, … at least to those of us who are self-employed … is that we don’t qualify to refinance our home, or for any of the nifty loan modifications, and wouldn’t even if our homes hadn’t lost value. Most of us write off everything we can on our income taxes making our bottom lines pretty skinny. But that bottom line is what is used by banks to determine our income — thus one step in our eligibility for a mortgage refinance, or even a loan modification. Our W2 income simply doesn’t support our true day-to-day ability to pay the bills. (Another one of my witticisms … “gee whiz, if my income is good enough for the IRS, it oughta be good enough for the bank!”)

So … for the last few weeks, I’ve been spouting my opinion about how to fix the economy. Here it is. Have at it:

Take ALL of the mortgages that are current and unilaterally lower their interest rate to the current market rate. Okay, I’ll even go so far as to say … lower them to the current market rate plus 1%. Period. No requalifying. (Afterall, I’m talking about “current in payments.”) Without regard to the current value of the home. Just give us all a ‘buy’ and get this over with. Make it effective, say, on December 1st.

No more messing around with “loan modifications,” and all that bank nonsense. Just get it done. Drop everyone’s payments down to today’s rates. Just do it. Get it behind us. Make house payments affordable for those folks who still own them.

Heck, maybe even take a good hard look at the reason folks are behind in their payments (I’m willing to bet one major reason is because their interest rates are sky high.) And perhaps give them a ‘buy’ as well. Forget about that pending foreclosure/auction for six months and see if they can make it at a lower interest rate. Write off all the past dues and late fees. Get it over with. Yes, I know this is a whammo for the investors that bought the loans for the banks. But so is letting this housing mess go on and on and on. It’s bringing everything else down, and there’s no sign of stopping. Fix the Housing Market, Fix the Economy!

I believe that stabilizing housing is far more important than jobs creation. Home ownership will always be an American dream. Let’s stop the nonsense and keep folks in their houses.

Interestingly enough, Moody’s had a proposal published just a couple of days ago in DSNews that was surprising similar … hmmmmmm (do you think someone is actually listening to my far fetched ideas?)

Fix the Housing Market, Fix the Economy. That’s my opinion and I’m sticking to it.

Facing a Foreclosure or Short Sale?

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Image thanks to Jeff Turner/FlickerThe Washington State attorney general’s office recently released three videos that explain your rights and options should you be facing a foreclosure or short sale of your home.

As an active Realtor®, I frequently receive phone calls from people that are already behind on their payments, or feel as though they will soon be in trouble with their mortgage. Sometimes, the call is from someone that is trying to get out from under a home that has lost significant value and is now worth far less than what they owe. Each of these types of calls requires a knowledgeable response and action. Sometimes the best response is to refer the person to an attorney. Most often, however, it’s a chance to help educate the caller as to the possible options based on their personal situation.

The three videos provided by Rob McKenna (Washington State Attorney General) and his staff explain some of the options available and the impact of these options on the consumer who may be facing a foreclosure or short sale of their home.

Each of the videos is moderated by Annie Fitzsimmons, the legal counsel for Washington Realtors. They are easy to understand and just a few minutes long. If you are facing a foreclosure or short sale, I urge you to take the time to view these videos, then give me a call if you have any questions or if you would like to discuss them.

In Part One, Mr. McKenna provides an overview of the options that are available:

In Part Two, Marc Cote, a Certified HUD Housing Counselor, discussses what will happen when you meet with a HUD Housing Counselor, what you need to be prepared for the meeting, and the options available when working with a HUD Counselor:

Part Three, presented by Rob Dickson, Lawyer and Short Sale Negotiator, discusses the short sale process, along with some of the difficulties that are faced when negotiating a short sale.

Obviously, at this moment many of us that are homeowners are facing significant loss of value in our homes and sometimes it takes just the smallest event to trigger an inability to make mortgage payments. Should that happen to you, please contact me at 206.300.8421 or gabrielle@gabriellenemes.com just to talk … and take advantage of the resources outlined in these videos.

Certified Short Sale and Foreclosure Resource

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I recently completed requirements by the National Association of Realtors to receive certification as a Short Sale and Foreclosure Resource, although I’ve been assisting buyers and sellers of these types of properties since 2004.

Taking the certification class was a fascinating experience – of the group of approximately 50 agents present, fewer than 30% of the agents had ever handled either the buyer or seller side of a short sale property! Wow, where have they been and how on earth are they still in business?

When questioned about where they work, well over half of the agents at the class focused on the east and northeast sides of King County – i.e., Bellevue, Redmond, Issaquah, Sammamish, etc., where short sale and bank owned properties aren’t as prevalent as they are in my practice areas. (Briefly, a short sale property is identified in our MLS as one where a property’s sale price is less than its outstanding indebtedness and some sort of negotiation, concession and/or approval is needed by the lien holder(s) before a sale can be completed.)

These types of transactions – for BOTH Sellers and Buyers – require considerably more experience and expert handling than do “regular” purchases and sales (whatever those are – I’ve almost forgotten!). From our informal classroom survey, it’s possible than over 70% of agents in our area have never handled a short sale or bank-owned property!!

Therefore, when you find yourself in need of help – or know someone who does – buying or selling short sale or foreclosure properties, call an experienced agent! I can be reached by phone at 206.300.8421 or by e-mail at gabrielle@gabriellenemes.com.