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Thinking of Buying a Bank Foreclosure?
How do I Finance Required Repairs?
By getting pre-approved before you begin the purchase you will save yourself a great deal of time and anxiety.
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Today's Real Estate Market provides excellent pricing for home buyers. Homes are selling 20% - 30% below their original value in the real estate frenzied markets of 02-05. In some areas where foreclosures have been rampant, the spread is even larger especially in the larger or Jumbo priced homes.
It is important that you work with an agent that knows the market to help you in your assessment of value. As a buyer it is imperative that you work with a good real estate agent. An agent that works for you, helps you research the value for the property in question by providing a CMA.
Some REO listing companies will list a property well below actual market value and then have the price "bid" up. This is a frustrating practice for home buyers, especially if the Listing Company "holds" all contracts for 30 - 45 days before presenting to the bank.
ROE Purchase "Watch-it's"...
1. Most owner-banks will contribute up to 3% of the sales price towards a buyer's closing costs. However, the banks find themselves reluctant to also provide costs for repairs. If you are a first time home buyer, that could be a problem when utilizing a government loan with the lower down payment requirements - 0% for VA and 3.5% for FHA. If the roof won't support a two year warranty by a licensed roofing company or a termite report is required you could be required to come up with the cash to have the work completed.
2.Your deposit is at risk if you are not able to obtain a mortgage within the 30 day time frame allowed after your successful bid on the property. That is where a "pre approval" comes in. I recommend that before you shop, get pre approved for your loan. Not just "pre qualified" but actually approved. BIG difference.
3.Most Bank REOs have a third-party manager who is the liaison to the bank. Offers to purchase must be made through them. They will relay counteroffers from the bank to you or your agent. In general, banks do not negotiate much on price, so if you offer less than the asking price be prepared to go through the negotiation process several times for a minimal discount. I would suggest credit towards closing costs (as mentioned above) as opposed to a price cut, unless of course the property is still overpriced for it's condition.
Any buyer can choose to finance repairs or upgrades to an REO property (or any property) through the FHA Streamline K loan program. This negates the need for you OR the "Bank" to advance the funds, and allows you to close escrow "on time". Minimum dollar amount $5,000 - maximum $35,000. No structural changes or repairs allowed.
Another option for quick fixes is the EEM ( energy effficient mortgage). The EEM allows replacement of broken windows, new heating and/or air conditioning, duct replacement or repair or any other items recommended by the Energy rating firm. The inspection cost is about the same price as a normal home inspection. Unlike the Streamlined K mentioned above, you won't need to requalify for the increased loan amount. See Flyer
LAYERING: If your costs for the Streamlined K exceed $35,000 seperate out the energy items. These can then be added under an EEM. In the industry this is called layering.
Benefits:
If you are a first time home buyer in Roseville County, you might qualify for a Mortgage Credit Certificate. There are special MCC's available to assist buyers in purchasing REO's.
Good value for a great house..
Happy shopping.
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