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Buying Distressed Properties Monica Florio Long & Foster, Realtors May 21, 2011

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  • 1.Buying Distressed Properties
    Monica Florio
    Long & Foster, Realtors
    May 21, 2011

2. What is a distressed property?
A property in any stage of the foreclosure process
Foreclosure is a legal process by which a defaulted borrower is deprived of his interest in a mortgaged property
3. Stages of foreclosure
Pre-foreclosure: begins at property default and ends when the property is sold
Foreclosure sale: property sold to the highest bidder at auction
Real Estate Owned (REO): the bank sets a reserve price at auction; if that price is not met, then the ownership reverts to the bank
4. What options does a distressed homeowner have?
5. What options does a distressed homeowner have?
Refinance or modify existing loan
Offer deed in lieu of foreclosure
Sell and bring cash to closing
Request a short sale
Let the property go into foreclosure
6. What is a short sale?
A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan
7. Why a short sale?
For buyers: may not damage distressed owners credit or ability to obtain financing in the future as much as a foreclosure
Can obtain a conventional mortgage after two years
For lenders: it costs less than a foreclosure
For community: lessen impact that foreclosure can have on surrounding community
8. How are short sales priced?
Listed at the low end of fair market value
After buyer and seller agree on sales price, the bank (the sellers lender) must approve the sales price
Banks determine what theyll accept for the property based on a brokers price opinion (BPO): an opinion of fair market value from an independent analyst
9. Buying opportunity: Low interest rates
10. Buyer and seller negotiation
Seller concerns
Price is too low lender might not approve
Possible deficiency that the seller will have to pay
Buyer concerns
Price is too low lender might not approve
Wasted time and possibly money
Both agents have a duty to negotiate the best price and terms for their clients before the contract goes to the lender for approval
11. Questions to ask before you write a contract
How many liens are on the property?
If more than one lien, what are they?
Is the seller delinquent on condo dues? (Many lenders will not pay these)
What is the status of the short sale package?
What is the plan to satisfy all the lien holders?
12. Timing
How much time a seller has to accomplish a short sale is impacted by:
The sellers lenders process
How many liens are on the property
State foreclosure laws
Whether foreclosure date has been set
13. Short sale addendum
Expiration date: allowing the buyer the option to walk away after a certain date
Lender approves SHORT SALE, not contract
14. What does it mean to buy a property Asis?
What are the risks?
Property disclosures still in effect
Home inspection is VERY IMPORTANT
Is the cost to make the changes worth it?
15. Negotiation with seller
Timing of home inspection
Time for lender approval
Timing of mortgage application
Earnest money deposit amount
16. Your lender must understand the needs of a short sale buyer
Because of the long time frame involved, consider locking in your interest rate.
Costs money up front to lock in a rate.
Ask what your lenders experience is with rate locks and short sale properties.
17. Brokers Price Opinion
The mortgage lender will order what's called a "broker's price opinion," which gives the mortgage lender some idea of what the property is actually worth in the current market. A broker's price opinion will be based on:
* the value of comparable properties in the same neighborhood
* the general condition of the neighborhood
* the condition of the specific property in relation to neighboring houses
18. Average approval time
Wachovia 2-4 weeks
GMAC 4-8 weeks
Bank of America 8 weeks
Wells Fargo 8-12 weeks
E*Trade 8-12 weeks
CitiMortgage 8-12 weeks
SunTrust 8-16 weeks
19. Buying a bank-owned property
Sold as is (an excellent home inspector is a MUST)
Bank must approve sale faster than short sale but more time than a normal resale property
Property may be in poor condition
20. Stay ahead with local housing market updates from Long & Foster
21. The Smarter Homeowner Seminar Series
Register at:
Long & Foster Fair Oaks
13135 Lee Jackson Highway
Fairfax, VA 22033
22. Monica Florio
Long & Foster, Realtors
[email protected]