Category Archives: Real Estate Tips

How to Buy A Foreclosed Home

Denver foreclosure

This old place might take a little more than a handyman!

This week I was speaking to a lady who is thinking about purchasing a home on her own.  She’s very handy at fixing up properties and has done it in the past with a spouse.  Now that she’s on her own (no spouse), she’s decided to try to put her creative talents to work by finding a home to fix up on her own.

She’s decided to buy a foreclosure, because she’s well aware that this type of home almost always sells for a lower than market value price and needs work.  She’s correct on both counts.

Most people purchasing a home want to buy one that needs little or no work.  Occasionally a buyer will come along who is looking to earn some “elbow grease equity.”  Buyers who have some spare cash after a closing, the know-how and a lot of patience and time on their hands are perfect candidates for foreclosed homes.

Where do you find a foreclosure?

Buyers often have misconceptions about finding foreclosures.  They think they have to go directly to a bank to find them.  This is not the case.  When a home goes through the foreclosure process they are put on the resale market and listing in the Realtor data base called the MLS.

Types of foreclosures

Depending upon the type of loan that was foreclosed upon, there are different types of foreclosures.  For instance a FHA loan where the seller loses the home will become a HUD Foreclosure.  Fannie Mae and Freddie Mac are also treated differently.

One thing in common with all these Denver Foreclosures is they are all found in the MLS.  This is a good thing because it provides buyers and brokers with one central source to locate a good property.

Finding a Foreclosed Home to Purchase

If you are looking for a good deal and would like to know about foreclosures as they come on the market, you should subscribe to my Denver Home Search Feature on this website.  You can configure a search using your own personal criteria for price, size, location, etc.  My search feature is very easy to use, you just  need to remember to check the “foreclosure box.”

Oddly enough the lady I was chatting with this week had no idea searching for a Foreclosure in Denver could be so easy!  Now I bet she wishes fixing one up would go as smooth!

Your Delinquent Mortgage Affects Your FICO Score

Denver Foreclosure Information

Working with homeowners in distress often brings many questions.  Some questions I can answer with ease, others I have to look to others to find.

When it comes to your FICO score there are certain factors that effect it.  FICO Scores use mathematical models taking into account various factors in each of these five areas to determine credit risk:

  1. payment history
  2. current level of indebtedness
  3. types of credit used
  4. length of credit history

Lenders use your FICO score to assess your credit risk on whether to extend a loan.

A FICO score range is between 300 and 850.  Typically a FICO score above 650 indicates a person who has a very good credit history.  When a score falls below 620 a person will find it increasingly difficult to obtain financing at a favorable rate.

Protecting your FICO score is important

When considering a Short Sale or outright default on a loan, one needs to know the ramifications.  Many persons who have absolutely no choice but to default will have to deal with the consequences regardless, but those planning a “strategic default” might decide otherwise when they know the difficulty in store for them!

A recent post on the FICO Banking Analytics Blog illustrates how Delinquencies affect scores

The FICO study simulated various types of mortgage delinquencies on three representative credit bureau profiles of consumers scoring 680, 720 and 780, respectively. I say “representative profiles” because we focused on consumers whose credit characteristics (e.g., utilization, delinquency history, age of file) were typical of the three score points considered. All consumers had an active currently-paid-as-agreed mortgage on file.

Results are shown below. The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact.

Chart of Delinquency Effect on FICO Score Results of the this study:

  • Higher FICO scores fall the lowest
  • There isn’t much of a difference in the type of default.  Short sales, foreclosures all suffer about the same amount of fall
  • It takes about 7-10 years to recover
  • The higher the beginning score was the longer it will take to recover

The author also noted in this particular study they only used select consumer credit profiles.  There are many credit profiles so in the end your results may vary.

It is interesting to note lenders are on the watch for homeowners who are planning their strategic defaults.  It only makes sense as defaults cost the banks money. Not only that, home values in the neighborhood decline causing the economic mess we are in to linger longer.

Speaking of one who has seen more than one real estate decline, this to will pass.

If you are having a hard time making the payments on your home due to job loss, health issues, death in the family or any of the reasonable excuses, doing a short sale or foreclosure might be your only choice.

If you are not suffering from any of these issues but are just spooked by the constant negativity in the media, remember to look at the positive side.  95% of Americans ARE making their house payments!

Yes, neighborhood values might be down, but that is now. Values will eventually start rising again.  The real estate market is a market that fluctuates.  Builders have reduced their building but we haven’t stopped having babies.  Nor are people stopping their American dream of immigrating to the U.S.

This real estate market shall turn a corner and we will see values rise, just be virtue of supply and demand.  We need housing.  People want to OWN a home. We are not a nation of renters, we never have been we never will.

If you are searching for the answer of what to do and need more information, maybe I can help.  Call me, let’s talk about your situation.  Perhaps I can bring clarity to what you need to do.

I welcome your call.

 

2 Big Time Lenders Get Loose ~ With Lending

Wells Fargo and Quicken Loans have come public saying they will lend to borrowers with a 580 FICO score or better.

This may not be so surprising to many as this has been the guidelines all along.  Well supposedly, in reality the banks CAN lend at 580 FICO or above, but don’t. HUH?  Sound contradictory, well you are right.

But now according to these big Lenders, they have revised their lending plans and are loosening up their requirements, at least on the FICO score side.  Borrowers will still be required to come up with the 3.5% down payment, that must come from the borrower’s own funds.  Yes, the borrower will need to jump through hoops to prove this, but then that is a good thing.

The banks want to make sure they aren’t lending to a borrower with a poor credit history.   FHA has seen enough defaults of late and certainly we don’t need anymore!

In order to prevent additional mortgage defaults, the requirements get more difficult to match for buyers who’s FICO Score is below 580, they may be able to find mortgage money, but not without additional scrutiny to their budget and a down payment from their own funds in an amount of 10% or greater.

This is really good news for home buyers who have been trying to repair their credit, have a savings, are employed and want to purchase a home.

I’m glad to hear Wells Fargo is setting the example to expand lending practices in a time when so many lenders have retracted.  We need to make financing available to those who can prove they are worthy and will be responsible home owners.

Let common sense prevail, on both sides.

How Much Can You Afford?

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Denver Real Estate Talking Points

We’ve all be anxiously awaiting the Denver real estate statistics to see how sales went after the tax rebate was over.  The results are in and frankly we are a little surprised.  The numbers are better than we expected.

July 8, 2010

  1. The average sales price jumped 10% in June over the month of May, and 6% over June 2009.  Best reason why: an increase in non-tax credit supported contracts written in May.  The months of May and June are traditionally the spring transferring months for the corporate buyer, and that seems to holding true in 2010.  By advancing the first time buyer market to March and April, the average sale price increased because the transferring buyer is in the $400,000 price range this year, and there were simply less low price buyers in play in June.
  2. 2. Average prices up, total sales down, but not out. The decrease in total closed sales was only 319 from May and 140 less than June of 2009.  Important consideration: The first half year to date sales totaled 20,990 compared to 19,363 units sold YTD 2009, an increase of 8%.
  3. The Total Available Inventory is creeping up. (an increase of 8.8% over June of 2009) This is a concern.  It is reasonable to assume that homes owners buoyed by the good sales numbers of April are trying to take advantage of the market and sell their present home.  While we are some ways away from a flood of inventory, it will take very little excess inventory to drive the prices down below the last two years low levels in the latter half of 2010.  While the much discussed “shadow inventory” seems to be barely visible in the Denver area market, the overall economy is still very fragile.  (Positive sign: RTD letting contract to build the commuter rail to DIA, etc. will pump 2 billion plus $$ into the local economy and add 3000 jobs.)
  4. Postscript to the above note: it is all about employment!!
  5. 5. The Average Days on Market (DOM) for May was the lowest in a long time. That number increased to 82 days in June, a factor of increased inventory and less total sales. 82 average days on market is still very good.
  6. 6. 3885 = the total number of contracts written in June, 2010.  5,664 = the total number of contracts written in May of 2010.  That is 1779 less units of inventory contracted for sale, which negatively affects the work load of REALTORs, Title Companies and their Escrow departments, mortgage lenders, home inspectors, appraisers, etc.
  7. Freddie and Fannie national mortgage rates are 4.57% today. Those low rates are providing some boost to the housing market, at least for those that can take advantage of the moment.

Pretty graphs to follow tomorrow!

Bank of America? Too Big to Fail? Well Listen Up You Just Got An F-

Bank of America RIP

This is a tale of misplaced loyalty, abuse, incompetence, anger and hours of wasted time.

Yes we had a closing today, Friday.  It was the closing that was scheduled to happen yesterday and before that on Tuesday, before that on Monday only because the lender couldn’t get their act together and quite frankly didn’t care.

The details are long and gory, no consumer should ever have to be treated with such a lack of respect.

The slide downhill begin when the buyers who purchased my listing announced they wanted to use Bank of America to fund their home purchase.  Collectively the selling agent and I both groaned because we knew their choice was not a wise one.

Gently the buyers were informed and encouraged to rethink their position, but they felt ties to the lender who most recently couldn’t approve the previous purchase (a short sale) that was also held by Bank of America.  (Huh, does anyone detect a little inbreeding here?)

Perplexed that the buyer didn’t recognize a problem when it just smacked them in the face, I still had no power to persuade as I was the listing agent not the selling agent.  The buyer’s loyalty was admirable on their part but soon proved to be sadly misplaced.

As the transaction progressed, normally easy to meet deadlines where not met. The appraiser called to set an appointment the night of the appraisal deadline.

Ouch!  Had the buyer realized the peril this put them in. What if we had a back up offer on the house (which we easily could have had) we could have let the deadline expire and the buyer would be back on the street looking for a house AND out their $6500 tax credit.

Strike one for Bank of America for putting your consumer at risk, all because of one simple little date.

Strike two came later when the Appraiser was unfamiliar with general construction called for a very expensive engineer’s report.  Ouch Ka Ching more money out of the pocket.

When the condition was removed someone failed to give the appraiser access to the file to delete the condition, another day was lost and another deadline not meet.

Was this someone’s first Rodeo?

As buyers meet the conditions, the final approval was not forthcoming.  The first day of closing Bank of America staff refused and/or failed to answer phone calls, or email.  In fact they refused all communication. Thankfully we weren’t all sitting around the table. This continued for 4 more days.

Finally Friday all the funds came together.  We gathered around the table to close, it took 3 hours to close what used to be a 1 hour closing. As it turns out the docs have to meet with final approval once they are signed.

Of course the person at Bank of America was out getting a hot dog, so we waited.  The world stopped because Bank of America is so inefficient, so careless, so irresponsible, so unreliable, so poorly run and what’s worse they don’t give a damn about the people who they are their to serve, their customers.

Well today the loyal customer acknowledged Bank of America failed.

The tipping point will come soon, one family after the next will discover what many already know,  and they will refuse to do business with Bank of America.

And BOA will go away.

Read other stories about dissatisfaction with Bank of America:

Bank of America and Short Sales

Bank of America – Makes the Top 10 Disliked Company List

Bank of America Exec Starves to Death at REALTOR Banquet _ Sweet Sarcasm