Yes, lenders are still having an impact on real estate values and sales. The numerous bank-owned properties throughout Carson Valley are continually driving down the neighborhood values because of the banks’ lack of maintenance on their properties. The dry lawns, weed forests, and other value-sapping deficiencies resulting from lack of care and a vacant property are driving down the values of entire neighborhoods.
There are other, less obvious lender impacts in our market that are also having a major impact in sales as they affect a borrower’s ability to qualify. These involve major changes that are new policies or procedures. They can range from allowable debt/income ratios being lowered, to a higher FICO score requirement. Those are usually known to a borrower at the beginning, but we have seen changes in the middle of a loan process. The more subtle, less publicized ones are the ones that will trip you up.
Consider the new Fannie Mae and Freddie Mac rules that apply when buying another home before selling your old one. Historically, the Buyer generated a lease agreement for the existing home and was allowed to use 75% of the lease income to offset payments on that home. Two months of cash reserves were typically required. The New Rules require a borrower with a home in escrow, but not sold, to qualify on their ability to carry the payments on both homes, no lease income or rental survey income is allowed.
If the new home is a second home, the borrower has to show the ability to carry both payments and have six months PITI on both properties in documented reserves. If you are buying a rental property you can use 75% of the rental amount, but now you must provide documented evidence that you have at least 30% equity in the property. Additionally, there are detail requirements that must be complied with, i.e.- you have to provide the receipts of the security deposit from the tenant, and the deposit into your account. If you have less than 30% equity the rental income won’t count to offset your payment, you must now have six months reserves for both properties.Our Advice: Don’t let the details stop you if you want to buy a new home. We recommend, however, that you don’t experiment with lenders. We have many good, seasoned, honest lenders in our Carson Valley that will work with you, protect you, and perform for you allowing you to achieve your objective. A new lender doesn’t know where the roadblocks in the process are. Your process will be one continual surprise resulting in an exceptionally frustrating experience if your lender isn’t seasoned. The seasoned lender will take you through the process addressing each hurdle like a hurdler. Lenders today are working to minimize the risk to the investor. That has resulted in a new industry which is much like the old industry … you have to truly qualify to borrow. If you qualify … proceed with confidence and don’t let the hurdles bother you along the way.
Professionals in our industry have rarely been as important as they are now. The major wealth in the world has been largely accumulated via real estate. These are good investment times, don’t let the hurdles keep you from your goal. Get with a good hurdler and have confidence in achieving your goals. Your lender, escrow officer and real estate agent are more important to you than ever before in these exhilarating times. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, 775-781-5472, carsonvalleyland@hotmail.com, visit our websites at carsonvalleyland.com or carsonvalleyland.net .
Showing posts with label Nevada forclosures. Show all posts
Showing posts with label Nevada forclosures. Show all posts
Thursday, July 24, 2008
Wednesday, October 31, 2007
We heard a lot about short sales and foreclosures, but nothing lately … what’s up?
Just a few months ago, the phrase “short sale” was on every real estate practitioner’s lips. It was the ready answer to the plethora of over-encumbered properties and was the key to making Buyers and Sellers happy at the same time. Every agent talked about it, and the Lenders even started opening up to the concept. So what happened?
There are several contributing factors that changed the short sale miracle into a problem. In a reasonable short sale situation, the Seller agrees to sell to a Buyer at a fair market value, which is below the amount of the existing loan. The Lender, instead of going to the great expense, risk, and liability of taking the property back by foreclosing, agrees to take less, and the sale proceeds.
What is hampering the short sale process today is that many of the “creative” loans that were put in place a couple of years ago involved a Second Deed of Trust. The Second is just that, Second … behind the First. When the value of the home is less that the amount of the First, the Second is wiped out in a foreclosure. They are also wiped out in such a short sale. Many are trying to negotiate something with the holder of the First so they get something by cooperating, but absent that, there is no incentive for them to cooperate … and most don’t.
Another detrimental factor of short sales is the time and mechanics involved. Most Lenders will not look at the application unless the borrower is behind in payments presenting a dilemma for owners current with their payment. Once you miss a payment, you have about four months before your home is foreclosed on. This situation forces the owner to miss payments and then watch the time go by to their deadline. It is frustrating as the Lenders want everything to be via FAX and email. There is no phone communication… paperwork gets lost… time goes by… and nothing is certain. Buyers don’t like waiting with so much uncertainty about the outcome.
Our Advice: Buyers were initially excited about short sales because it was a way to get a home in good condition at a good price. There wasn’t the risk associated with buying foreclosure properties in which case you can’t see the interior when you buy it. Most foreclosures these days are going back to the bank as the loan is higher than the value and a short sale couldn’t be worked out. You can buy bank owned properties at or below market after they get them back and evaluate what they have, but it is rare these days to get a good deal on the courthouse steps. Short sale sellers – get a good short sale agent and make a run at it, and look to your options. Buyers – do not discount short sales on principle these days, rather look at the circumstances of the individual property, the loan, and the agent involved. You can make a good deal with good business practices. Foreclosures and short sales … a game of patience.
This market requires hard work and short sales require extraordinary hard work. Be realistic… be fair, and all will benefit. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, www.carsonvalleyland.com , 775-781-5472.
There are several contributing factors that changed the short sale miracle into a problem. In a reasonable short sale situation, the Seller agrees to sell to a Buyer at a fair market value, which is below the amount of the existing loan. The Lender, instead of going to the great expense, risk, and liability of taking the property back by foreclosing, agrees to take less, and the sale proceeds.
What is hampering the short sale process today is that many of the “creative” loans that were put in place a couple of years ago involved a Second Deed of Trust. The Second is just that, Second … behind the First. When the value of the home is less that the amount of the First, the Second is wiped out in a foreclosure. They are also wiped out in such a short sale. Many are trying to negotiate something with the holder of the First so they get something by cooperating, but absent that, there is no incentive for them to cooperate … and most don’t.
Another detrimental factor of short sales is the time and mechanics involved. Most Lenders will not look at the application unless the borrower is behind in payments presenting a dilemma for owners current with their payment. Once you miss a payment, you have about four months before your home is foreclosed on. This situation forces the owner to miss payments and then watch the time go by to their deadline. It is frustrating as the Lenders want everything to be via FAX and email. There is no phone communication… paperwork gets lost… time goes by… and nothing is certain. Buyers don’t like waiting with so much uncertainty about the outcome.
Our Advice: Buyers were initially excited about short sales because it was a way to get a home in good condition at a good price. There wasn’t the risk associated with buying foreclosure properties in which case you can’t see the interior when you buy it. Most foreclosures these days are going back to the bank as the loan is higher than the value and a short sale couldn’t be worked out. You can buy bank owned properties at or below market after they get them back and evaluate what they have, but it is rare these days to get a good deal on the courthouse steps. Short sale sellers – get a good short sale agent and make a run at it, and look to your options. Buyers – do not discount short sales on principle these days, rather look at the circumstances of the individual property, the loan, and the agent involved. You can make a good deal with good business practices. Foreclosures and short sales … a game of patience.
This market requires hard work and short sales require extraordinary hard work. Be realistic… be fair, and all will benefit. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, www.carsonvalleyland.com , 775-781-5472.
Wednesday, August 15, 2007
Physical Condition of Foreclosure Properties
I’m going to bid on a foreclosure property … how do I know its physical condition?
That is one of the inherent risks of buying property at foreclosure auctions … you generally don’t know the condition – especially the interior. If the property owner still occupies the property you can’t access it unless it is listed for sale and you can set up a showing. If it is vacant you might be able to peek through the windows, but you are technically trespassing. Generally, you are buying the proverbial “pig in a poke”.
The Lender doesn’t own the property until after the foreclosure, and then only if there are no bids to match their minimum bid amount and they end up receiving the property. That situation presented a dilemma for the Nevada Legislature with the Seller’s Real Property Disclosure form they require for all residential transactions. In a foreclosure sale the Owner isn’t selling the property, and the Lender never lived in it. How could the Buyer be protected from known defects? Who is responsible for disclosing them?
Recognizing that the Owner isn’t involved in a foreclosure sale, the State added a clause in 2005 that requires the Trustee or Beneficiary to disclose any defects of which they are aware. The situation is still problematic for the Trustees or Beneficiaries usually have not been in the property – ever. They might, however, know of problems related to the property and are now compelled by law to disclose those before the property is conveyed. Such problems can be a neighborhood issue, something like all the windows having been vandalized, or the roof being blown off. Any defect required by a law to be disclosed must be disclosed if they have knowledge of it. Perhaps, there was correspondence from the Owner to the Lender relating the need for a new roof and a request for relief from payments so they could afford it. This type of knowledge must be related to a new Buyer by the Lender.
Our Advice: Despite the legal requirement for disclosure, proceed with caution. The Lender most likely has no knowledge of the condition of the home. If the Owner wrecks havoc as they vacate the property just prior to or subsequent to the sale the Lender would have no knowledge of the damage. Lenders usually want to sell ‘As Is”, and may ask that you waive the SRPD requirements. If you are to waive the requirements remember that you must sign the waiver document and have it notarized to be valid. A Buyer can waive the SRPD requirement in any transaction as long as it is notarized.
Be smart in your foreclosure acquisition. Your successful bid might seem like a good deal until you walk through the front door, or when you get a physical inspection to ascertain the condition of the home. Build a cushion in your bid for the unexpected … you can expect it.
When it comes to choosing professionals to assist you with your real estate needs… Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, carsonvalleyland.com, 775-781-5472.
That is one of the inherent risks of buying property at foreclosure auctions … you generally don’t know the condition – especially the interior. If the property owner still occupies the property you can’t access it unless it is listed for sale and you can set up a showing. If it is vacant you might be able to peek through the windows, but you are technically trespassing. Generally, you are buying the proverbial “pig in a poke”.
The Lender doesn’t own the property until after the foreclosure, and then only if there are no bids to match their minimum bid amount and they end up receiving the property. That situation presented a dilemma for the Nevada Legislature with the Seller’s Real Property Disclosure form they require for all residential transactions. In a foreclosure sale the Owner isn’t selling the property, and the Lender never lived in it. How could the Buyer be protected from known defects? Who is responsible for disclosing them?
Recognizing that the Owner isn’t involved in a foreclosure sale, the State added a clause in 2005 that requires the Trustee or Beneficiary to disclose any defects of which they are aware. The situation is still problematic for the Trustees or Beneficiaries usually have not been in the property – ever. They might, however, know of problems related to the property and are now compelled by law to disclose those before the property is conveyed. Such problems can be a neighborhood issue, something like all the windows having been vandalized, or the roof being blown off. Any defect required by a law to be disclosed must be disclosed if they have knowledge of it. Perhaps, there was correspondence from the Owner to the Lender relating the need for a new roof and a request for relief from payments so they could afford it. This type of knowledge must be related to a new Buyer by the Lender.
Our Advice: Despite the legal requirement for disclosure, proceed with caution. The Lender most likely has no knowledge of the condition of the home. If the Owner wrecks havoc as they vacate the property just prior to or subsequent to the sale the Lender would have no knowledge of the damage. Lenders usually want to sell ‘As Is”, and may ask that you waive the SRPD requirements. If you are to waive the requirements remember that you must sign the waiver document and have it notarized to be valid. A Buyer can waive the SRPD requirement in any transaction as long as it is notarized.
Be smart in your foreclosure acquisition. Your successful bid might seem like a good deal until you walk through the front door, or when you get a physical inspection to ascertain the condition of the home. Build a cushion in your bid for the unexpected … you can expect it.
When it comes to choosing professionals to assist you with your real estate needs… Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, carsonvalleyland.com, 775-781-5472.
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