The easiest way to find foreclosures is to subscribe to online listing services or work with an agent or lender. You can also look for notices of defaults and auctions in public records and local newspapers.

Look for notices of defaults and auctions in public records and local newspapers.
Research “foreclosure” on the Web and subscribe to online listing services like RealtyTrac.
Work with a real estate agent who specializes in foreclosures.
Market yourself as an investor offering “cash” for property.
To find bank-owned houses that aren’t listed with an agent, contact the lender for information.
Network with real estate investors in your area.

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So you want to buy or invest in residential foreclosures? Not quite sure where to start? Get to know the three very different “faces” of Colorado foreclosure buying. Each has its own unique characteristics related to time, money, risk, emotional element and potential profits. Select the one that is the best fit for you.

FACE ONE: Pre-Foreclosure

The pre-foreclosure period begins when a homeowner gets behind on his or her loan, and ends with the foreclosure sale. The pre-foreclosure phase itself is divided into two stages.

•The first stage covers the period of time beginning when the homeowner misses his or her first mortgage payment, and ends in the final month preceding the impending foreclosure sale. During this time, if a homeowner is not already marketing their home, it will be up to you to reach out to and find these distressed homeowners through mailings, ads (”We buy homes fast” and “We have CASH for homes”) and networking.
•The second stage occurs during the final month leading up to foreclosure. The precise laws differ from state to state, but most states require some form of public notification of a pending foreclosure. You can look for these notifications, many of which have ample contact information to approach the distressed homeowner. Many larger communities have a number of online and subscription services which compile the pending foreclosures in a specific geographic range. You can also network within your local real estate investors association or do an Internet search (e.g., “foreclosure listings”) in order to find these publications and services.
You can think of buying a Colorado pre-foreclosure as a win-win situation. You get a home at a discount, while the homeowner with built-up equity gets some quick cash and avoids a damaging foreclosure on their credit record. For tips on working with homeowners, read Working With Distressed Homeowners. There are also opportunities to work with some of the foreclosing lenders directly (with the distressed homeowner’s approval, of course), as it is in the lender’s interest to avoid costly foreclosures.

PROS: Pre-foreclosures can be very lucrative. A typical pre-foreclosure might have an investor paying off a distressed homeowner’s $220,000 loan, giving the distressed homeowner $25,000 in cash to walk away with, and taking over the $350,000 property.

CONS: The primary negative associated with pre-foreclosures is the taxing emotional element that can come with constantly dealing with homeowners involved in a downward spiral. Simply put, this will not be feasible for every investor.

Case in point: Almost 20 years ago, we were fresh out of one of those “get rich quick” seminars. Our model was to focus on pre-foreclosures, and we went to only one home. The family we visited was the most likeable family. The husband was a veteran, and both he and his wife lost their jobs within a short time of each other. When visiting the home their little girl took my hand and showed me the “doggie window,” the hole in the kitchen door for their family dog to go in and out of the house. I left this visit emotionally drained and with a sour feeling in my stomach. This was the last pre-foreclosure we ever visited.

FACE TWO: Foreclosure Sale

This occurs when the loan on the home is not brought current by the distressed seller or the home is not sold. Again, the procedures and processes differ from state to state, so research the process in Colorado. For many states, the sale of the property takes the form of an old-fashioned auction on the courthouse steps (in several states, this occurs on the first Tuesday of every month).

PROS: Like pre-foreclosures, the foreclosure sale also can be a quite lucrative way to purchase property. However, unlike pre-foreclosures, there is no emotional element other than controlling your adrenaline at the foreclosure sale.

CONS: You may not be able to access the property, which makes assessing repairs and improvements challenging. You may need to quickly assess the title and any liens (this can lead to mistakes and can be costly). Many states require certified funds at sale or within a very short timeframe (such as 24 hours). Having access to large sums of cash or fast financing limits this face to a subset of experienced and well-financed investors. If you’re interested in this face, go to a foreclosure sale and see how one works firsthand.

FACE THREE: Post-Foreclosure

If the property is not sold in pre-foreclosure and not purchased at the foreclosure sale, then it goes back to the bank or other lien holder who secured the loan.

With interest only, 100 percent financing and other loans offered in recent years requiring little down payment, record numbers of properties are going through the foreclosure process without attracting investor interest in the pre-foreclosure or foreclosure sale stages. These properties eventually land on the desk of someone within a financial institution (bank, mortgage company, etc.) that has the responsibility of disposing of these properties. Many institutional lenders carry so many properties that they have entire departments dedicated to this task, often referred to as REO (real estate owned) or Post-Foreclosure Departments.

Institutional sellers generally fall into one of three categories:

•Those who first indicate plans to list their REO property, but can be persuaded by the skillful investor to delay the listing until the investor has a chance to see the property and make an offer

•Those who are happy to work with an investor directly, bypassing listing the property with a real estate agent

•Those who will not consider working with an investor directly, but will instead list their properties with selected real estate agents

PROS: Sellers have no emotional tie to the property. For financial institutions, this is a business transaction. Also, the more REO properties a bank or lender has on its books, the more likely the lender will act quickly at a discount to investors.

CONS: Financial institutions may not get back to you right away, so be patient. Also, getting a 30 percent discount is not as common in this face as it is when you buy during pre-foreclosure (and even some foreclosure sales). But it is possible to find discounts of 10 percent to 20 percent.

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There are different stages in the foreclosure process, and each stage offers unique advantages and disadvantages for the buyer. For instance, some buyers prefer buying bank-owned properties because they’re uncomfortable dealing with distressed homeowners.

Read more about the three bargain-buying opportunities:

How to Buy a Bank-Owned Property or Real Estate Owned
Five steps to finding a bargain
By RealtyTrac | Published: 2/03/2008
Under this buying stage, the lender or bank has taken ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction. REO means “real estate owned” by the lender and indicates the house has already gone through the foreclosure process and has been repossessed by the lender.
The lender usually sells the property to recover the unpaid loan amount and typically clears the title for any buyer. But the potential bargain is often less than a pre-foreclosure or auction property. Here’s how to buy bank-owned properties or REOs:

1) Find properties and look at them. At this stage of foreclosure, it’s more likely the property will be listed for sale on the Multiple Listing Service (MLS) used by real estate agents, so if you are working with an agent, ask him/her to check the MLS for bank-owned properties or contact us at MyH-O-M-E.com.  Keep in mind that the potential bargain often diminishes if a listing agent is involved.

You can also contact lenders directly and ask for a list of their REO or bank-owned properties. You’ll have to do some digging to find the department or person at the lending company or bank who manages repossessed property. You can also find properties online through services like RealtyTrac.

Once you identify a property, drive by it to get a better idea of its condition and neighborhood. You may find notices posted about the lender who owns the property or signs that show the property is listed with a real estate agent. Take lots of pictures and notes.

2) Check the potential bargain. Gather this information:

•Estimated market value

•Bank’s break-even amount — includes the unpaid balance of the loan, any fees and costs incurred during the foreclosure process and any other liens the bank had to pay off to take ownership of the property.

•Your monthly expenses as a homeowner (mortgage payment, taxes, insurance, repairs, etc.)
Subtract all your costs as a buyer (break-even amount, additional liens, repair costs) from the estimated market value of the property, and use that number as a basis for your offer to the bank. This is all public information so you can research on your own with the county recorder, consult us at MyH-O-M-E.com or use online services like RealtyTrac.com.

3) Contact the lender to express your interest in seeing the property and making an offer.
If you don’t know who owns the house, contact the local property assessor (either through county or city government) and ask who is listed as the owner of the property. The assessor should also have the owner’s mailing address. Find your local property assessor here.

•When you call, ask for the REO (real estate owned) department, bank-owned homes department or asset management department. Be patient and persistent. A lender’s main focus is lending money, not selling property, so it may take some time to get through to this department.
•If you can’t get through by phone, another option is to overnight or fax a letter to the lender stating your interest in the property. To stand out from other letters and requests, you can prove you’re a serious buyer and include a check made out to a local escrow company in the amount of a small percentage of the total purchase price. This should be refunded if no transaction takes place.

4) Negotiate a purchase agreement. Once you make contact with the bank’s asset manager or REO officer, arrange to walk through the property (with a MyH-O-M-E.com agent, if applicable) to make sure it fits your criteria as a buyer. If both you and the bank agree to proceed, negotiate the terms of the purchase agreement.
NOTE: Colorado law allows a redemption period for the owner after the bank takes ownership of the property, you may have to wait several weeks or several months, depending on the state, before the bank is willing to sell the property. During the redemption period, the owner can regain ownership of the property by paying the total amount owed to the bank plus any applicable foreclosure expenses.

The bank’s primary goal is to at least break even on all the costs that it has sunk into the property. That includes the unpaid balance of the loan, the expenses associated with the foreclosure proceedings, other liens and repairs to the property.

Your goal as a buyer is to purchase the property below market value, minus any estimated repair costs. This is often possible if you contact the bank quickly and are a prepared buyer ready to make a purchase.

To get a better bargain, consider these:

•Prove you have the financing and can close quickly. Pay with cash or show your pre-approval letter. Be ready to show proof of income.

•Buy the property “as is.”

•Work with lenders that have a glut of foreclosures. These are non-performing assets from their perspective, so unloading them is to their benefit.
•Build relationships. Let the asset manager or REO officer know to contact you in the future if the bank needs to quickly unload foreclosure properties.
5) Close the deal. Once you’ve arrived at an agreement with the bank, put the agreement in writing. If you’re not familiar with how to draw up a purchase agreement, ask us at MyH-O-M-E.com or a real estate attorney. The purchase agreement should make closing the deal contingent on 1) a full title search conducted by a title company or attorney and 2) a professional inspection of the property (even if you’re willing to buy the home “as is,” you may find out there’s a foundation problem and choose to end the deal).
An escrow company, which acts as a third party, can manage the transfer of money and property ownership. Assuming that you have your financing secured, this should be a fairly smooth process.

There is no set time frame within which the banks must sell their REOs. However, banks often want to get REOs off their books rapidly. As a result, many REOs sell quickly.

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There are different stages in the foreclosure process, and each stage offers unique advantages and disadvantages for the buyer. For instance, some buyers prefer buying bank-owned properties because they’re uncomfortable dealing with distressed homeowners.

Read more about the three bargain-buying opportunities:

How to Buy a House at Public Auction:

Eight steps to finding a bargain
By RealtyTrac | Published: 2/03/2008
A property owner who misses several mortgage payments has a pre-foreclosure grace period of a few weeks to a few months — depending on the state — to bring the payments up to date and stop any foreclosure proceedings. If the owner does not bring the delinquent payments up to date, the property will be sold at a public auction, which is announced via a Notice of Trustee’s Sale (NTS) or Notice of Foreclosure Sale (NFS).

NOTE: Buying foreclosure properties at the courthouse steps can be challenging and the most risky option because:

•You are competing with seasoned investors who track the auctions daily.
•You may not have much time to research the title and condition of the property beforehand.

•You will likely have to pay cash for the property, because financing an auctioned property isn’t possible in many states.
•If there is a money encumbrance attached to the property — a tax lien, a mechanics lien or a second or third mortgage — you, as the new owner, will have to pay it off in full.
Here’s how to buy a house at auction:

1) Find properties and look at them. Look for foreclosure auction notices in the local newspapers or subscribe to an online listing service like RealtyTrac. You can also call the city or county recorder for the latest foreclosure auction schedule.
After you find a property, drive by it to get a better idea of its condition and neighborhood. This could facilitate a casual meeting with the owner (you may be able to still work out a last-minute deal before the auction) or yield a wealth of unexpected information from a talkative neighbor. Take pictures and notes, but the owner may still be living in the home so be discreet.

2) Confirm auction status, date, time, location and requirements. After a property is scheduled for auction, the owner has a chance (typically less than a month) to stop the auction by paying the amount owed to the foreclosing lender. Auctions may also be postponed without a new date being published. Cancellations and postponements are announced at the time and location of the originally scheduled auction. You can find out beforehand by calling the trustee — the person or party (often an attorney) who is filing the paperwork to initiate and carry out the foreclosure.

Location: Most auctions are at a public place in the same county where the property is located. In many states, all the auctions in each county are at the same location. You can typically get that information from the trustee or county clerk. If you call the county clerk, make sure you clarify that you are looking for the location of mortgage foreclosure auctions, not tax foreclosure auctions.

Depending on the state, bidders are required to bring:
•the full amount they want to bid in the form of cash or cashier’s check, or a certain percentage, usually 10 percent, of the bid amount in the form of cash or cashier’s check (like a deposit), and pay the remainder of the amount within a certain time frame if they are the highest bidder
The opening bid at the auction is based on the total amount owed to the foreclosing lender and may include fees incurred because of the foreclosure proceedings. If no one bids above that amount, the foreclosing lender will take possession of the property.

The bidding procedure varies from state to state, so educate yourself with the procedure in Colorado area before bidding at an auction. Observe a local auction, ask the trustee or consult us at MyH-O-M-E.com or attorney.

3) Check the potential bargain. Gather this information:

•Estimated market value (calculate estimated house market value)

• Outstanding loan balance
• Other property liens and loans the owner may have taken out
• History of ownership
• Your monthly expenses as a homeowner (mortgage payment, taxes, insurance, repairs, etc.)
  Subtract all your costs as a buyer (loan balance, additional liens, repair costs) from the estimated market value of the property, and use that number as a basis for your bid. This is all public information so you can research on your own with the county recorder, consult a local real estate agent or use online services like RealtyTrac.com.

4) Contact the owner. You can still contact the owner for a possible last-minute sale at this point, but if the owner isn’t willing to sell, the property will be sold at the auction.

5) Research the title and look for other liens. Check the title of the property through a local real estate agent or title company. If you have the winning bid, you may be subject to other liens in some cases. A lien is a legal filing by someone owed money by the owner of the property. Usually the debt has to be paid off before the owner can sell the property.
If the loan in default is the senior lien, then any other liens will typically be cleared out for the highest bidder at the auction (confirm this with a local real estate attorney or the trustee). If the loan in default is a junior lien, then the highest bidder will hold the note to that lien, subject to any senior liens against the property. Determine if it’s the senior lien and also factor in estimated repair costs and the estimated market value to determine your maximum bid for the auction.

6) Determine your bid amount. Based on all the factors used to determine the potential bargain — and your financial capability — you’ll need to determine how much you can and should bid at the auction.
A reasonable purchase amount at auction is at least 20 percent below full market value. Other factors to consider are the rate of real estate appreciation in the area and the potential for increasing the property’s value by making repairs and improvements.

If you’re in a state that requires you to bring the full bid amount in cash or cashier’s check to the auction, secure financing in advance. You won’t even be qualified to bid if you don’t meet that requirement. If you don’t have that type of cash lying around, you have a couple options.

•If you own a home, you might be able to take out a home equity line of credit, which is a cash loan.
•If you can’t secure a cash loan, try to buy a pre-foreclosure or buy a bank-owned property, both cases where you can usually obtain a regular mortgage loan secured by the property being purchased.
If you don’t need to bring the full bid amount to the auction:

•Set a firm ceiling for your bid.
•Avoid getting caught up in the heady auction atmosphere and overbidding, which can result in little or no bargain for you.
•Be sure you can pay the remainder of the bid within the time frame stipulated by Colorado law, or you can lose the deposit you made at the auction.
7) Bid at the auction. Bidding at an auction can be intimidating, especially if you’ve never done it before. Before you bid, attend an auction as an observer or consult us at MyH-O-M-E.com or a real estate attorney.
•Call the trustee the day before or the day of the auction to check one last time if the auction has been canceled or postponed. If an auction is postponed, the trustee should provide the new auction date.
•Arrive at the auction location early and locate the auctioneer as quickly as possible.
•Take as many cues from the other participants as you can, but don’t let them dictate how much you bid. You may encounter investors who attend many auctions every month and who don’t necessarily appreciate new competition.
Take ownership. If you are the winning bidder:
•Make sure you get the necessary documents from the auctioneer to verify that you are the winning bidder.
•Clarify with the auctioneer and a real estate attorney what further steps need to be made before you take ownership and possession of the property. In some states, ownership can be transferred immediately or within a few days. In other states, you may need to wait a month or more for the sale to be confirmed by a court. Colorado has a redemption period for the owner, in which case the owner can buy the property back from you if they pay the full amount paid at the auction, plus applicable fees. Avoid spending money on repairs or improvements during the redemption period.
•Find out if you will be responsible for evicting the current owners. If eviction is necessary, contact a local real estate attorney or the county sheriff for the proper procedure.

• Read More »

There are different stages in the foreclosure process, and each stage offers unique advantages and disadvantages for the buyer. For instance, some buyers prefer buying bank-owned properties because they’re uncomfortable dealing with distressed homeowners.

How to Buy a Pre-Foreclosure House:

Six steps to finding a bargain
By RealtyTrac | Published: 2/03/2008
The pre-foreclosure stage — the period from when a Notice of Default or Lis Pendens has been issued until the time the lender puts the property up for an auction — can last several months, so buying during this time requires a lot of patience and persistence. It typically offers the best bargains, but it’s also the most difficult stage to purchase a distressed home. Understand that the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property. Here’s what to do:

1) Find properties and look at them. If the house is not already on the market, you’ll need to find distressed homeowners by marketing yourself through mailings, ads (”We buy homes fast” and “We have CASH for homes”) and networking. You can also look for foreclosure notices in the local newspapers or subscribe to an online listing service like RealtyTrac.
After you find a property, drive by it to get a better idea of its condition and neighborhood. This could facilitate a casual meeting with the owner or yield a wealth of unexpected information from a talkative neighbor. Remember, the owners are still living in the home, so be discreet.

2) Confirm that the property is still in default. Sometimes a homeowner has already resolved the situation. Contact the trustee — the person or party (often an attorney) who is filing the paperwork to initiate and carry out foreclosure proceedings on a property.

3) Check the potential bargain. Gather this information:

•Estimated market value
•Outstanding loan balance
 

•Other property liens and loans the owner may have taken out.

•History of ownership

•Your monthly expenses as a homeowner (mortgage payment, taxes, insurance, repairs, etc.)
Subtract all your costs as a buyer (loan balance, additional liens, repair costs) from the estimated market value of the property, and use that number as a basis for your negotiations with the owner. This is all public information so you can research on your own with the county recorder, consult a local real estate agent or use online services like RealtyTrac.com.

4) Contact the owner.

•Start by sending a letter. Let the homeowner know of your interest in the property.

•Try to arrange a meeting to discuss a possible sale and to get a better look at the property.

•For tips on how to work with homeowners.
•You can search for the owner’s phone number if it’s listed.
•Don’t approach the owner in person, unless you’re experienced at doing that.
•Arrange to walk through the property to make sure it meets your criteria as a buyer.
•Depending on the owner, you may have to buy the property “as is.”

•Keep a tab of estimated repair costs and subtract them from your purchase offer. Your willingness to put some “sweat equity” in the property will increase the chances of realizing a good bargain.
5) Negotiate a purchase agreement. If you and the owner both agree to proceed, negotiate the terms of a purchase. The goal for you as a buyer is to purchase a property at least 20 percent below full market value, though better deals are possible. When determining the final purchase offer, take into account the rate of real estate appreciation in the area and the potential for increasing the house’s value by making repairs and improvements.

•Contact the foreclosing lender and any other lien holders and let them know you plan on buying the house. You may be able to negotiate a lower payoff amount to satisfy the debts owed, meaning you may not have to pay off the entire debt amount.  We at MyH-O-M-E.com can also be a valuable resource during the negotiating process.
•If the loan in default is assumable, you may be able to pay off the amount in default and take over payments under the current terms of that loan.
•If not, you will need to pay off the full amount owed on the loan. If the property has other liens placed on it, you’ll need to make sure those are cleared out as part of the purchase agreement.
Homeowners might be more willing to work with you if you offer to help them in creative ways. Consider these:
•If the owner has equity in the property above and beyond the liens, offer to split the equity with them, allowing them to walk away with cash and you to acquire a property below market value.
•Let them stay in the house for a certain amount of time (possibly paying rent) until they find a new place to stay.
•Pay their housing costs for the first month or more after they leave the property.
•If you’re purchasing the property as an investment, you may let them stay and pay rent until you decide to resell the house.
6) Close the deal. Once all parties have arrived at an agreement, put the agreement in writing. If you’re not familiar with how to draw up a purchase agreement, ask a local real estate agent or real estate attorney. The purchase agreement should make closing the deal contingent on 1) a full title search conducted by a title company or attorney and 2) a professional inspection of the property.  An escrow company, who acts as a third party, can manage the transfer of money and property ownership.   Assuming that you have your financing secured, this should be a fairly smooth process.
Remember, a property in pre-foreclosure status is not necessarily for sale. The owner may be pursuing other options to cure the default; however, an offer from a pre-qualified cash buyer may be the best solution to get the owner out from under the impending foreclosure. You can also make an offer to the owner prior to the scheduled auction date even if the Notice of Trustee Sale has already been filed.

• Read More »

Many buyers associate buying a foreclosure with getting a steal of a deal. This can be true, but there are also potential pitfalls. The pros and cons of buying a home involved in foreclosure vary with the phase of foreclosure the property is in when purchased. Use this handy guide to figure out what sort of property is best for you!

Missed Payments/Motivated Seller
Advantages:

•Seller may be more likely to do repairs.

•Seller will be motivated to achieve a fast sale, may create opportunity for below market purchase price.

•Seller might be amenable to providing major closing cost credits and other concessions.
•Buyer can use regular mortgage financing.
•Buyer can obtain desired inspections within standard due diligence/contingency period.
•Seller must legally provide complete history of property’s condition, problems, repairs, etc.
Disadvantages:

•Seller may not be able to negotiate price below outstanding balance of seller’s mortgage(s).
•Sellers still have to move out.

Pre-Foreclosure/Notice of Default (NOD) or Lis Pendens Filed by Lender/Short Sale
Advantages:

•Seller will be motivated for fast sale, increasing buyer’s bargaining power.
•Buyer can do all standard inspections, including researching title during due diligence/contingency period.
Disadvantages:

•Unless purchase price will pay mortgage(s) and closing costs in full, lender’s approval of price and terms of sale will be required (i.e. short sale).
•Lender may not approve price, seller concessions or closing cost credits.
•Short sale may take 45-90 days to close.
•Sellers still have to move out.

Foreclosure Auction
Advantages:

•Property will be sold for outstanding mortgage balance owed to foreclosing mortgage holder — this can be a low price for the property.
•Cash payment requirements reduce competition.
Disadvantages:

•Bank cannot provide disclosures as to property history/condition issues.

•Auction purchase price must be paid in cash on the same day as the auction — no mortgage is usually allowed.
•No inspections allowed; as-is sale.
•Buyer may take property and owe other liens, back taxes and mortgages. Buyer must research state of title prior to auction.
•Bank cannot provide disclosures as to property history/condition issues.
•If bank believes auction will not recover a good price, bank may buy the property at auction.
•Property condition might be suspect due to damage done by upset homeowners.
•No commissions or attorney’s fees will be paid; buyer must pay for their own representation.

Post-Foreclosure Bank-Owned Property REO (Real Estate Owned by Lender)
Advantages:

•Bank is motivated to get property sold and will negotiate price, down payment, closing costs, escrow length, etc.

•House will be vacant.
•Title will be clear; buyer will not take on any liens, mortgage or back taxes of prior owners.

•Inspections and mortgage financing are allowed within normal due diligence/contingency period.

•Property will usually be listed on MLS; bank will pay real estate agent’s commission.

•REO sales close within a normal escrow period of time.

Disadvantages:

•Bank will not agree to do any repairs; as-is sale.

•Bank will usually require additional paperwork.

•Bank cannot provide disclosures as to property history/condition issues.

• Read More »

This will be a multi-part series with additions every few days…more exciting reading to come!

So you’re looking for a bargain in a sea of foreclosures? It won’t be easy. Buying a foreclosure is tricky, but if you do your homework and follow these 10 steps, you can land a great deal on a home.Understand the Foreclosure Process
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. It begins when a borrower/owner defaults on loan payments and the lender files a public default notice or a lis pendens (Latin for “lawsuit pending”), depending on the state.

Ultimately, the foreclosure process can end one of four ways:

The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure
The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history
A third party buys the property at a public auction at the end of the pre-foreclosure period
The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
Read the Advantages and Disadvantages of Buying a Foreclosure.

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On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.

HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.

HAFA is a complex program, with 43 pages of guidelines and forms, designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure. HAFA:

•• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
•• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
•• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
•• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
•• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
•• Uses standard processes, documents, and timeframes/deadlines.
•• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

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You got to move
You got to move
You got to move, child
You got to move
But when the Lord
Gets ready
You got to move

-   Fred McDowell

Three cheers (with bated breath) for the Senate, for it has approved a bill that will extend and expand the homebuyer tax credit. If approved by the House (remember, The House killed the $15k proposal last year), nearly every current homeowner who has owned a primary residence for five years will be eligible for an incentive up to $6500 as long as the contract is written before April.  I’m getting ready for staging and my office filled with new agents, because it’ll be a busy Spring – if the House of Representatives allows it.

• Read More »

We are racing toward the sunset of the 2009 homebuyer tax credit program. Most of our first timer homebuyers are “safely” under contract awaiting inspections, appraisals and loan approvals prior to their November closings, so it’s appropriate to ask whether the government spent our $12 billion wisely, or was it plugging the dike with a TARP-like finger? Did the first time homebuyer tax credit actually do something to stimulate a failing economy $8,000 at a time?

When the program was announced in February, spending money for anything other than bare necessities was unthinkable and real estate was six feet underground. It took people several months to understand that there could be money to be made simply by moving into homeownership, and by July future young homebuyers began poking around with an increasing sense of urgency to close on their first place.

Now, with the deadline approaching, November will be a banner month for most real estate practitioners within every area of the industry.  For REALTORs, the heavy lifting is completed and the administrative tasks of negotiating inspection issues, monitoring deadlines and assuring lender performance has replaced the intensive work of home touring.  For other real estate professionals: title companies, inspectors, appraisers and lenders, they are working break-neck to assure November 30 closings.

But what happens on December 1st?  Well, as the tax credit checks begin making their way into our new homeowners’ mailboxes, it is quite probable that the Big Boxes, like The Home Depot will explode from thousands of newly appointed home handy men and women with  eight G’s burning holes in their pockets.  Carpenters, electricians, roofers and a plumber named Joe will all be on backlog for their schedules will be full and money will circulate.

Back to the REALTORs, though.  If an extension for the homebuyer tax credit is not granted by Congress, the real estate economy could take on a bleak tint which undoubtedly would trickle into retail sales and the construction trades.  We need an extension of the program. It is imperative. This has been the one bright light of the government’s attempt to right our economy that has actually worked.  By putting dollars into the hands of people who actually circulate the money, everyone benefits.  It is uncertain whether the programs for bailing out the banking and auto industry have accomplished as much.

-Dave Perlowski, GRI

MyH-O-M-E.com

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Well, sorta.

I just attended a seminar in Florida sponsored by Equity Trust, Inc. (www.trustetc.com)  about utilizing funds that may be tied up in IRA accounts to invest in real estate.  What a concept!  Especially now, when the volitility of the stock market has made uncertainty a fact of life.  There has not been a better time than the present to invest in real estate, especially in the Denver market where values are are on the uptick, and what better way to manage your own retirement destiny than to place your investment into something that will actually appreciate?

The best news, though, is that all of the profit that your real estate investments generate can be completely tax-free if they are done within the confines of a Roth IRA!  And as if that weren’t enough, the government has a special one-time deal for anyone, at any income level that may want to convert a tax-deferred account into a ”tax free” Roth IRA.

Normally, the conversion of a tax-deferred account into a Roth IRA required  taxes to be paid during the year the conversion was made.  But in 2010, the government is deferring the tax due for 50% of the conversion until 2011, with the remainder due in 2012.  What’s more is that anyone, at any income level will be eligible, but is has to happen in 2010.

Sure, this is a sneaky way for the government to extract tax dollars from the estimated $4.2 Trillion tied up in qualified plans, but what better way can you think of to take control of your financial destiny than by converting a standard security-based IRA into a Roth and purchasing Denver real estate with it?  Once done all of the gains are tax-free.

Of course, you’ll want to speak with your CPA for advice about how this works, but once you do, place a call to your expert REALTOR who can help plan the best approach for your real estate investment,

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No, I haven’t been on a month-long vacation.  Yes, I could use one.  Preferably on a golf course with palm trees and alligators patiently awaiting my every errant shot. 

It’s been busy at the MyH-O-M-E.com office.  There’s no question that the $8k stimulation bait has gotten the attention of first time home buyers and investors alike, because even those properties that were considered to be ugly listings just a month ago are receiving loads of showing activity.

Here’s an example:  I have a 3 bed, 1 bath listing located on one of the busiest boulevards in Colorado.  It’s in need of serious TLC, especially the inch-wide daylight-emitting crack along the entire north wall.  The kitchen and bathrooms require complete makeovers, and I’m not sure if the Home Depot has enough paint in stock to make the exterior pretty, but this basket case of a property has been shown 53 times in the two weeks since it was listed and we have received ten offers over the list price of $60k!  Those were from the investors.  We also receive a handful of offers below list price from misguided first time buyers who think that the market still favors them.

Here’s an article that appeared in today’s Denver Post.  I won’t ever say “I told you so,” but…

Metro Denver’s housing market experienced a big bump from February to March, but sales and prices continue to lag year-ago levels.

The number of area homes sold in March increased 29.1 percent to 3,206, compared with 2,484 in February, according to data released Tuesday. That’s still down 13.6 percent compared with the same month a year ago.

It’s the beginning of the prime selling season. We’re seeing pent-up demand and people out there looking to purchase homes. The median price of a single-family home was $203,950, up 6.2 percent compared with last month but off 9.3 percent from March last year. The median price of a condo was $128,500, a 9 percent increase over February and down 2.7 percent compared with the same month a year ago.

People are looking at condos as being more of a solid residential investment again versus a money-losing piece of property. Nearly half of the homes sold last month were in the $100,000-to-$200,000 price range, compared with previous months when many were $100,000 or less.

“There were 20,628 homes on the market in March, up 2.8 percent from the prior month but down 19.2 percent compared with the same time last year.

Homes are starting to sell faster, with the average days on market declining 6.7 percent to 101. Single-family homes were on the market an average of 99 days.  It’s under 100 days for the first time in six months.

Let the appreciation begin!

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