Is a Foreclosure Purchase a Good Idea?

No matter where you live, the topic of purchasing a foreclosed home is bound to come up in social settings. That’s because there are so many right now, and there are so many people promoting the foreclosure investment opportunities. But are foreclosures really a good deal?To determine if buying foreclosures is for you, you have to understand the process as well as the pros and cons of this type of sale. So let’s begin.

What are the benefits?

How much of a bargain you are getting on the home depends on local conditions. In many instances foreclosed properties are being directly compared to other properties that are in foreclosure which means the foreclosed properties are actually setting the market value.Even so, buying foreclosures intrigues many.

Richard Geller, CEO of says "There’s little risk and can be great rewards if you purchase the property in a short sale." A short sale is when a home is sold in the pre-foreclosure phase. The lender agrees to the sale and ends up taking less than the amount owed to the lender. Basically, the lender is letting the homeowner out of the mortgage in order to have the home be sold to a third-party buyer.

There are several other benefits to buying foreclosures, whether it’s a short sale or in any other phase of the foreclosure process. Lower purchase price equals a lower required down payment. Of course, foreclosures typically have motivated sellers who are eager to climb out from beneath the debt, and with that there can be motivated lenders who are hoping to not end up owning a property and then trying to sell it. However, don't expect any negotiations for repairs to be done to these properties as they truly are sold  in "as is" condition.

The disadvantages

Here’s what you should consider before you leap with both feet and your wallet into this marketplace.Some foreclosures have what is called a “cloud on title”. In other words, there are liens or judgments against them. Some buyers get what they think is a “steal” at an auction, only to find out later that the property has significant liens attached to it and now must be paid by the buyer which can result in taking a loss on the property.

Keep in mind, especially with properties sold at auctions, you will be taking the property sometimes “sight unseen” and “as is”. Both of these should make you think before you slap down the money to buy a foreclosure. There can be a considerable amount of work to rehabilitate the property.

Foreclosed-on homeowners may sell fixtures out of the home before they are evicted. “So you may find a foreclosure home without air conditioners, dishwashers, light fixtures — anything they can sell  to get some extra cash.  Buyers should be prepared to do out-of-pocket work on the home to get it to the condition they want.

Your best bet is to go into the foreclosure market knowing that while the properties may not be perfect, the end result can be the best for all — a discounted property for you, the investor, and helping a neighborhood to reduce potential blight.


Is a New Home the Right Fit for You?

The real estate market is full of a great variety of homes for potential buyers to choose from. One of the first decisions a potential buyer must consider is their preference for finding an existing home or building a new one. Here's some things to consider about buying a new home:

Aggressive incentives are alluring. The common consumer urge to “never pass up a deal” can blur objective reasoning in this very important decision-making process. But, while many buyers would be good candidates for a brand new home, incentives are just gravy and shouldn’t be a major factor in weighing housing options. There can be more costs and stresses tied to acquiring a new home versus an existing one.

For example, a spike in driving can mean a drain on the wallet. Generally, existing homes are closer to town with better access to jobs, shopping and schools. New construction subdivisions tend to be on the outskirts of town, which may make for a longer compute or further drive for shopping.

Making a house a home. The feeling of a brand new house can be intoxicating. But once that feeling subsides and the new homeowner begins decorating, the need to start from scratch can be overwhelming. While interior design can be fun, it can turn expensive and stressful.

Buyers can often find an existing home to live in while accomplishing the decorating and/or remodeling changes. And many sellers have already neutralized and made the necessary repairs in order to sell more quickly.

Surprises on actual costs. Existing homes usually cost less per square foot due to escalating land costs in new subdivisions. New homes are often built in outlying areas where the municipalities need to charge higher taxes, as there are fewer families to pay for basic services. Additionally, newer homes are often subject to assessment fees for amenities the family may or may not use.

Rome wasn’t built in a day. Owners in a new construction subdivision must be prepared for the daily noise and dust of construction crews, trucks, neighbors moving in, streets changing and traffic increasing.
Source: Monica O’Neil / Warranty of America.

Study Finds Gaps in Online Listing Information

Some home shoppers may not be getting a full or accurate picture when they view listing information on some popular real estate Web sites, suggests a study conducted by the WAV Group on behalf of Redfin. 

The study evaluated the accuracy of information contained in more than 6,000 listings among 33 ZIP codes on five sites: Zillow, Trulia, Redfin, and two regional real estate brokerages — Windermere and Long & Foster.

The Redfin study found that 36 percent of the agent-listed homes shown as active listings on Zillow and 37 percent of those on Trulia were no longer for sale on the local multiple listing service.

“Zillow and Trulia do not dispute that their listings have some gaps and inaccuracies, though they dispute some of the particulars of the Redfin study,” The New York Times reports. “There’s a simple reason they don’t have everything their rivals do: Neither of them belongs to the local MLSs, which provide the most complete set of agent-listed properties.”

Zillow and Trulia are not real estate brokerages. Real estate brokers can provide electronic feeds or add their listings so they appear on the real estate sites. As such, some agents that do provide feeds to the sites don’t take listings down quickly after the property sells, says Glenn Kelman, chief executive of Redfin.
Trulia says it is forming stronger relationships with brokers so that it can improve the accuracy and completeness of its listing information, according to The New York Times. Zillow said it was making a similar effort.

“There is no gold standard for listings data, so comparing Zillow’s MLS-only listings to an MLS isn’t going to give you the whole picture,” says Cynthia Nowak, a spokeswoman for Zillow, adding that Zillow also includes items that aren’t often listed on the MLS, like for-sale-by-owner listings and new construction.
Source: “On Big Real Estate Sites, Study Finds Gaps in Listings,” The New York Times

Mortgage Rates Reach New Record

Fixed-rate mortgages set new all-time lows for the second consecutive week, Freddie Mac reports in its weekly mortgage market survey.
"Fixed mortgage rates fell again this week to all-time record lows due to the mortgage securities purchases by the Federal Reserve and indicators of a weakening economy,” says Frank Nothaft, Freddie Mac’s chief economist.
The Federal Reserve’s move recently to buy up $40 billion of mortgage-backed securities each month until the job market improves is causing mortgage rates to fall.
Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 4:
  • 30-year fixed-rate mortgages: averaged a new record of 3.36 percent, with an average 0.6 point, dropping from last week’s previous record of 3.40 percent. A year ago, 30-year mortgages averaged 3.94 percent. 
  • 15-year fixed-rate mortgages: averaged a new record low of 2.69 percent, with an average 0.5 point, dropping from last week’s previous record, 2.73 percent. A year ago, 15-year rates averaged 3.26 percent.  
  • 5-year adjustable-rate mortgages: averaged 2.72 percent, with an average 0.6 point, rising slightly from last week’s 2.71 percent average. Last year at this time, 5-year ARMs averaged 2.96 percent.
  • 1-year ARMs: averaged 2.57 percent, with an average 0.4 point, dropping from last week’s 2.60 percent average. A year ago, 1-year ARMs averaged 2.95 percent.
Source: Freddie Mac

The Importance of Good Credit

If you’re thinking about buying a home, you need to be aware of your credit. Better credit may mean mortgage opportunities with lower rates.  

What Is Your Credit Report?
Your credit report is a record of money you've borrowed, your history of paying it back and how much open credit is available to you. It consists of a list of debts and a history of how you've paid them, including credit cards, car loans and student loans. Any bills referred to a collection agency, such as utility or medical bills that you did not pay or were significantly late. Public-record information, such as tax liens and bankruptcies that may be linked to you. Inquiries made about your creditworthiness, showing how many inquiries were made for your credit and if you were given credit based on the inquiry.  

What Is Your Credit Score?
Your credit score is a single number that helps lenders decide how likely you are to repay your debts and plays a significant role when securing a mortgage. A score ranges from 300 – 850 points and is based on: Your payment history and ability to repay your debts on time. Late payments will decrease your credit score. The amount of total debt you owe, including credit cards, student loans and car loans. If your credit cards are at their limits, this can lower your credit score - even if the amount you owe isn't large. How long you've used credit and how you’ve managed it.

If you show a pattern of managing your credit wisely, keeping credit card balances low and paying your bills on time, your credit score will be positively affected. How often you apply for new credit and take on new debt. If you've applied for several credit cards at the same time, your credit score can go down. The types of credit you currently use, including credit cards, retail accounts, installment loans, finance company accounts and mortgages.  

What Does Your Credit Score Mean?
Credit scores ranging from 770 to 850 are considered very good, and the best credit rates are usually available to borrowers within this range. Credit scores above 700 are considered good, and most borrowers' credit scores are within this range. The median credit score is about 725. Credit scores below the mid-600s may have difficulty obtaining a loan, and will experience higher interest rates and/or larger down payments.  

You are entitled by law to get a free copy of your credit report:
  • Every 12 months 
  • Every time you find a mistake and want to make sure it's been fixed 
  • If you've been denied credit and in certain other situations, such as fraud 

To get your annual free credit report, go to or call (877) 322-8228. For more information about your rights regarding credit and the Fair Credit Reporting Act, visit the Federal Trade Commission Web site.

To help you build, maintain and protect your credit:
Establish credit if you don't have any. Open a free or low-cost checking or savings account and apply for one or two credit cards but use them carefully. It is important for lenders to verify that you have a credit history to determine your ability to repay your debts Limit your number of credit cards and try to pay the balances in full every month. Using your credit cards responsibly can help you build excellent credit. Honor your promise to pay your debts.

With good credit, you can borrow for other major expenses, such as a home, car, or education, at a lower cost – ultimately saving you money. Seek the guidance of a HUD approved counseling agency for free, confidential advice if you run into problems paying your bills. The sooner you reach out, the more likely they can help you. Be sure to protect your private information. Do not provide any personal information (such as your social security number or credit card numbers) over the phone, online or through the mail unless you know the person or company.

By understanding your credit and the important role it plays with securing a home loan, you’ll be on the right path to realizing your goals. Remember, strong credit will provide you with many financial advantages so it’s worth the effort to maintain it.
Source: Freddie Mac

Tips for Improving the Saleability of your Home - part 2 of 2

Here's the conclusion of the article from yesterday with more tips to help you sell your home quicker and for more money...
  1. Get the house inspected before it’s listed to know its condition and identify any structural issues that could derail sales. Many problems can’t be detected by an untrained eye, including those in a basement, crawl space, or attic, says BillJacques, president-elect of the American Society of Home Inspectors. “There might be roof damage or a plumbing leak. Many inspectors take photos and provide a detailed report,” he says. “And if home owners have repairs made, they should be handled by a qualified licensed contractor, so the home owner can get problems corrected.”
  2. Outfit closets for extra storage to make rooms look larger and less cluttered.Top contenders for redos are an entry closet for a good first impression, kitchen pantries where storage is key, and a linen closet to keep sheets, towels, and other stuff neat.
  3. Tighten a home’s “envelope” to improve energy efficiency and savings. Put money and effort into well-insulated double-paned windows, sealed furnace ducts, energy-efficient appliances, the newest programmable thermostats, LED and compact fluorescent lights, and a smart irrigation box on a sprinkler to cut water usage. If you've already done this, you can show buyers how costs have dropped. Also should put together a "green" manual to show which features have been added.
  4. Improve a home’s healthfulness by using paints and adhesives with low or no VOCs. Point out these changes to prospective buyers in another list or manual.
  5. Use what you have, and arrange each room in a conversational way if possible. Don’t set all furnishings in a family room so they face a TV, since most potential buyers like the idea of an open-room milieu for socializing.
  6. Remove and replaced faded draperies, fabrics, and rugs, or leave windows and floors bare to avoid showing lack of attention. Slipcovers, which can cover worn furniture can also provide an affordable decorative feature, changed for each season.
  7. Replace old, dated, or worn bedding. Before any showing, fluff up pillows and covers, and make all beds neatly. 
  8. Toss out old magazines. You don’t want a People magazine from a year ago; it looks like nobody lives in the house or cares.
  9. Check smells regularly. Besides getting rid of bad odors from pets and mildew, introduce nice fresh fragrances, but don’t go heavy on scents from candles. A light lavender or citrus spray is smart and inoffensive. Open windows before showings to bring in fresh air.
  10. Make rooms lighter and larger for showings with good lighting. If it has minimal windows, make sure you maximize on the lighting.
  11. Go with plants rather than flowers indoors since they last longer, but either choice can add vivacity to a room.
  12. Pay attention to your bathrooms. Specifically, make sure you have freshly laundered towels, new soap in soap dishes, spotless mirrors, and no mildew in view.
  13. Be sure your house is priced competitively with the current market and homes in your area. In most regions, it’s still the No. 1 “fix” to sell quickly. Go a bit under the market price, and you may even bring forth multiple offers that are higher than expected. 
Source: Realtor Magazine

Tips for Improving the Saleability of your Home - part 1 of 2

Even with rising values and reduced inventory in certain markets, selling a home remains challenging. Buyers who like to watch home improvement shows expect not just a shiny new stainless sink but pruned hedges, freshly painted walls, glistening hardwood floors, and more. Prioritize based on the condition of what’s needed most when you get your home ready to put it on the market. Here’s a list of affordable, easy-to-make changes from top design and real-estate pros:
  1. Add power outlets with USB ports in rooms that lack them, especially in the kitchen, bathrooms, and bedrooms where they’re most needed. Younger, more tech-savvy couples and individuals love them.
  2. Eliminate acoustic popcorn-style ceilings since they look dated.
  3. Remove exposed posts and half walls. Today’s buyers want more space, and partial walls and posts gobble up room. The only walls that should remain are those that offer privacy or conceal electrical wires or plumbing stacks.
  4. Update wiring for the Internet and flat-screen TVs. You don’t have to run CAT-5 through walls, which can be costly and require opening and closing and repainting walls. Instead, find a place to put a wireless router.
  5. Clean carpets and wood floors. This is a must since they’re often the first part of a room that buyers check out; you don’t need to replace them unless they’re in terrible shape. A good carpet steam cleaning or wood floor waxing can be relatively inexpensive, sometimes less than $200.
  6. Expand a small kitchen to make it work better and look larger. Two quick fixes: Change the backsplash by adding mirrors, stainless steel, or paint, which will introduce light and views; and add an island, which requires only 30” between counters and the island to pass through comfortably. If there’s not enough room for an island, bring in a rolling cart with pull-out shelves underneath and a wood top.
  7. Clear out and clean a garage. Power wash the floor or paint it if it’s in bad shape, remove dated cabinets, and remove all junk that’s been stored there, so prospects can see how much space they would have for their stuff.
  8. Change out corroded or dented door knobs and levers. The replacements don’t have to be expensive but they should look new and clean,
  9. Pay attention to landscaping, which can add 7 -15 % to a home’s value, according to Jessy Berg and Bonnie Gemmell of Focus on mowing grass, removing crab grass, and eliminating dead plants and tree branches. If you have extra funds, add lots of seasonal color through blooming annuals and perennial plants and remove problems like too much noise from traffic or neighbors by installing an inexpensive fountain with trickling water.
  10. Paint exterior windows, doors, gutters, downspouts, and trim, then go inside and paint the home’s trim, doorways, and walls that are in need of freshening. Don’t worry about the colors but consider those that veer toward quiet and comfort. Painting rooms lighter colors such as white, yellow, and beige help to bounce and reflect sunlight and use more natural and less artificial light.
  11. Remove outdated wallpaper, replacing it with paint and preferably a neutral color.
  12. Remove, store, or discard excessive accessories on tabletops and walls and in cabinets. Less is more, and you want the house to be seen by prospective buyers without the distraction of too many personal items.Some suggest following the rule of three: Leave out only three things on any surface.
Souce: Realtor Magazine