No one can deny what an amazing time it is to purchase a home in this current real estate market.  Since foreclosures are continuing to rise, one person’s tragedy can truly be another’s good fortune.  This is a once in a lifetime buying opportunity that we may never see again.  Incredibly low prices coupled with historically low interest rates makes today the perfect time to purchase a foreclosure.

However the complex and involved road to foreclosure purchase is filled with potholes and roadblocks.  No matter your level of experience, purchasing foreclosed real estate is best when guided by a professional.  Such complex transactions require the expertise of not just any real estate agent but one with a background in buying and selling foreclosed homes.  The lending institution is changing requirements, procedures and qualifications almost daily.  We know how to deal with these changes correctly, making offers more effective in a competitive foreclosure buying market.

Purchasing foreclosures can be overwhelming to the average buyer unfamiliar with Georgia foreclosure laws, local market trends and incredibly quick moving inventory.  This is why we compiled the “Buyers Foreclosure FAQ” for you.  When you are ready, contact the Walker Derby Team for assistance in purchasing foreclosed properties.

What is a REO Property?
REO means “Real Estate Owned” or Bank owned Property

What are the benefits of purchasing a foreclosure property?
Foreclosure and pre-foreclosure (short sales) can typically be purchased well below current market value helping the purchaser to walk into instant equity.

Where can the good foreclosure or pre-foreclosure deals be found?
There is no doubt that the most challenging part to buying real estate in general is first finding the good deal.  It is very competitive out there in the foreclosure world however an experienced Foreclosure Realtor can keep you on top of the heap by setting you up on a daily search of brand new listings.  You will need to move fast though.  Many new listings receive multiple offers within hours.

I feel like I'm taking advantage of someone in foreclosure if I try to buy their home for a discount.
Purchasing a pre foreclosure is only helping a homeowner avoid foreclosure. 

Is it true banks can call a loan due if title is transferred to someone else without the lenders consent?
Yes, the lenders have the option of calling the entire loan due (due-on-sale clause) but rarely ever do.  Banks are in the lending business.  They make money by lending money to you.  As long as someone is making payments to them, they most likely will not call the loan due.  The only time you really need to worry about lenders calling loans due, is if interest rates went up dramatically. For example, if the previous owner was locked in at 6%, and interest rates have climbed to 12%, you can bet most banks want the higher interest rate and more than likely they would call the loan due just so you would have to refinance with them.

Why are most of the properties in poor condition?
You must be prepared to have “vision” when searching in the bottom of the pricing bracket.  When homes are priced 30-50% below market, be prepared for needed work:  carpet replacement, repainting, home maintenance items.  The term “they took everything but the kitchen sink” can also be applied here as some previous homeowners take all appliances, lighting fixtures, ceiling fans, etc.  Also note that when homeowners are not making their monthly payments they are not properly investing in the upkeep of their home.  It is common to find exterior neglect (mold, wood rot, overflowing gutters, broken windows), unserviced systems (HVAC) and sometimes just simple property disrespect (holes in walls, broken cabinetry).

Will the banks repair the properties that are distressed?
It really depends.  The asset manager in charge of the property will confer with his broker prior to listing it to determine if it is a good candidate for repair or rehab. He will then proceed with a marketing strategy - either "as-is" or "repaired". The as-is properties are priced much lower, and the bank typically does not make repairs for these. They feel any repairs should be the responsibility of the buyer since the property's price is already discounted.

Can I ask for an allowance to repair cosmetic items?
If you are using an FHA Loan, underwriting guidelines will allow a maximum 6% in seller paid contributions which are normally split to the buyer as 3% in closing costs paid by seller and 3% in cosmetic allowance paid directly to contractor (for items such as paint and new carpet)

Are Foreclosure Homes sold “AS-IS”?
This also depends.  Normally the home is priced to take into account any needed repairs or after inspection the bank may allow an allowance for things such as plumbing or roofing.  Most listings are noted as to whether the property is being sold in as-is and your Realtor can assist you with the process.

Since the banks are desperate, can I lowball an offer to reduced home?
Not if you expect to be the winning bidder!  If you stumble across a foreclosure already priced anywhere from 15-50% below market value get ready for a possible bidding war.  Banks will continue to reduce prices until they get a bite and more likely than not when they get “a bite” it is more likely to get “multiple bites”!  The below market price is the bottom line the bank is willing to take at that time so if you need seller paid closing costs and/or seller paid allowances (for cosmetic items such as paint and carpet) it is best to roll that into the already stated price.  Also be prepared that in situations where homes are receiving multiple bids, the home will more than likely sell for greater than the list price.  Sometimes 10% or more!

What is a HUD Foreclosure Home?
A HUD home is a 1 to 4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.

Who can buy a HUD Home?
Almost anyone! If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.

Are there any special programs for HUD Homes?
Yes, it is called Good Neighbor Initiatives.  Properties in designated areas are available at a reduced sales price to law enforcement officers, teachers, firefighters, emergency medical technicians, nonprofits and local governments.

Are there any special financing programs for HUD Homes?
WOW!  There sure are!  Currently Fannie Mae is offering special financing incentives when you purchase one of their bank owned homes. 
Here is some more specific information about their guidelines:
97% (3% down) for owner occupied financing with NO MORTGAGE INSURANCE!

Why is this such a big deal?
A typical FHA loan with an equivalent down payment (3.5% down) would require 1.75% of the loan amount to be paid upfront for a mortgage insurance premium. Then on top of your monthly payment (PITI), you would be charged .55% (of the loan amount) every year for ongoing mortgage insurance.

Let me break this down so I don't throw too much loan lingo your way.. Here is an example mortgage insurance fees for an FHA loan of $200,000:
$200,000 x 1.75 = $3500 You would be charged this amount at closing or you could roll this into a loan on a traditional FHA loan program for the upfront mortgage insurance premium.

$200,000 x .55 / 12 months = $91.67 This means $91.67 would be added to your payment every month for mortgage insurance.
With this special financing offered by Fannie Mae you could put .5% LESS down than a FHA loan and you do no pay ANY MORTGAGE INSURANCE!  This really is a sweet deal!

Will Fannie Mae offer any special financing to Investors?
90% (10% down) for non owner occupied properties with NO MORTGAGE INSURANCE!
If you are looking for an investment home in and around Metro Atlanta, you know that you will get a better return on your investment if you have less money in the deal.  Right now with typical financing (actually offered by Fannie Mae for non-Fannie Mae owned homes), you should expect to put down at least 25%.  This is a significant difference!

How are foreclosure properties identified on the MLS?
Not all foreclosures are specifically identified by criteria you may search however an experienced Realtor can access confidential info only released to real estate professionals.  Fannie Mae REOs can also be accessed outside of the MLS.  It is important to have an experienced REO Realtor to assist you!

Bottom line, using an experienced Real Estate team that specializes in short sales, pre-foreclosures, and bank owned REO foreclosures is a must!  Please contact us today to get started!