DATELINE SANTA FE

Foreclosures: Deal or No Deal

Last month several of the nation’s top banks announced a suspension in the sale of their foreclosure (REO) inventory in the 24 judicial foreclosure states which includes New Mexico. Concerns over fraudulent filings and improper procedures only compound the potential problems in store for those seeking deals on foreclosed properties. RealtyTrac, which tracks foreclosure data, reported that for the third quarter of 2010 foreclosure filings were up 4% from the previous quarter to a record of 930,437 properties. Halting the sale of these properties will create pressure in the market and we anticipate a corresponding spike in sales once the moratorium is lifted. If you are a homebuyer looking to find a deal on a distressed property, we would like to share some insights with you.

First and foremost, don’t go it alone. If you are thinking you can double down on your savings by negotiating with the bank on your own, you may be woefully mistaken. Foreclosures are challenging purchases and an experienced broker is your best strategy for success. All too often we see homebuyers who think they are getting a deal but end up overpaying on a foreclosure with many latent defects and little to no recourse.

Just because a house is a foreclosure doesn’t mean that it is priced below market value. Many banks list their REO’s at appraised value and take a wait and see approach. Use a knowledgeable agent to evaluate the property and ask him to provide you with a comparative market analysis, CMA. Keep in mind that what a home appraised for a year ago is of no value today.

Banks do not provide a seller’s disclosure and will sell a property “as is”. This means that it comes down to your own due diligence. Hire a good home inspector to provide you with a detailed report. Homes that have been winterized and utilities turned off require special attention. It is imperative that you have the bank turn on the water and electricity prior to your inspections. If they will not turn the utilities back on, back away.

If your foreclosure is a fixer upper, have a qualified contractor provide you with detailed estimates of the costs involved. Once you take the purchase price and add on the cost of repairs, it may no longer seems like such a great deal. If you are having trouble getting a loan because your lender doesn’t like that the dry wall is falling off and the kitchen has been ripped out, you may find help financing. The 203K is a mortgage that the F.H.A. offers to help homeowners buy and rehabilitate foreclosed properties.

Ask your title company to provide you with a current title binder and examine it carefully. The New York Times reported a story recently of a couple who thought they were getting a deal on a foreclosure at auction only to discover after the sale that they paid $137,000 for a second mortgage and there was a large, delinquent first mortgage in place. Ouch! In our state, the previous owner has the right to redeem their property within a certain time period so be clear that you know what that time frame is.

It’s too early to tell if this moratorium will become a major story but it is clear that foreclosure concerns will be with us for a while. Although opportunities are out there, buying a foreclosure is in no way a guarantee of value. Create a team of professionals to aide you in your purchase of a foreclosure and increase your chances of getting a deal.

November 22, 2010 Posted by Carson & Carson | Realtor 121 | Bank Owned Property, REO, Santa Fe Foreclosures | Leave a Comment