Gilbert Real Estate Blog
~ by Randy Hooker of Dreamcatcher Realty
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Archive for November, 2011
11th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first ten installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures, 5th Thing You Should Know About Buying Foreclosures, 6th Thing You Should Know About Buying Foreclosures, 7th Thing You Should Know About Buying Foreclosures, 8th Thing You Should Know About Buying Foreclosures, 9th Thing You Should Know About Buying Foreclosures, 10th Thing You Should Know About Buying Foreclosures), I wrote about Terminology, Pricing, Multiple Offers, Response Time, Property Condition, Repairs, Utilities, Bank Addenda, Owner-Occupant vs. Investor Buyers, and Closing Costs – as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 11th post of the series:
- Appraisals – Perhaps the biggest ‘wild card’ of residential real estate these days is the infamous appraisal that is a requirement of any purchase utilizing a mortgage loan. Appraisers can no longer be influenced or manipulated by lenders or real estate agents, and in fact, appraisals are now done via third party appraisal management companies. That may very well reduce or eliminate undue influence by a lender or agent, but it also sets up the possibility of an inexperienced appraiser turning in a bad appraisal. Or an appraisal can be done by an appraiser that is not at all familiar with the particular area in which the appraised property is located.
The appraisal can ultimately make or break a transaction. What if the appraised comes in with a value that is substantially below the contracted price? Will the buyer be willing to ‘eat’ the difference? Will the bank/seller be willing to reduce the contracted purchase price to match the appraisal? Will the buyer and seller be willing to split the difference?
In transactions involving Foreclosures, there’s little or no direct negotiating with the bank/seller, so it’s vital that your Buyer’s Agent is experienced and knowledgeable in how to present the low appraisal to the listing/seller’s agent.
10th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first nine installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures, 5th Thing You Should Know About Buying Foreclosures, 6th Thing You Should Know About Buying Foreclosures, 7th Thing You Should Know About Buying Foreclosures, 8th Thing You Should Know About Buying Foreclosures, 9th Thing You Should Know About Buying Foreclosures), I wrote about Terminology, Pricing, Multiple Offers, Response Time, Property Condition, Repairs, Utilities, Bank Addenda and Owner-Occupant vs. Investor Buyers – as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 10th post of the series:
- Closing Costs – Many home buyers these days are utilizing FHA financing that requires only a 3.5% minimum down payment. But for many home buyers, especially first timer buyers, closing costs of 3-5% can be cash prohibitive. As a result of current market conditions, it’s become a fairly common practice for buyers to ask bank/sellers to make ‘concessions’ of 3-3.5% toward buyers’ closing costs and prepaids. Generally speaking, most bank/sellers are receptive to paying such closing costs, but not always. Once again, how receptive any given seller is to paying such concessions depends on the particular bank/seller, asset manager, pricing on the property, if multiple offers have been submitted, comparable sales in the area, and a number of other variables.
The strategy and structure of your offer is extremely critical when it comes to bank owned foreclosures. It needs to be competitive with other buyers, but it also needs to be within reasonable appraisal range, include terms and conditions that are favorable to your financial situation, cash flow, etc., and yet it has to be attractive enough to a bank/seller to invite them to accept your offer. Best advice is to work closely with your Buyer’s Agent in drafting your offer. An experienced, knowledgeable and skilled Buyer’s Agent can be worth a pot of gold at this stage!
9th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first eight installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures, 5th Thing You Should Know About Buying Foreclosures, 6th Thing You Should Know About Buying Foreclosures, 7th Thing You Should Know About Buying Foreclosures, 8th Thing You Should Know About Buying Foreclosures), I wrote about Terminology, Pricing, Multiple Offers, Response Time, Property Condition, Repairs, Utilities and Bank Addenda – as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 9th post of the series:
- Investors vs. Owner-Occupants – Fannie Mae, Freddie Mac and a couple other banks have implemented what is commonly known as a FirstLook Policy. During the first 15 days of the listing (for Fannie & Freddie), the bank/seller will not accept, entertain or consider any offer that is not from an owner-occupant buyer.
In other words, no investor offers or second home buyer offers may be submitted until at least 15 calendar days have passed, thus theoretically giving owner-occupant home buyers first shot at the property. Other banks that are following the lead of Fannie and Freddie have implemented similar policies, with owner-occupant offers given priority consideration for the first 5-7 days of the listing.
So how might this affect your home buying strategy? You need to be aware that if you’re a buyer looking to purchase and occupy a home, then you have a significant advantage during the first 15 days of such new listings. You will be in competition with other owner-occupant buyers, but investors and second home buyers will not be able to compete with you. Be sure to consult with your Buyer’s Agent about the nuances of this advantage, and how you can best take advantage of it.
If on the other hand you’re a second home buyer or investor, then your best strategy is going to be in spotting potential bank owned bargains and then ‘hawking’ them until the FirstLook period has expired. And prudence would dictate that you be fully prepared to submit an offer on the 16th day of the listing.
Make sense?
Thinking of Entering into a Lease with Option to Purchase a Home? You might want to think again!
Here’s a short video by one of my favorite real estate vloggers, Jessica Edwards from Wilmington, North Carolina.
As you’ll see, she makes a great case for why it’s a BAD idea for sellers to enter into a lease with purchase option.
In another post I’ll address why it’s an even WORSE idea for a home buyer to enter into a lease with purchase option, or what I call a “Glorified Lease.”
Regardless of whether you’re a home seller or buyer, I urge you to NOT enter into a lease with purchase option without solid legal counsel.
As always, I’m open to your comments or questions!
8th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first seven installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures, 5th Thing You Should Know About Buying Foreclosures, 6th Thing You Should Know About Buying Foreclosures, 7th Thing You Should Know About Buying Foreclosures) I wrote about Terminology, Pricing, Multiple Offers, Response Time, Property Condition, Repairs and Utilities – as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 8th post of the series:
- Bank Addenda – It’s a common practice for banks/sellers to require the buyer to sign off on their counter offer and/or addenda PRIOR to the bank/seller signing the contract or addenda. Each bank and bank asset manager operates their own way, but the buyer should be aware that the bank will inevitably require their own documents to be executed by the buyer before the buyer is ‘awarded’ a contract for purchase of the property.
Once again, Buyer Beware! Often these addenda and counter offers contain language that supersedes or nullifies certain clauses in the standard Arizona Purchase Contract, so make sure you thoroughly understand the language and intent of the addenda. If and when in doubt, consult your buyer’s agent and attorney.
7th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first six installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures, 5th Thing You Should Know About Buying Foreclosures, 6th Thing You Should Know About Buying Foreclosures) I wrote about Terminology, Pricing, Multiple Offers, Response Time, Property Condition and Repairs – as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 7th post of the series:
- Utilities – Most banks/sellers will agree to turn on water and electricity to the property in order for a professional home inspection to be conducted. However, some banks/sellers flat out refuse to turn on the utilities. The primary issue here is that it’s impossible to check out a gas furnace, water heater, range/stove, fireplace or any other gas appliance when the gas not on. And it’s impossible to check out or inspect plumbing and electrical systems and appliances when the electricity and water are not turned on.
And to add further insult to possible injury, if turning on the utilities by the buyer results in damage to the property (like the house blowing up, burning down, suffering water damage, etc.), the bank/seller can technically hold the buyer responsible – a risky proposition at best.
Why would a bank/seller refuse to turn on gas, in particular? The explanations always come down that the seller does not want the extra liability and exposure to potential hazards involved in turning on the gas. But in my experience, that’s a load of horse hockey! Truth be told, I fully believe it has more to do with a listing/seller’s agent or bank/seller’s asset manager who does not want the extra hassle and time commitment that’s involved with having to wait on the gas man to physically go to the house, inspect the meter and pressure, double-check the gas appliances, light the pilots and otherwise make sure the property is safe from any gas hazards. And I find it extremely interesting that if the gas company detects ANY type of leak or problem, they will NOT turn on the gas. Of course, in that event the seller would then be obligated to find and fix the problem(s), but there’s no way in hell that the gas company will leave the property in a hazardous condition – thus shooting holes in the banks/sellers’ claims that turning on the gas can be hazardous.
Once again, I would strongly urge you as a home buyer to consult with your Buyer’s Agent about any utilities issues BEFORE you sign the purchase contract and bank addenda. And you should also discuss the potential ramifications and risks involved with NOT turning on the utilities or NOT performing appropriate inspections by qualified professionals.
6th Thing You Should Know About Buying Foreclosures in Gilbert, Arizona
In the first five installments of this series (1st Thing You Should Know About Buying Foreclosures, 2nd Thing You Should Know About Buying Foreclosures, 3rd Thing You Should Know About Buying Foreclosures, 4th Thing You Should Know About Buying Foreclosures, 5th Thing You Should Know About Buying Foreclosures), I wrote about Terminology, Pricing, Multiple Offers, Response Time and Property Condition as they relate to “Things You Should Know About Buying a Foreclosure.” Here’s the 6th post of the series:
- Repairs - Most Buyer’s Agents out there are unaware that there have actually been cases where the bank did indeed agree to perform a specific repair, in spite of their AS-IS stipulations. During a professional home inspection, occasionally a major problem is detected. Some examples would be an A/C unit that is inoperable, roofs that have serious problems or zero life expectancy, electrical issues that pose a health and safety hazard, plumbing problems that pose imminent water damage risks, etc. These types of property conditions are what some people call “deal breakers,” as they can often result in the buyer canceling the contract and walking away from the property. However, an experienced Buyer’s Agent can present a copy of the inspection report(s) to the listing/seller’s agent, along with a carefully worded repair/replacement request. The incentive for the seller to consider the repair is that they now know the condition exists, and they know that any subsequent buyer will encounter/discover the same problem. So often the bank/seller will actually agree to perform the repair(s).
I want to emphasize that there are no set rules, customary practices, ‘normal’ responses or even reasonable decisions made by any given bank or asset manager. This arena is clearly an art, not a science. Just be sure your Buyer’s Agent is an experienced, skillful artist.
