Volume 18, Issue 4 October, 2008
Buying Foreclosures...Is it Worth it?
Price-conscious home buyers are lured by the low prices advertised for properties in foreclosure. They hope to show up at the auction and be the lowest bidder. However, many of these homes are not available for inspection prior to purchase. Is it smart to buy a home that you cannot inspect? Could be, if the price was low enough to compensate you for the amount of work that might be required to bring the condition of the home to market standards.
Before you rush forward to buy a foreclosure, stop to think about some of the drawbacks and repercussions if you can´t get in the house to inspect the interior.
Who is Living on the Property?
If the property is occupied, the successful bidder is typically responsible for removing the occupants, who may not be the previous owners. They could be relatives or friends of the owners, renters or squatters. You may have to evict them.
• If you are unfamiliar with the eviction process, you should hire an attorney to handle it for you.
• Be aware that tenants who are sued for eviction sometimes retaliate.
• A better solution might be to pay or bribe the occupants to leave.
Condition of Foreclosed Homes
Because these homes are purchased "as is" from the lender or HUD, there is no guarantee of condition. Sometimes it is possible to inspect these homes prior to making an offer, but sometimes access is not granted.
When sellers realize they are about to lose their homes through foreclosure, it´s not uncommon for them to stop caring for the property.
• If something breaks or malfunctions, they aren´t going to fix it.
• If they are angry or desperate enough, it´s possible they might actually destroy the house. Some have been known to flood the home, smash out walls, then pull out the copper pipes and wiring to sell as scrap metal.
• Owners will also sell the appliances and kitchen cabinets.
Buying foreclosures is not for the faint of heart. It´s best handled by the pros and is not recommended for first-time home buyers. Seminars don´t always prepare you for the fact that not all foreclosures are profitable.
Did You Know...?
• Add a teaspoon of water when frying ground beef. It will help pull the grease away from the meat while cooking.
• To avoid soggy leftover pizza, reheat in a non-stick skillet on top of the stove until warm. This will keep the crust crispy.
• Store opened cheese in aluminum foil to prevent mold.
• Double the amount of canned frosting by whipping it with a hand mixer for a few minutes. It will go farther and reduce the number of calories per serving.
• Pin a small safety pin to the seam of your slip to prevent a clingy skirt or dress. The same thing works with slacks.
• Dryer sheets can cause a build-up of waxy film on the lint filter, which will eventually burn out the heating unit in your dryer, or worse, cause a fire. To keep your dryer working for a very long time, be sure to wash the filter with hot soapy water and a brush every six months.
Marriage Doesn´t Mean Owning All Assets Jointly
Marriage is all about togetherness.Yet when it comes to owning assets,
too much togetherness may not be financially healthy.
Owning assets jointly is more convenient, and it´s the simplest way to
avoid probate after a spouse´s death. But couples should consider separating their assets. Here´s why:
Estate tax implications. Estate rules let spouses leave unlimited property
to each other tax free, but the tax bill upon the surviving spouse´s death
could result in a significant tax bill. Couples likely to have estate tax issues could acquire property individually to help maximize the value of each other´s estate tax exclusion.
Dividing jointly owned property. How you take title affects who can inherit your property. If you own it individually or jointly as "tenants in common," each of you may specify in your will that you want a particular asset or share of an asset to go to a designated heir. However, if you take title as "joint tenants" (with rights of survivorship) or "tenants by the entirety" - the most common form of ownership used by married couples-you won´t be able to say how the assets are split. That´s fine if you share the same beneficiaries, but it could be a problem if you´re in a second marriage and want to divide assets among children from different marriages.
Other considerations. Owning assets separately is especially important if
your combined net worth is at or above the IRS estate tax exemption-$2 million in 2008 and $3.5 million in 2009. Once you approach these levels, it pays to consider ways to separate these assets.
Deciding on how to hold title to your assets is not a simple decision, as
state laws differ and each situation is unique. Speak with your attorney to help you decide what´s best for you and your spouse.
A special thank you to Chris Holden with HomeStreet Bank for providing the above Newsletter.
What's the best way to handle the anxiety of buying a home?
Q: We are in the process of trying to buy a home, and I feel like I've been on an emotional roller-coaster ride. Is it normal to feel this way?
A: Yes. Buying a home is one of the most important decisions you will make, and most likely the largest financial investment. Because we live in an informative society, the choices we must make regarding the right home, area, price and financing can be quite overwhelming. Rely on a competent Realtor you can trust to help guide you in these areas. Most of these "emotional roller-coaster" feelings will subside. Some of these feelings are just excitement and anticipation of buying a new home.
I like to tell customers that buying a home is similar to having a baby. It can be very painful and frustrating at first, but the final prize is worth it all.
Q: When we were going to open houses, I felt panicky every time a nice house had a big crowd of visitors - like we were going to miss a great opportunity if we didn't act quickly. Do you have any practical advice on how homebuyers can better use their heads, not their hearts, in making such an important decision?
A: The real estate statistics we have show us if a home is in good condition, in a good location, and priced right, it is not unusual for it to sell quickly.
The open house is the initial time when a home is marketed to the general home-buying public. However, if you are working with a Realtor, he or she will be able to pull the home off the computer from the Realtors Multiple Listing Service as soon as it is available for sale. This is usually several days or even a week prior to the open house. This will enable you to make an appointment or take a "sneak preview" of the home prior to the open house, thereby giving you extra time to think about whether to by the home.
Q: The night our Realtor gave the sellers our offer and we were waiting for their reply, I didn´t sleep a wink, wondering whether we´d offered enough, or too much. How can we be assured we´re doing the right thing?
A: Being assured you´ve done the right thing doesn´t always hinge on price. In this day and age many other aspects should affect our decision of a home purchase. Things such as:
- Is the location a safe place for my family?
- How long will it take me to get to work?
- How close are the schools?
- Where are the nearest parks?
- How much privacy will I have from my neighbors?
- How livable is the plan?
In the old days, appreciation of the property was usually one of the biggest reasons for buying a home. It is still important, but there are several safeguards for offering too much.
As a home buyer, you need to be familiar with the prices in the area you are considering. As you begin to compare these homes, you will become aware of which of them are overpriced. Also, if you are working with a Realtor who is your buyer´s agent, you could ask him or her to pull comparable homes from the multiple listing computer which have recently sold and closed. These comparables will help you to know whether what you are offering is the right value.
Q: We´ve had friends whose sales have fallen apart before the end. At what point can an anxious buyer relax and start gathering curtain swatches?
A: After spending 17 years in real estate, there is one thing I know is for sure. A sale can actually fall apart right up to the final closing date. While that´s unusual, it can happen. There are as many as 25 to 40 possible different people involved in your home purchase. Because of this, if any oversight or error is made along the way, all could go awry. My best advice to prevent this is as follows:
Get yourself completely pre-approved for a loan by a reputable lender. If you do this, you also have much more negotiating power when you find your home. If there are two offers on a property, and one of the buyers is pre-approved and the other buyer is not, the chances are that the pre-approved buyer will probably win out.
Be sure all contingencies have been removed as soon as possible. If repairs need to be made on the home, negotiate who will pay these right after the home inspection. If the roof is questionable, ask for a roof certification from a reputable roofer.
Be sure to carefully read the preliminary title report from the title company. Call and ask the title rep questions if you don´t understand the report. If you are currently renting an apartment or home, never give your 30-day notice until your loan and the home have been completely approved by the lender. This sometimes involves extra rent for you, but is always the safest decision, since something could always go wrong and hold up to the closing of your new home. If you are selling your current home, be sure to include a time when you can rent back your property after closing. No one likes to make an interim move.
Linda Eaton is a broker with Remax Equity Group West Hills office. She is also a Certified Residential Specialist and a Graduate of the Realtors Institute.
