The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust." Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that "the lender has foreclosed its mortgage or lien."
Buying a foreclosure can be a great way to get a home for less, whether you're planning to live in the property or rent it out. The supply of foreclosures certainly isn't going to dry up soon, which means plenty of opportunities for home seekers and investors.
Some banks slash a property's price for a quick sale, which means you'll get the house for less than comparable homes in the area. Other banks don't offer much, if any, discount, and intense investor interest in a property can lead to a bidding war that drives up the price.
"The first and arguably most important issue to consider when looking for a bargain-basement buy on a foreclosed home is the property's condition. Most residents of foreclosed homes are none too happy about their eviction, and many physically take out their discontent on the house itself. Missing plumbing, holes in walls and broken appliances are all common, and as many as half of all foreclosed properties have major damages from a former owner. Even if there's no intentional damage, foreclosing on a home is a lengthy process -- often taking a year or longer -- so it's pretty much guaranteed that the property hasn't been properly kept up for at least 12 months. You're going to have to move fast to secure a property, leaving little time for a proper home inspection. In fact, many people buy foreclosed homes at auctions, sight unseen. That's a risky gamble for a company or a wealthy investor, but it can be disastrous for someone who's hoping to make a quick profit by flipping the house or for budget-minded home shoppers."TLC
A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts. The lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower.
Definitely! Hiring a professional home inspector can save a great deal of grief for buyers. The one exception would be when the home is new and carries a written warranty by the builder.
Many buyers mistakenly believe that the only reason to have a home inspection is to make sure that the house they are buying does not have defects serious enough to warrant backing out of the transaction. But there is more to it than that.
Certainly, an inspection will usually reveal major problems that may even surprise the seller. The obvious ones are corroded plumbing, antiquated and unsafe electrical, or structural and foundation problems. The discovery of such problems may cause the buyer to re-think his or her offer.
Although a competent inspector can uncover deal-crushing defects, these problems are usually not commonplace. Typically, the seller will already have told the buyer about anything major. More often, inspections reveal less serious problems; problems that may not be serious but can be aggravating.
There is, of course, the possibility that the home inspection will produce another outcome: everything is fine. In this case, the buyer gains piece of mind, confident about the major investment s/he is about to make. That, too, is an enormous benefit for the cost of the inspection.
By asking Adams Realty, friends, or lender. Inspectors are also listed in the Yellow Pages under "Home Inspection Services." But, a word of advice - do not hire a contractor. Contractors earn their living doing repair and renovation work, so their recommendations aren't likely to be as objective as those of a professional inspector.
One of the first things you might want to consider doing as you begin searching for a new home is to get pre-approved for a mortgage. A pre-approved buyer is one who has completed the mortgage process and has actually been approved for a mortgage up to a specified amount.
A pre-qualified buyer is one that has submitted certain income information that a lender uses to say they are qualified to borrow up to a specified amount. However, the lender has not verified any of the information that has been submitted and may also require additional information before final approval is granted.
Generally, mortgage companies and banks look for a monthly mortgage payment that is 28% or less of your gross monthly income and total debt including bank loans and credit cards that is less than 36% of your gross monthly income.
Being pre-approved is useful for a number of reasons. First, it lets you know just how much you can afford to spend on a home purchase. You'll know exactly what the bank will finance, you'll know how much you need for a down payment, and finally, you'll know just how much closing costs will be. Once you've been pre-approved, you can also sleep at night knowing that as you shop for your new home, there won't be any obstacles to financing the purchase.
Secondly, pre-approval will aid you in your purchase negotiations. Most offers to buy property are contingent on being able to finance the purchase. A pre-approved buyer is a fully qualified buyer which the seller is often more willing to negotiate the price with.
You've been pre-approved for a mortgage and you've found the house you want to buy. You like the neighborhood, the schools, the community facilities, the shopping and the roads into and out of the neighborhood. Now it's time to negotiate the price. It is important to remember that the seller has made a valid, legal offer to sell his or her home at a specified price and inclusive of specific personal property. In reality, you are presenting a counter offer or proposal. When considering the seller's initial offer you should keep in mind several key factors:
Given your consideration of all the above topics, you're ready to make a counter offer. In doing so, try not to criticize the furnishing of the individual's home. You may not like the color of the carpets, walls, or wallpaper; but, saying so will only alienate the seller and make them less willing to negotiate. Unless they are in poor condition, something you've already considered in the inspection phase, their aesthetics do not detract from the value of the home.
Likewise, a low ball offer will almost always be rejected and can only serve to alienate the seller, making them less willing to negotiate in good faith. Be reasonable in your offer and you are more likely to get a fair price. There is nothing wrong, however, on countering with a low offer on a home that you feel is grossly overpriced based on your research. Finally, your counter offer should be for a very short time duration; often 24 hours. This prevents the seller from shopping your offer to another buyer and using it to get a higher price.
Elements of an offer
The fixed rate mortgage offers stability, but a higher payment. The adjustable rate has a lower initial payment and enables you to get a larger loan, but it's more risky because you cannot predict how interest rates will fluctuate. If you are considering an ARM, ask the following:
1. Will my income cover higher mortgage payments if interest rates go up?
2. On what market variable is the loan rate dependent?
3. How volatile is the variable?
4. How long do I plan to own this home?
If you intend to keep it only a few years, the ARM is a good bet because the interest rate cannot increase much in a short period. If you plan to stay 10 to 20 years, the fixed rate may be the better option.
Financial Ramifications of the Loan
Ask the lender or mortgage broker to project your financial commitments over the full life of the loan. You need to know your monthly payment, the rate of interest and the total amount of the loan for each type. If you are considering an ARM, ask the lender to project the worst case, with the highest interest rate permitted by the cap and any increase in the principal due to negative amortization.
Sometimes, lenders use financial terms confusing to the layman. Just keep asking questions until you understand. Ask the lender to explain it in plain English. You have every right to do this. Federal law requires lenders to give you this information.
Steps to the Mortgage & Purchase
1. Pre-qualification is the first step in the mortgage purchase. You supply your lender with information about your financial situation, including your income, assets and debt. The lender will evaluate this info and provide a ballpark figure of the mortgage amount for which you could qualify, in addition to discussing your mortgage options.
What can you afford to pay for a house?
First, start by making a budget if you don’t already have one. Be honest with yourself about the amount you can reasonably spend each month on your housing. Be sure to factor in taxes, insurance premiums, maintenance and other upkeep required when you own a home. No calling the landlord to fix that broken hot water heater when you own the house! You should also consider your other financial obligations and how they play into your ability to pay for a mortgage.
How much can you borrow?
Most lenders base their home loan qualification on both your total monthly gross income and your monthly expenses. These monthly expenses include property taxes, PMI, association dues, insurance, and credit card payments.
There are all sorts of calculators to help you figure these things out: What home can I afford?
How much of money do I qualify for?
What does your credit score mean?
Your FICO score, also known as your credit score, tells lenders whether you are a worthy risk. The number is an indicator of whether you pay bills on time and whether you have outstanding debt.
Check your credit report through www.annualcreditreport.com to request your FICO score, and then get to work disputing any incorrect information with your existing or previous lenders.
If your score is low, your home loan application may be rejected. Even if it’s accepted, you may be required to make a larger down payment or pay a higher interest rate on the loan.
Your pre-qualification doesn’t guarantee how much the bank will lend you.
2. Pre-approval is when you complete a mortgage application and give the lender permission to perform extensive research into your financial history and credit score. The lender will then tell you the precise amount that it is willing to loan to you, so you will be able to begin looking for homes at or below that price.
3.Loan commitments Once the lender has approved you and the house you’d like to purchase, your income and credit rating will be checked once more to make sure that it hasn’t changed since the pre-approval. A loan commitment is issued when the bank is certain it will lend and you have a promise from the bank that locks in your rate and loan amount.
TYPES OF MORTGAGES
Fixed-Rate Mortgage Types
A fixed-rate mortgage (FRM) is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan. As a result, payment amounts and the duration of the loan are fixed and the person who is responsible for paying back the loan benefits from a consistent, single monthly/bimonthly payment and the stuff to plan a budget based on this fixed cost. Fixed-rate mortgages are characterized by amount of loan, interest rate, compounding frequency, and duration. With these values, the monthly repayments can be calculated. Now you can choose from 10-year, 15-year, 20-year-, 30-year, 40-year and even 50-year fixed-rate mortgages, all of which are completely amortized.
Calculate my Mortgage Payment
Which is better: 15- or 30- year loan term?
FHA mortgage loan types are insured by the government through mortgage insurance that is funded into the loan. First-time home buyers are ideal candidates for an FHA loan because the down payment requirements are minimal and FICO scores do not matter.
Adjustable-Rate Mortgage Types
Adjustable-rate mortgages (ARMs) come in many flavors, colors and sizes. The interest rate fluctuates. It can move up or down monthly, semi-annually, annually or remain fixed for a period of time before it adjusts. Which is better fixed or adjustable?
Borrowers who want to pay a lower interest rate initially often opt for mortgage buydowns. The interest rate is reduced because fees are paid to lower the rate, which is why it's called a buydown. Buyers, sellers or lenders can buy down the interest rate for the borrower.
Option ARM Mortgage Types
This type of government loan is available to veterans who have served in the U.S. Armed Services and, in certain cases, to spouses of deceased veterans. The requirements vary depending on the year of service and whether the discharge was honorable or dishonorable. The main benefit to a VA loan is the borrower does not need a down payment. The loan is guaranteed by the Department of Veteran Affairs, but funded by a conventional lender.
Interest-Only Mortgage Types
Calling a mortgage loan type an "interest-only mortgage" is a bit misleading because these loans are not really interest only, meaning the borrower pays only interest on the loan. Interest-only loans contain an option to make an interest-only payment. The option is available only for a certain period of time. However, some junior mortgages are indeed interest only and require a balloon payment, consisting of the original loan balance at maturity.
Homeowners attempting to sell their home without the assistance of a real estate professional generally do so for one and one reason only: to avoid paying a commission fee. Is it worth it? Well, only the homeowner can answer that, but experience has shown that many "For Sale By Owners" find that it is not! Before making a costly mistake, consider the benefits, from A to Z, you will receive from working with a Adams Realty real estate professional:
Advertising - Adams Realty pays all advertising costs.
Bargain - Research shows that 77% of sellers felt their commission was "well spent."
Contract Writing - Our Agents can supply standard forms to speed the transaction.
Details - Adams Realty frees you from handling the many details of selling a home.
Experience and Expertise Our Agents have experience and expertise in marketing, financing, negotiating and more.
Financial Know-How - Adams Realty is aware of the many options for financing the sale.
Glossary - Our Agents understands, and can explain, real estate lingo.
Homework - Adams Realty will do homework on how to best market your home.
Information - If you have a real estate question, Adams Realty will know (or can get) the information.
Juggle Showings - Our Agents will schedule and handle all showings.
Keeps Your Best Interest In Mind - That's Adams Realtys' job!
Laws - Our Agents are up-to-date on real estate laws that affect you.
Multiple Listing Service - The most effective means of bringing together buyers and sellers.
Negotiation - Adams Realty can handle all price and contract negotiations.
Open Houses - A popular marketing technique.
Prospects - Our Agents have a network of contacts that can produce potential buyers.
Qualified Buyers - Avoid opening your home to "curiosity seekers."
Realtor - Adams Realty is a member of the National Association of Realtors and subscribes to a strict code of ethics.
Suggested Price - Our Agents will do a market analysis to establish a fair price range.
Time - One of the most valuable resources in a Adams Realty agent.
Unbiased Opinion - Most owners are too emotional about their home to be objective.
VIP - That's how you will be treated by Adams Realty!
Wisdom - Adams Realty can offer the wisdom that comes with experience.
X Marks the Spot - Adams Realty Agent is right there with you through the final signing of papers.
Yard Signs - Adams Realty provides a professional sign, encouraging serious buyers.
Zero-hour Support - Selling a home can be an emotional experience. Adams Realty can help.
So you are selling your house. . .
When a property is put up for sale, the first 30 days are the most critical. Statistics show that's when most buyers and Realtors see the property. Interest is high! But, the longer the property is on the market, the fewer the prospects and Realtors. Thus, the initial period is critical - along with the proper pricing.
Some sellers, however, believe that if someone is really interested they will counter offer. Some will, many won't! Some well-qualified buyers may just walk away. The bottom line is a high priced listing will turn many buyers off.
Still, a seller wants to be confident s/he is getting the best price for his/her home. The way to accomplish this is by talking to a real estate agent before listing the property. Ask for a comparative market analysis - that is, research what similar homes in the area have sold for recently. Compare your property to those and have the agent help you calculate a fair market value. Be objective - even though it is your home. Remember, an over priced listing will usually result in only one thing - an unsold property.
Why won't my house sell?
Unless market conditions are very poor, the failure of the home to sell within about six months usually indicates a problem - usually with the price and sometimes with the condition - or both.
The most common reason for a property not selling is price. A house priced correctly from the start captures the interest of Realtors and buyers, while overpricing a home chases them away. Even if the seller drops the price later, once buyers and Realtors have lost interest, it is tough getting them back.
The second culprit in a slow sale is the condition and appearance of a house. Sellers shouldn't rely on buyers to use their imagination; they need to capture it. Remember that a buyer may see six or seven other homes in the same day - they will remember the house that seems the brightest, the most spacious, the most cheerful. This almost always means rearranging and eliminating furniture, removing excess knickknacks, etc. to create a simple, streamlined look. Adams Realty can help with suggestions.
Far and away, however, trying to sell a property at the wrong price is the key reason a home does not sell. It is only natural to overestimate the value of a home - after all, it is yours! However, when determining the price, it is important to be objective.
There are a number of price indicators, but the most important one is the price of a comparable property.
Many owners go wrong on pricing because they look at homes that are listed instead of properties that have been sold. There is a major difference. Anyone can list a property at a high price, but that does not mean it will be sold at that high price. The key is to find out what properties have recently sold and for how much. Property owners who follow this procedure usually are more successful.
What makes one offer more attractive to one seller than another?
When it comes to contingencies, first-time buyers are often better prospects for a seller's home than move-up buyers. Why? Because offers from homeowners usually are contingent upon the sale of their present home. Even if a move-up buyer has an offer for their home in hand, their buyer's offer may be contingent on another contingency (or sale) - and so on down the line. If one transaction in the chain falls through, they all might.
Cash offers can also be more attractive to sellers. Why?
After all, the seller will get their money at closing whether or not the buyer has cash or takes out a loan. True, but cash offers do not require lender approval, and loan approval is never a certainty - it may delay closing. (incidentally, for this reason, buyers who get pre-approved for a loan have an edge over other buyers. A pre-approved buyer is the same as a cash buyer.)
Buyers offering a larger-than-customary amount of "earnest money" (a deposit that accompanies an offer) can be more appealing, too. More money demonstrates greater sincerity and motivation to close the transaction.
Naturally, sellers are always looking for the best price for their home, but remember they also want an easy, trouble-free reliable transaction. Thus, as a rule, the fewer the contingencies, and the greater the commitment - the smoother the transaction.
Hot Topics: Cost vs. Value 2013
Remodeling Market Data
Lower costs and stabilizing house prices bump the cost-value ratio up a notch For the first time in six years, the overall average cost-value ratio has improved, reaching 60.6%. This is 2.9 points better than the 2011–12 number, which hit a low of 57.7% (the lowest point since at least 2001), and is more than a half-point better than the 60.0% ratio from two years ago.
Home Improvements: Dos And Don’ts For Increasing Resale Value
By MySpendingPlan.com Editorial Staff
There is no doubt that home improvements can increase the resale value of your home. However, you should know that not all types of home improvement projects will add to the value of your home – lots of research has been done on this.
Do Home Improvements Add Value?
Find out which home improvements will add the most value to your home.
Renovating, remodeling, and improving your home can be great ways to give it a makeover, gain extra space, or otherwise make it possible for you to stay in one place longer. But will they increase your selling price? The day may come when you want or need to sell. In preparation for that possibility, realize that not all home improvements are created equal. Some will increase the value of your home, and some will actually make selling more difficult. Here's how to tell the difference.