How to Buy a Marin County Foreclosure or other Distressed Home - Some FAQs

I work with a lot of people who are either wanting to buy or sell distressed properties in Marin County. If you're a seller, this can be a very difficult time in your life. You do have some options, though, to help avoid foreclosure and minimize damage to your credit. I can provide guidance, just contact me at (415) 725-1911 or kmcginnis@fhallen.com Or visit my website, www.BestHomesMarin.com

The silver lining in the current housing situation is on the buying side. Some of the best deals in today's Marin County marketplace lie with two types of properties: foreclosures and short sales. These are both distressed properties, but they are different from each other.

FORECLOSURES

What is a foreclosure?

A foreclosure is a home that is owned by the bank. A bank takes possession of a home after the owner has missed several mortgage payments. Bank properties are also called REO, or real estate owned by the lender. Buyers can often purchase REO homes for less than what the bank is owed on the property, and that is why they are so desirable among savvy buyers.

How are foreclosures priced?

Banks look at comparable sales in the neighborhood and often price their REO very competitively; often just below market value. Banks are not in the "home ownership" business, and they want all these foreclosures off their books and quickly.

When a foreclosure is priced just below market value, it's likely to get multiple offers. But don't despair! These are not the crazy, "over-the-top" multiple offers of 2003-2006. Right now, buyers who are in the game (are pre-approved for a loan and are actively looking to buy) have a lot of selection, and even "hot" properties are only selling for the asking price or just slightly more on average. Since January 1^st of this year, 19 REO homes have sold in Novato (condo and single family). On average, these homes sold for 95.86% of their asking price.

Also, not all Marin County REOs are priced super well. So, you can still get them for less than the asking price in many cases.

If there are multiple offers, the bank may throw out all but two offers and then ask the selected buyers to resubmit what is called a "Highest and Best" offer. Or, the bank may simply accept the best offer from the start.

How can I have the winning offer?

Here are a few tips to help you select the right price and terms on any REO property:

1) Get the property history. As your agent, I look up what the bank is owed on the home. This can be a good indicator of what the bank will accept.

2) Look at comparable sales. A home's asking price can be very different from the home's actual value. The indicator of value of is what a buyer is willing to pay, and that can be determined by looking at recent sales of similar homes in the neighborhood. I will run the numbers for you to see what the home is "worth."

3) Find out the level of interest in the home. Are there other offers? If not, then you can usually feel comfortable submitting a lower offer. Before my clients write an offer, I always find out from the listing agent whether there are other offers, and if so, I can get a sense of what it will take to ‘win' the house. There are other ways than price to strengthen an offer, such as shortening an inspection period, putting more money down, etc.

4) Get the "right" pre-approval letter: Get pre-approved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the pre-approval letter from this lender, along with the letter from your own lender. I can help you with this if it's necessary for any particular property.

5) Don't ask for repairs. Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.

I have other ideas, too, about how to help you buy a Marin County foreclosure property as smoothly as possible. Contact me if you want to see some Steals and Deals! kmcginnis@fhallen.com or (415) 725-1911

SHORT SALES

What is a short sale?

A short sale occurs when a homeowner needs to move, but they are "upside down" in their home, meaning their house is worth less than what they owe on their mortgage. Under a short sale, a lender must agree to accept less than the amount that is owed on the property.

Unlike a foreclosure, buyers typically buy the home for even less because they're not paying off the existing loan nor making up the back payments. Buyers are striking a deal with the existing lender to take less than what the lender has coming to avoid dealing with a foreclosure.

Short sales can require patience from a buyer. It can take 2-3 months to complete a short sale transaction, although in many cases now, it is faster. Sometimes the bank will have "approved" a sale price, and that moves the process along.

I am experienced on both ends of short sales, so I can help you get a great deal on one of these homes. I can send you some available short sales, just email me! kmcginnis@fhallen.com

SEARCH ALL HOMES, including a daily foreclosures list: www.BestHomesMarin.com