Doug Reynolds

Debunking common misperceptions about this once overlooked market of real estate

Because the foreclosure market has been relatively dormant in years past, many people don't fully understand how foreclosures work. This lack of understanding can foster foreclosure myths that are dangerous both for homeowners who want to avoid foreclosure and buyers interested in purchasing a foreclosure.

Here are six of the most common myths about foreclosures:

Myth 1: Foreclosures only happen in poor areas.

Foreclosures come in all shapes and sizes and occur in all neighborhoods. From low-income to million-dollar properties, you will see the full spectrum of homes entering into the foreclosure process. Economic forces such as rising interest rates and decreasing home values affect homeowners from all types of neighborhoods.

Myth 2: Financial irresponsibility causes most foreclosures.

While there are always those cases of financial neglect, most homeowners have shown some high level of financial responsibility in order to qualify to purchase a property in the first place. Unforeseen events such as job loss or a catastrophic accident can cause sudden and unpredictable financial havoc for homeowners. In addition, foreclosures also tend to increase when interest rates are up and property values begin to decrease. When this occurs, homeowners may find themselves paying higher monthly mortgage payments for a property that is no longer worth what they originally bought it for.

Myth 3: All foreclosures are in disrepair.

While some foreclosures can be in less than ideal shape, many are in great condition. The myth that all foreclosures are in disrepair seems to be driven by the other myth that foreclosures are usually caused by financial irresponsibility. Many homeowners who find themselves in a default situation encounter circumstances that are out of their control. Even so, this usually does not negatively affect the condition of the property. However, if you are not an expert in buying foreclosure properties, it is highly recommended that you seek the advice of a professional who is experienced with these types of sales to avoid common pitfalls.

Myth 4: Lenders want to foreclose on homeowners.

The foreclosure process is costly and time consuming, and is a last resort for lenders to recover their investment. When a homeowner defaults on a mortgage agreement, the lender must first file a public default notice after which the homeowner is given a grace period known as a pre-foreclosure period. During this time, the homeowner can pay off the debt or choose to sell the property. The minimum timeframe for a pre-foreclosure period varies by state and can range from 27 days (Texas) to 290 days (Wisconsin). Only at the end of the pre-foreclosure period can the lender auction the property off to a third-party buyer or repossess the property and sell it on the regular market.

Myth 5: Foreclosures are often bought for pennies on the dollar.

While it is true that foreclosures are sometimes purchased below market value, one should be leery of anyone claiming that one can consistently find discounts of less than 10 percent of market value.

Myth 6: Foreclosure buying is only for professional investors.

Perhaps at one time this may have been the case, but with all of the tools available to today's buyers, more people than ever before have the opportunity to purchase foreclosure properties. Using online resources or a professional Realtor, potential buyers can search nationwide for properties in pre-foreclosure, up for auction or banked-owned, as well as find extensive reports on each property listed.

Doug's Take: Unfortunately, Foreclosures are currently a very big part of our market right now. Foreclosure/Bank Owned/REO sales are much different than a regular sale. There are typically a few additional hoops a buyer has to jump through in order to purchase a bank owned home. For example, many times that bank that currently owns the house will require any potential buyer to get preapproved with their bank before they submit an offer. The bank will allow the buyer to use any lender they want but they like to have someone within their company to confirm that buyer will be able to obtain financing. Another change is that bank owned sales usually shorten the buyers contingency periods. Such as time for inspecting the house with a home inspection. Rather than the standard 17 days, their time period is usually shortened to 7 or 10 days. Not a huge problem but definitely a difference from a regular sale. Feel free to email or call me if you have any questions or concerns about how to purchase a bank owned home. I can guide you through the process.

clear skies,

doug

www.BuyWithDoug.com

Bank Owned Story:

I want to share a recent story that I was involved with. It has to do with a Bank Owned/Foreclosure/REO (all three of those terms are basically interchangeable. REO the most commonly used term by me and my fellow Realtors. It stands for Real Estate Owned, meaning it is property that the bank now owns and has on their books). This is an educational story for anyone just starting to look for a home or is thinking about buying a home soon. A lot of people out there hear about REO's but don't really know how they work. Well unfortunately in our Sacramento Market, the REO's are a large majority of our market because of the high volume of foreclosures in recent months and years. Well, the banks aren't the greatest at dealing with selling properties. Once they foreclose on the house they have an appraisal done on the home to figure out the value and then list the property with a real estate agent. However, one very recent trend is the asset manager for the bank is deciding to list the properties for much lower than the values that the Realtors and appraisers are suggesting to them. One particular property was listed near $170,000, much lower than its true value. Within 4 days the listing agent had received over 30 offers. The recent sales in the area supported a much higher price. Eventually the winning offer went for $220,000. As part of the buyers' loan process, they are required an appraisal by the bank that is going to be lending them the money. The appraisal came back at $222,000!!! That is over $50,000 than where the person making the decision for the bank decided to have it listed at. This is one of the major factors right now with so many properties having multiple offers over list price right now. Many, many, many of the banks are just not doing what's in their best interest of taking the time to understand each property and market and have the home listed correctly. Even when the professionals are telling them. It's an adventure out there for each buyer on every bank owned home. You can't trust the list prices right now.

Clear skies,

Doug

www.BuyWithDoug.com

clear skies,

doug

www.BuyWithDoug.com

written by Shelby Bateson:

The House of Representatives has voted to extend the popular $8000 first time home buyers tax credit to military personnel who are currently serving overseas. These soldiers and their families might have missed out on this credit, if it is not otherwise extended, because they were serving their country while it was being offered.

There has been a lot of controversy over extending the $8000 tax credit beyond the current expiration date of November 30, 2009. While home builders, lenders, realtors, and almost anyone employed in the housing industry have been aggressively lobbying to have the bill extended, time is running out, and no decision has been made to date.

This bill will extend the $8000 tax credit until November 30, 2010 for any members of the service who has served overseas at least 90 days during 2009 and who are otherwise eligible. The credit will also be extended for Foreign Service and intelligence personnel who have been deployed overseas this year.

The bill would also prohibit the IRS from "recapturing" the $8,000 credit when service members are forced to sell or rent out their houses because they are ordered to deploy to a different duty station, overseas or inside the country.

Currently, buyers who obtain the credit must use their houses as a principal residence for 36 months or repay the credit to the IRS. This provision has caused military and Foreign Service personnel, who are moved around frequently, to hesitate to apply for the tax credit, even when they have purchased homes.

Service Members Home Ownership Tax Act (H.R. 3590), as the bill is known, is expected to pass through the Senate equally quickly and be signed into law by President Obama.

HR 3590 is not only a victory for those who are serving our country, but is also a testimonial to the fact that our Congressional Representatives are finally listening to us, the taxpayers, and the backbone of this country.

For the rest of the "would be" home owners" who are still waiting to hear if the tax credit will be extended, the battle wages on. It is a bipartisan battle with advocates and naysayers on both sides of the aisle. While almost everyone recognizes the need to stimulate the housing sector of the economy, the primary obstacle in extending the credit remains the cost.

Doug's Take: Well that is a small step for those wanting and hoping for the tax credit to be extended. I will continue to keep everyone updated on this continuing story.

clear skies,

doug

www.BuyWithDoug.com

Below is some information I recieved from a Local Lender that works with my buyer clients:

"LISTEN TO WHAT THE MAN SAID." And those aren't just the words from Paul McCartney's hit song of the same title...they're also words of advice for anyone who's considering buying a home or refinancing. Last week, Federal Reserve Chairman Ben Bernanke said that as the economy heals, the Fed will be very vigilant to protect against inflation. While inflation is not a problem at present...it will most certainly become a problem down the road. So why does this matter if you are considering purchasing or refinancing? Because inflation is the arch-enemy of Bonds and home loan rates, and just the knowledge of it coming has been causing both Bonds and home loan rates to worsen in recent days. Along with the fear of inflation, the Fed's purchasing program of Mortgage Backed Securities is already slowing down, with the end of their buying in sight - and the reduced demand for these Bonds is also driving home loan rates higher.

Bottom line: home loan rates are already on the rise, and we won't likely see these low historic levels again.

Interest rates are still very near historic lows - George Washington couldn't have gotten a better interest rate - and the opportunity these low rates present is huge for homebuyers or people looking to refinance. If we haven't talked recently about your own home loan situation - or if you have a friend, family member, neighbor or coworker who needs advice - please call or send me an email. There's no time to waste.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Doug's Take: Next to price and market conditions, current interest rates are one of the biggest factors when buying a home. If you know you will be buying some time in the next year but are sitting on the fence. It is in your best interest to speak with a knowledgable lender that can give you advice on where interest rates are headed. Unfortunately, it sounds like they will be higher in the near future and moving forward. This can have a big impact on your monthly payments. I've got a few great lenders that i work with who can offer you great advice. Give me a call or email and i'll share their contact info with you.

clear skies,

doug

www.BuyWithDoug.com