Matt Grohe CRS, GRI, ABR

HUD homes can offer an afforable alternative to homebuyers and investors seeking value. Often buyers can expect strong equity from the purchase. In the Greater Des Moines area HUD homes come on the market every Friday. Read here to understand the basics of purchasing lucrative HUD homes or HUD Town Homes in the Des Moines area

There is a lot of interest from the public in HUD homes, or homes offered by the Department of Housing and Urban Development. The process of buying HUD homes has changed in recent years and this report is meant to give prospective HUD home buyers a broad overview of the process as it now exists.

HUD homes come on the market as a result of default on FHA mortgages by home owners. FHA used to be one of the only lending programs available to buyers which did not require a significant downpayment. With the explosion of 0% down programs in the lending industry, fewer FHA backed loans are being written, but there still exist a number of homes that have been purchased using FHA programs.

HUD does not like the term "foreclosure" to be associated with HUD homes, but that is in fact what they are. HUD acquires the home through the mortgagee's default, and then resells the home through an agent. In the case of Iowa, the agent is Best Assets located in Minneapolis Minnesota. Best Assets manages HUD's portfolio of homes, but lists them with a MLS participating broker. In Iowa the broker is RE/MAX Real Estate Concepts.

New HUD homes come on the market here on Fridays. Priority bidding is given to owner occupants for a 10 day period. So, for example if a HUD home comes on the market on the 8th, owner occupants have until midnight of the 17th to submit a bid on the property. Bids are collected throughout the initial 10 day period. It does not matter if you are the first bid or the fifteenth, if you place the bid on the first day, or at 11:59PM on the 10th day.

Buyers must use an agent with a brokerage that has made an application to Best Assets for a special registration number. Buyer's agents submit bids online, and the result of the bidding is posted on the Best Assets website after 1pm the day after the bidding period is over. Following our earlier scenario, this would be the 18th. Earnest money is required in the amount of $500 up to $50,000 in listed value, $1000 over $50,000 in listed value.

If an acceptable owner occupant bid has not been placed during the priority period, the HUD home is open for general bidding, meaning investors may now bid on the property. Bids are then taken daily during the business week, until the property is sold.

Procedures are very precise for offers on HUD homes and must be followed to the letter. If a bid is accepted, a completed contract with all accompanying documents must be received by Best Assets within 48 hours of acceptance. If the offer is not received in 48 hours, the home will go back on the market. If the paperwork is not done correctly, Best Assets may reject the offer and place the property back up for general bidding. In HUD's own words: ****If your bid package is not received within 48 hours after the date the bid is awarded or your contract corrections are not received within 24 hours, your bid will be cancelled. No Exceptions.

HUD homes are sold AS IS without warranties or repairs. HUD does provide a Property Condition report however, which is the result of observations made by a Best Assets selected inspection company. These reports may run to 30 pages, depending on the home. Succesful bidders are allowed a 15 day period in which to inspect the property, and may have the utilities turned on, at the buyer's expense. If the inspection is acceptable, the closing will proceed as normal. HUD requires that the buyer agree to a 60 day close, but the property may close sooner.

Buyers may use one of three types of financing. Conventional, FHA, or FHA with escrow. Conventional would be a loan from any lender not FHA. An FHA mortgage would be through an FHA approved lender. FHA with escrow is for buyers wanting to purchase a home needing repairs to be livable, but are using FHA financing, which normally has stringent requirements that the home be in very good condition. The amount of repairs would be determined by the buyer soliciting bids from licensed contractors, and having the bids approved by the lending institution. The buyer would then get a loan for the home and the repairs, but the repair money would be held in "escrow" by the lender until repairs are completed. Repairs under this scenario would need to be completed in 3 months.

A great thing about HUD homes is that HUD will often cover the buyer's closing costs and pay for a home warranty, with an acceptable offer. This can make the home very affordable. HUD also offers Property Improvement Loan Insurance for financing repairs.

I have greatly simplified the HUD home buying process in the above paragraphs. There are too many ins and outs to explain it in it's entireity in this report.

The process is not simple, and it helps to have an agent such as myself, who has had offers accepted and delivered all the required paperwork in line with HUD regulations

Whether you are buying your first home or your fifth, the process of buying a home can be an emotional, time-consuming venture. Feeling that in the end you made the right decision and got a good deal can make all the difference to your happiness beyond the purchase.

As with most major decisions, the amount of work and research you undertake before you start searching can have a dramatic effect on how well you do in the end.

#1 Do you really need that sauna or swimming pool?
Everyone can picture their ideal home. If you haven't thoroughly prepared yourself prior to viewing houses, chances are that you will find what you think is your ideal home, and will wind up paying too much for it. Changing your mind along the way is ok.

It is essential to treat the buying process in a slightly detached manner. Those who fall in love with houses usually pay too much.

That's why it's recommended that you develop a list of needs and one of wants. When looking at houses, make sure that they cover all of your needs - things like adequate space, a good neighborhood, perhaps a garage - and then have fun with items on your wants list. Treating the process in a regimented manner will help you to make a rational, informed decision.

#2 Get pre-approved
Visit your lending institution prior to shopping. Be sure to get a mortgage commitment in writing. Being pre-approved gives you a solid price range it lets your Realtor® and potential sellers know that you are serious and not just a browser.

#3 Select the right team
Buying a home is a complicated process with many people involved. Having the right people working on your behalf can make a big difference. An experienced, dedicated, and knowledgeable Realtor® can put a team of advocates including lenders, lawyers, home inspectors and movers on your side immediately.

#4 Effective Communications
The more you share with your Realtor® the better job he or she will be able to do in representing you. Letting your representative know exactly what you're looking for in terms of needs/wants, price range, and location can eliminate unnecessary trips to unsuitable homes and that focus can help ensure you wind up in the right home.

#5 Location, location, location
It's still true. The desirability and resale value of your home depend on location more than any other factor. People want a desirable community that includes character, quality of schools, access to work, major transportation arteries, recreational facilities, etc.

On your viewing trips, take a careful look and ask the following questions: How does this home compare to others in the neighborhood? Are yards fenced? Are there many children playing in the streets? Are the front and back yards and the exteriors of the homes properly maintained? The less expensive houses in a better area tend to appreciate faster than the most expensive houses in a less desirable area.

Additional factors that affect the property value of a home include traffic, sounds, smells, zoning bylaws, and many others. Be objective. Be sure you are completely satisfied with the neighborhood. If you choose a neighborhood with problems, you likely won't get as much as you hoped with it comes time to sell.

#6 Use your Realtor's® knowledge and skills
Your Realtor® is trained in all aspects of real estate, including understanding supply and demand, economics, and the fundamentals of the neighborhoods in the city in which they practice. A professional Realtor® can do much of the work for you, by reviewing your needs, reviewing available properties, and making an informed match. A comprehensive knowledge of the available homes in your neighborhood is one of your Realtor's® strongest assets. With the aid of computerized systems, a Realtor® is notified within hours when a home becomes available.

#7 Pay attention to red flags
When evaluating a home, be sure you know the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn carpeting, or unattractive wallpaper can be easily remedied, and can be used as negotiation items, as there will always be costs involved in updating the home.

Major problems, however, are clearly red flags. Look for items such as major foundation cracks, water damage, outdated electrical systems, and inadequate plumbing. In some cases these items could be too expensive to remedy to make the home a worthwhile investment.

#8 Hire a home inspector
A home inspection is an inexpensive way to gain peace of mind, and guard your pocket book. A proper inspection will cover all areas of the house including foundation, electrical, heating, plumbing, floors, walls, ceilings, attic, roof, siding and trim, porches, patios, decks, garage and drainage. A professional inspector can give you an objective view of the property, with a written report, indicating the present condition and items that will need repair.

#9 Be cautious with fixer-uppers

Sometimes, a fixer-upper can be purchased below market value and once sufficient repairs are made can be sold at a significant profit. However, not all fixer-uppers will bring in the profits you might expect.

Consumers often overestimate their level of dedication to doing extensive renovation work, and underestimate the costs associated. A wall that needs to be replaced can often lead to the discovery of faulty plumbing, electrical, or other major undertakings. Your Realtor® and home inspector are your best allies when it comes to cost-benefit analyses.

#10 Consider your future needs
A move can be a major undertaking. Take a good look at your current lifestyle and consider the future. Will you need extra space for a home office, a child, or perhaps have a child moving back home? Perhaps it may be easier and less expensive if you purchase a home that can meet these needs now, rather than moving up to a larger home a few years down the road.

#11 Proceed quickly
When you're ready to buy, don't be afraid to act. Good properties sell fast in all markets. When you work with a Realtor®, you have access to the latest technology. As part of the MLS and Agent Handshake networks, a Realtor® has access to properties within hours of when they are listed.

Technology works to your advantage. Many Realtors® now have personalized websites which allow you to sign on as a client and receive notification of new listings via email. You save time and effort, and you can view only those homes that come closest to meeting your needs. You can sign up for Des Moines MLS listings right here by following this link: http://searchthemls.myiowahome.com

#12 Clarify relationships
In any real estate transaction be very certain about who is working for whom. Unless otherwise stated, an agent represents the seller in transactions for the sale of a home. This agent, as part of his or her fiduciary duty must ensure that the seller's (and not your) position is represented throughout the entire process. Get a buyer agent on your side to ensure that someone is acting in your best interests.

#13 Ask for a written CMA
A Comparative Market Analysis (CMA) is an analysis of comparable homes in a given neighborhood. It shows you the sale prices of comparable homes in the area along with asking prices of other homes currently on the market. A Realtor® can produce this report for any home and neighborhood. Ask for this report in writing. With this valuable document you'll have solid, reliable information about how fairly a home is priced compared to its real market value.

#14 Know the seller
Understanding a seller's reasons for moving could work to your advantage during negotiations. For instance, a seller who has been transferred to another city may be more motivated to sell than someone who is still shopping for a new home. A vacant house, or a house that has been on the market for several months and has been reduced in price could also provide the opportunity for lucrative negotiations.

#15 Keep it impersonal
Conversely, information could be used to your detriment. Information about your mortgage, size of down payment, move-in deadline, or circumstances for buying could be used to the seller's benefit in negotiations. While you want your Realtor® to know these details, maintain your poker face and keep your cards hidden with the sellers and their agents.

#16 Measure twice, sign once
While you definitely want to move quickly once you've made the decision to purchase, you don't want to cave in to pressure for a quick close. Someone who is trying to pressure you into buying a home is likely doing so for a reason. Make sure the reasons for you to buy a home are your reasons, not theirs.

#17 Exercise your negotiating skills
Even if you prefer not to haggle, it's worth it, especially when it's your home and one of the biggest investments you will make. Most people expect to haggle over the price. There is always room for negotiation and your Realtor® should be a skilled negotiator.

#18 Avoid bidding wars
In some cases, the seller's Realtor® may use scare tactics to rush the sale or increase the price. Falling for this trap could cost you money. If there is another buyer, or some other reason this pressure is being applied, whoever wins also loses because they tend to overpay. Let reason be your guide, not passion.

#19 Get it in writing
Legally, sellers must disclose all known material defects of a property. Ask for this in writing. Also be sure to consider the ramifications of these defects. Will they be costly down the road? Are they "serious" defects?

#20 Be aware of hidden costs
While Realtors® often tempt first-time buyers with rent/mortgage comparisons, there is more to a home than simply the mortgage. You will be responsible for other items including mortgage insurance, appraisal fees, legal fees, inspection fees, transfer taxes, title insurance, inspections, property tax, increased bills, etc. Your Realtor® Matt Grohe can give you a good idea of the costs associated with buying a home that are beyond its final negotiated price. Call today at 515-988-726.

Be a Real Estate Investor - 10 Important Secrets

When it comes to investing, everybody has certain goals and aspirations. However, we have found that there are certain guidelines every aspiring real estate investor needs to know:

1. Compare Property Values and Rents
Financial statistics only go so far; the best measure of a property's market value is often the sale prices of nearby properties. The same holds true for area rents. A

2. Be careful - Repairs can drag you under
A low price may seem like a good deal, but consider your realistic repair expense. Assess on your first visit any immediate and/or future repairs. Figure these costs in your analysis.

3. Specialize in something you Know
Start in a market segment you know. Whether you focus on fixer-uppers, foreclosures, starter homes, low-down payment properties, condominiums, or small apartment buildings, you'll benefit from experience by specializing in one aspect of investment real estate properties.

4. Know the Costs going in
Know the financial statements inside out. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These are key issues that must be addressed before making a solid investment.

5. Know where your tenants are coming from
If the last rent increase was recent, your tenants may be considering a move. If tenants have a short-term lease, they may be living there simply to attract unsuspecting buyers. It is also important to collect the tenants' security deposits at closing.

6. Assess the tax situation
Taxes are an integral part of successful real estate investing, and they often make the difference between a positive cash flow and a negative one. Know the tax situation, and find out how it can be manipulated to your advantage. Make a tax benefit analysis part of your evaluation.

7. Investigate insurance coverage
If seller's coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price.

8. Confirm Utility Costs
Ask the local utilities to verify recent utility expenses, especially if any of these costs are included in your tenant's rent.

9. Consult Your Accountant
Taxation is a key element of successful real estate investing, so be sure to find an accountant who is well-versed with the constantly evolving tax code as it applies to the real estate arena.

10. Inspect!
Make sure that you always perform a thorough inspection of the property before buying it. Never, ever buy any property without at least examining the site. Hiring professional inspectors to examine the structure and mechanical systems is a good move, but it also adds to the your costs.

There's an industry saying "Subject to Sale offers are subject to problems". This has validity because a lot can go wrong. Knowing how these offers operate can be the key to using them effectively.

OFFER COMES IN

You are a seller. You have just received an offer on your property. The offer has a contingency, it is "Subject to Sale" of the buyer's own property. You of course don't want this, you want to sell your home yesterday. The fact is though that many buyers are sellers as well and can be very good prospects becuase of it, here's why.

ATTRACTIVE BENEFITS

Subject to sale offers are likely to net you a higher price. This is because the buyer needs to write an offer decent enough for you to accept it, and for you not to want to "bump them" off at the first chance.

Subject to sale offers are likely to net you better terms. This is for the same reason as above. If they ask for too much off the bat, you're not going to even consider giving what they propose, and accept the Subject to offer.

THE MECHANICS

There are several components of the offer to pay particular attention to. The first is the length of time you will allow the subject offer to exist. Find out what the average time is on market in your MLS area, then go for two thirds or half of that. Your reason is that you want that buyer-seller to know he needs to be agressive in his sale, marketing, conditioning, etc; because you won't, and don't have to wait forever.

The second equally important factor is the notification period. Even if you have a subject to sale offer, your home remains on the market. If you get another offer you want to have the first buyer perform, or get out of the way. When you take a Subject you neogtiate the notification period. Generally, it is from 0 to 72 hours. O notice means you can accept any offer without notice to the buyer with the subject offer. 24 hours notice gives the buyer a day to either getr interim financing or withdraw.

THE FACTS

Here are a few basic facts about subject to sale offers

• You continue to market the property
• You do not need another offer to seek performance
• If you ask a buyer to remove a subject, the offer is not subject to buyer's sale

If have placed and received subject to sale offers. I have been through many scenarios and would be happy to answer any question you may have about them. Contact me anytime.

Matt Grohe RE/MAX REALTOR®3125 Douglas Ave Des Moines, IA 50310 Ph 515-988-3726 Licensed to sell Real Estate in the State of Iowa RE/MAX Real Estate Concepts® Each office Independently owned and operated

Mistake #1 -- Pricing Your Property Too High

Every seller obviously wants to get the most money for his or her product. Ironically, the best way to do this is NOT to list your product at an excessively high price! A high listing price will cause some prospective buyers to lose interest before even seeing your property. Also, it may lead other buyers to expect more than what you have to offer. As a result, overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price.

Mistake #2 -- Mistaking Re-finance Appraisals for the Market Value

Unfortunately, a re-finance appraisal may have been stated at an untruthfully high price. Often, lenders estimate the value of your property to be higher than it actually is in order to encourage re-financing. The market value of your home could actually be lower. Your best bet is to ask your Realtor for the most recent information regarding property sales in your community. This will give you an up-to-date and factually accurate estimate of your property value.

Mistake #3 -- Forgetting to "Showcase Your Home"

In spite of how frequently this mistake is addressed and how simple it is to avoid, its prevalence is still widespread. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant as possible. Make necessary repairs. Clean. Make sure everything functions and looks presentable. A poorly kept home in need of repairs will surely lower the selling price of your property and will even turn away some buyers.

Mistake #4 -- Trying to "Hard Sell" While Showing

Buying a house is always an emotional and difficult decision. As a result, you should try to allow prospective buyers to comfortably examine your property. Don't try haggling or forcefully selling. Instead, be friendly and hospitable. A good idea would be to point out any subtle amenities and be receptive to questions.

Mistake #5 -- Trying to Sell to "Looky-Loos"

A prospective buyer who shows interest because of a "for sale" sign he saw may not really be interested in your property. Often buyers who do not come through a Realtor are a good 6-9 months away from buying, and they are more interested in seeing what is out there than in actually making a purchase. They may still have to sell their house, or may not be able to afford a house yet. They may still even be unsure as to whether or not they want to relocate.

Your Realtor should be able to distinguish realistic potential buyers from mere lookers. Realtors should usually find out a prospective buyer's savings, credit rating, and purchasing power in general. If your Realtor fails to find out this pertinent information, you should do some investigating and questioning on your own. This will help you avoid wasting valuable time marketing towards the wrong people. If you have to do this work yourself, consider finding a new Realtor.

Mistake #6 -- Not Knowing Your Rights & Responsibilities

It is extremely important that you are well-informed of the details in your real estate contract. Real estate contracts are legally binding documents, and they can often be complex and confusing. Not being aware of the terms in your contract could cost you thousands for repairs and inspections. Know what you are responsible for before signing the contract. Can the property be sold "as is"? How will deed restrictions and local zoning laws will affect your transaction? Not knowing the answers to these kind of questions could end up costing you a considerable amount of money.

Mistake #7 -- Limiting the Marketing and Advertising of the Property

Your Realtor should employ a wide variety of marketing techniques. Your Realtor should also be committed to selling your property; he or she should be available for every phone call from a prospective buyer. Most calls are received, and open houses are scheduled, during business hours, so make sure that your Realtor is working on selling your home during these hours. Chances are that you have a job, too, so you may not be able to get in touch with many potential buyers.