Michael Neville - Intown Atlanta Realtor

This is a question I've been answering for friends, family & others since last week after it hit the news that the Treasury Dept. MAY announce a new rate of 4.5%, in hopes of creting an economic stimulus. If this happens, anyone on the fence of buying needs to step up to the plate because it doesn't get any better than this combination of rock-bottom prices & low interest rates. We're looking at foreclosures & short-sales taking up 35-40% of the sales in the marketplace. This is a Buyer & Investor's dream scenario. But even if you're not buying right now, you can potentially save some serious $$ with refinancing your mortgage.

We can assume since it is the Treasury Department working with FNMA and FHLMC that it will be targeted at conventional, conforming loans for credit-worthy borrowers. This would mean loan amounts of $417,000 and lower in our area.

This is the opportunity for you or anyone you know to potentially save thousands of dollars a year, and tens of thousands of dollars over the course of your homeownership. Who wouldn’t appreciate that, especially right now? This is the step to help you & those around you have some breathing room and ease some of your financial burden.

I’m urging you to let your friends, family, & coworkers know that this is a VERY SMALL window of opportunity that they need to seriously consider taking advantage of. It doesn’t matter where they live in the country, they need to seek out their lender and discuss their options for refinancing their home. And if you know anyone who’s in the market to buy, this is an enormous opportunity because a 1% drop in interest rates is equivalent to a 10% drop in sales price on a 30-year fixed loan.

REFINANCING will be great for some but NOT for everyone.

There are a number of factors to keep in mind.

1) What's your current rate & terms?

If you are in an adjustable rate, you should consider it.

If you can drop your interest rate by more than 1%, traditionally it's worth considering.

If you've got a 15-year or 30-year fixed, compare the interest rates & have a professional assist with your market value (let's be honest, 99.9% of people think their house is "1 of a kind" and better than the comp's - even realtors fall into this trap), you need an objective opinion.

2) Appraised Value vs. Outstanding Balance

If your house can be appraised currently for more than you owe then it may be worth considering - be honest & have a realtor pull the true comp's for your neighborhood. Please don't think that because your home was worth XYZ 12 months ago, it's still worth that today b/c with short-sales and foreclosures in the market place values can change quickly - with appraisers & lenders working on a short leash.

If you've taken out a line of credit, 2nd, 3rd, or 4th, etc. - be careful and review your numbers.

For some people the great rate may be canceled out by the fact that they will now have to pay mortgage insurance because the value of their home has dropped and the loan would be more than 80% of the appraised value.

3) What's your exit strategy?

If you plan to move in the next year or two - the closing costs may not cancel out any savings you'd earn with the refi.

Whatever the your situation, this is an opportunity that you or someone around you can benefit from. It's a matter of talking with your lender & realtor to evaluate your situation. Honestly, who would mind a couple extra hundred dollars in their pocket every month?

So, the buzz words are everywhere that lead the general public to believe that Foreclosures are automatically an incredible deal "Instant Equity" "$.50 on the dollar" "Bank Owned" and the list goes on and on, but how good of a deal are they?

Well, like people, each foreclosure is unique - while some are similar and tend to be grouped together, no property or transaction is identical.

Over the last year I've had friends, clients, & complete strangers ask me about the amazing world of foreclosures and how they can get the instant equity they keep hearing about. There's no doubt that the current market presents wonderful opportunities for investors & primary-residence homeowners, but not every foreclosure is truly a deal. There are a number of factors to keep in mind

1) What is the condition of the home?

2) What is happening in the neighborhood?

3) What type of financing will I be using to purchase this property?

4) What do I intend to do with the property (WHAT IS MY EXIT STRATEGY)?

Foreclosures come in all shapes, sizes, and conditions. In Atlanta you can literally buy homes for under $10,000 dollars, that's right - I didn't forget a zero - less than ten thousand dollars or you can buy a multi-million dollar estate. But that doesn't necessarily mean you can purchase these homes and move right in.

Be careful, check to see whether the appliances are still in the house. Very often times refrigerators, dishwashers, microwaves, stoves, & hot water heaters "disappear" in foreclosures. Copper plumbing lines & Air Conditioning Condensers fall prey to opportunistic criminals who know that no one is living in foreclosures and don't even have to enter the home. Also, make sure there's no black mold (toxic). Bank's aren't going to provide a Seller's Disclosure because the corporate entities never occupied the home - so INSPECT EVERYTHING!

If you do not have these items you most likely will have to use alternative financing options because traditional lenders won't touch a property that doesn't have it's operating systems functioning. You will then have to evaluate renovation loans (watch out for additional closing costs because you will have to do a 2nd closing once the renovation is complete & convert the loan to a permanent loan), hard-money loans (not for the average buyer - these are utilized more commonly by savvy investors who understand the high risk/high reward scenarios of the interest rates and timelines), or cash only deals.

Make sure you have a realtor who is familiar with the foreclosure sales process, with bank addendums that protect the banks & put buyers at risk, deadlines and contingency periods that can be over in the blink of an eye - they need to make sure the utilities are on, who's paying for them, if the property needs to be de-winterized, when the "clock starts" for due diligence, appraisal, & financing perdiods start & stop --- let's just say they need to be on top of a lot of details in order to make sure you are protected as much as possible & have the ability to choose whether or not you truly want to purchase this home without putting you at risk unnecessarily.

Check out the neighborhood - are there a lot of vacant homes? what is the crime rate like (check the local police statistics/reports)? what are the schools like? how many other foreclosures are in the neighborhood? what are the recent sales #'s indicating - not what the home previously sold for!

I had a client who looked up a house on a popular site that said the house was worth almost 400K and was so excited that we were going to purchase this home for only 200K. The website had them believe that they were making a killing on the deal, but what clearly took place with a little bit of realtor investigating was the house had previously been a part of a mortgage fraud ring. The house was worth roughly 225K & was in pristine condition, so the Buyers were going to be very comfortable with a 4 bedroom 3 bath with granite counters, cherry cabinets, wrought iron, etc. - but they weren't walking into a 200K equity position that the website would have them believe.

What we've seen in the metro Atlanta market, that has occured in many locations around the country, is large-scale foreclosures in massive developments - BE CAREFUL. If a builder is only 30% through building a massive development and they've closed up their onsite sales department, with weeds growing over lots that have plumbing in place -- know that this isn't the safest investment for an owner occupant. Big developments are some of the scariest things in our current market b/c you can be surrounded by homes that are virtually identical and be the market can be flooded with 5-10% of the development in foreclosure in a matter of weeks (even if the builder has sold all of the homes in the development - b/c if they closed sales over the last 3 or 4 years, there's a good chance some of the buyers used sub-prime loans and the adjustments are kicking in and they can't afford to pay).

Last month we watched a well known builder's development in a historic part of the city have values drop on these townhomes by 30% in less than a month. The development has been around for almost 5 years, completely sold out for the last 2 and about 15% of the homes foreclosed and crushed the values from 280K down to about 200K. The residents who are there will not be able to sell these properties anytime soon and recoup their money if their loans are anywhere near 280K. On the other hand, the Buyers who just scooped up these units, some for as low as 170K, now are well positioned to make a sizable return on their investment when they decide to sell (hopefully they hold onto these units for at least 5 years to ensure solid equity positions).

There are great deals to be had, but there are even more pitfalls to avoid. Just because properties are listed on the market, doesn't mean they are positioned "in the market".

It's not a matter of luck - positioning, knowledge, and attentiveness will allow you to capitalize on the opportunities in the current market, but understand there are reasons why others have failed in the world of foreclosures. It's a high risk/high reward environment - so keep your head on a swivel and feet planted firmly on the ground.

All The Best,

Mike

On the East Atlanta/Kirkwood border on Memorial Drive just off the Maynard Terrace exit of I-20 East, Ann's Snack bar has been serving up monster burgers the last three decades.

If you're serious about burgers, you have to have the Ghetto burger, with more than a pound of beef covered in onion, bacon, chili and cheese. There's no way you can finish this meal in one sitting and not keal over. I had the plate of fries as I was waiting for my Ghetto Burger, then managed to only eat half of the burger -- and trust me I'm a human garbage disposal. That thing sat in my stomach for a solid day & I didn't have dinner that evening. I'm gluttonous - but this thing was on a whole other leve.

There's also the Hood burger, a chili dog split is two dogs deep-fried and covered with chili on a white bun. The burgers and dogs are worth a trip. No matter what get it as a combo so you can sip lemonade & munch on the fries as you wait for the incredible portions beef to come your way.

This place is a true hole-in-the-wall, but with a special flare to it. Ann has very clear rules & expects you to follow them, no questions asked. It's a throwback to your grandparents days of "sit down, show respect, and speak when you're spoken to." Don't bring a cell phone in and think you'll talk at the table, or be allowed to wear a hat, or dare to come inside when all of the chairs are taken. Just wait patiently in the screened in porch and enjoy the comedy of someone else not following the rules and being kicked out. You may want to bring a book or cards because the wait can be long, but the pure experience alone is awesome. Whatever you do - DON'T CURSE - b/c just like if you did in front of your grandmother - you're gonna get the boot, switch, or at least a good tongue lashing and definitely no food. Follow the simple rules (they're posted right in front of you above the grill.)

Ann's Snack Bar is truly unique. A place that everyone in Atlanta or even just visiting Atlanta should experience.