Thursday, April 28, 2011

Is a Foreclosure the Best Deal for a Home Purchase?

No doubt you've heard all about foreclosures and short sales flooding the market.  They do in fact represent more than a third of all transactions done today.  But is buying a foreclosure (bank owned property) a better deal than buying a regular house??
It might be, but then again, it might not be.  There are some things you should know about buying a foreclosure that maybe you haven't thought about.

1.  Condition:  usually, bank owned properties are sold as-is with no disclosure.  This is because the bank has not lived in the house (duh) and therefore, would not know the history of the house or it's problems.  Now do you think that if someone owned a home, and then could not afford to pay for it and lost it to foreclosure, that they somehow were able to afford to keep it up??  My guess is no.  Keeping up a house they were losing was probably not a priority, so there may be deferred maintenance or issues that may not even show up on a home inspection.
This is definitely a buyer beware situation.   A lot of times, after the bank takes back a property, they may refurbish it with new carpet, paint and possibly make repairs and replace missing appliances, etc., but these are generally cosmetic fixes.

2.  Price:  many times the bank owned price may be below market value, which is why you would be interested in a foreclosure.. right?   But the bank set price may not be below the value you could buy a regular house for.  You just have to do some homework or have a good agent who can help you determine if the price is below market or not.  Many times, if the bank set price is below market, they may get multiple offers, driving the price above the asking price. 

3.  Repairs:  if the bank allows you to conduct a home inspection after your contract is accepted, many times they will not be willing to make repairs.  Are you willing to take on the unknown expense to make such repairs after closing?  Have you already sold a house or given an apartment your notice to vacate and need to close on this home in time to move in by the date you have given up possession of your current place?  If this is the case, you might be in a tight spot to get out of this deal in time to buy another home if you find out that the foreclosure you thought was such a good deal turns out to have some major problems that the bank won't repair.  Regular sellers will usually try to make any repairs needed to close the deal.

4.  Timing:  As mentioned above in number 3, you may have either put your existing home under contract to close in say 60 days or have given your 30 day notice to terminate your lease and you need to move in 30 or 60 days.  In this case, you may not have time to negotiate with a bank.  Once submitting your offer, you may not even hear back from them for a week or two.  You may not be able to negotiate in a timely manner to even know if this property will work out for you.  It is much safer to negotitate with a regular seller than the bank.  I know this from experience in dealing with banks and REO companies.

5.  Bank Addendums and Contracts:  Most banks require lengthy, wordy addendums to any agreed upon contract that favor the banks.  At this point, you may need an attorney to help you understand the addendums, your liablity and the bank's liability and limitations to the contract.  Even if you are working with an experienced buyer's agent, a realtor is not an attorney and can't advise you on legal matters.  A regular house purchase will most likely be using a Purchase Contract form that is standardized by the Georgia Association of Realtors and is fair to both parties, and fairly easy to understand by all.

6.  Clear Title:  If you do purchase a foreclosure, there is a something called GAP insurance on the title insurance policy you would purchase at closing that would be especially important when buying a foreclosure. 

All that said, it is much easier, cleaner and less frustrating to deal with a regular home purchase.  In this market, regular sellers are pricing their homes to compete with distressed property sales, and in many cases, are better deals overall than foreclosed, bank owned properties.  Still, I have had some great success in getting great deals for buyers who purchased bank owned homes.  You just need to know the ropes ahead of time.   Knowledge is power!

Tuesday, April 5, 2011

Cheaper to Buy than Rent a Home in Atlanta

The Atlanta real estate market is making a comeback!  If you're renting a house, condo or apartment, now is the time to take advantage of one of the very best times in American history to buy a home and invest in real estate! 

According to a recent article written in Fortune Magazine and an online article in  CNN Money (online) , Atlanta takes the cake with the number one spot in the country where it is cheaper to own vs renting a home.  I love cake.  And I love that we're number one. 

Deutsche Bank does a  study which measures affordability in two ways: the share of income that Americans are paying to own a home, and the cost of owning vs. renting.  They found that in Atlanta, the average monthly rent is about 50% more than the average mortgage payment (after taxes).   The chart featured here shows that rent is 151.2% as a percentage of the average after-tax mortgage payment in our fair and (windy today) city.  A major contributing factor to this surprising nugget of info is that the median home price fell 33.2% in the period from 2006-2010.

The simple truth of the matter is that with a few exceptions, if you stay, you gotta pay.  If you're paying rent, there is no hope to recoup any of the money you've paid over the life of the lease.  Not true for owning.  You will get a return of some sort when you sell.  You may not recoup all of your money, or you may make money- but unlike renting you have something to sell when you're ready to move on.  And now that home prices are so low, and rates are LOW-LOW, it is the perfect time to get your piece of the American Dream Pie. 

The market is coming back.  There is no more land.  Prices are like being at a clearance sale or yard sale (no pun intended).  Contact me if you want to take advantage of this wonderful, historic opportunity