Tips for Buying Foreclosures in the Charlotte Area

Many Charlotte area residents are considering foreclosed properties either as first-time home-buyers, or as investors. The number of available foreclosed homes is incredibly high--at 1.5 million right now, and more are expected to be available soon. This means great opportunities for bargain hunters, and plenty of possible pitfalls for home buyers as well!

Here are 7 tips for making sure you get a foreclosure that is right for you.

1. Don't get caught up in the "foreclosure frenzy"

Everyone loves a great deal and the idea of getting a home for a bargain, or even for less than it is worth can make people pretty excited--but that doesn't mean you should forget your common sense! Banks put repossessed homes back on the market at below-market prices because quick sales help avoid the expenses of keeping the home up, the property taxes, the insurance, heat and electricity. They need to get these houses off their books (and onto yours!) so they are willing to make a deal.

Those hard-to-believe prices may be golden opportunities, but they may also attract a frenzy of buyers who may bid the homes up until they are no longer bargains. Don't get caught up in a bidding war, and find yourself spending more than you can--or should for a property. Carefully consider what you want to spend, and when the home reaches that point in the bidding process, move on.

2. Contact lenders directly

Buyers looking for an edge, should establish relationships with asset managers at banks. The asset managers may know when new foreclosures hit the market, and can give you a competitive advantage. In the case of a short sale, you should talk directly to the property's asset manager. That way, if the short sale falls through and the bank repossesses the house, the asset manager knows you are still interested, and you could be in a situation where you get the advantage of a quick sale without other bidders.

3. Get pre-approved from "their" bank

If you're trying to buy a property from a certain bank, take the extra step to get a pre-approved mortgage from them. Lenders may be more inclined to accept your bid if they know they are also getting your business in the deal. (And you can always change lenders laters)

4. Consider fixer-uppers

Most bank owned properties, are "sold as is", and many foreclosed homes are in less-than-perfect condition. Since the former owners were often struggling to pay their bills before the foreclosure, they may have neglected routine maintenance, or even the big stuff"--or they chose to trash the property before vacating, removed the majot appliances, fixtures, wiring and other important pieces of a home.

While some lenders will make some repairs before the sale closes, many would rather sell the house to the next available bidder, so be willing to consider a home that needs some work, and just budget the repairs into your overall investment numbers.

5. Work with a real estate attorney

Once the bank agree to the sale, they will often want to move fast--and the real estate contracts are full of legalese that can be hard to understand. Choosing to work with a real estate attorney is a great solution, even in states where they are not required. A real estate attorney can assist you in making sure the contract is equitable and the property you are buying really is a deal!

6. Wait to make an offer

It may work in your favor to wait before making an offer on a property you really like. Let the house sit on the market a few days, and then talk to the agent--they may give you some kind of clue as to what a good number is compared to bids that have already come in--especially on a home that has LOTS of interest (but don't wait TOO long--a day or two will usually be plenty in a hot market).

7. Have an inspector and/or contractor look at the property

It is true with any home--but especially so with foreclosed properties...it pays to have a professional look at the "structure" and potential problem areas of the home before you make an offer. A professional home inspector and/or a contractor will be able to tell you about foundation cracks, heating and cooling systems, roofing issues and other needed repairs, and what it will cost to make the repairs, and get the home in working condition. A contractor may also be able to tell you what "could" be done in the future to make that home more livable, such as a patio or sunroom, or other additions.






Would you like more information about the Mint Hill, Matthews and Charlotte area real estate market? Check out http://www.minthillrealty.com/

Can a house be sold for less than the mortgage?

More and more recently I have been asked about the process of selling a home for less than what an owner owes on a mortgage. The current economy is causing homeowners to have to make some tough decisions.

This process is called a “short sale,” and occurs when a lender agrees to write off the amount of a mortgage that’s higher than the value of a home. A short sale is complicated process but can keep a homeowner from filing bankruptcy or having to go through a foreclosure. However, a lot will depend on the lender, and often it is dependent on having an offer from a buyer.

The lender will have to approve the sale, and this is a complex procedure--after all the lender has to "write-off" the potential future income from the loan, weighing the risk of not being able to collect on the payment. It takes a competent Realtor to navigate with the home seller and the lender to insure all parties are able to get the most out of an often difficult situation.

A short sale can also get more complicated if the loan has been sold to a secondary market, in which case the lender will need permission from Freddie Mac or Fannie Mae. And if the loan was a low down payment mortgage with private mortgage insurance, the lender also will need to involve the mortgage insurance company that insured the low down payment loan.

Unlike when you are buying a home, if you are trying to short-sell you will need to prove you are broke, instead of your credit worthiness. Also the difference between your home’s value and the balance on your mortgage is taxable income, and you will have to pay this tax at the end of the year.

A short sale is not a solution for everyone, but it is one that can benefit many who find themselves in a home for which they cannot maintain mortgage payments.

Are you looking for information about the Mint Hill, Matthews and
Charlotte area real estate market?
Check out www.minthillrealty.com

What is a "Short Sale"

Dear Rich,

My wife and I bought a home in Charlotte about 2 years ago and we now have to move. I was laid off last month, and I think we will have to move in with family until I am able to get a decent job put some money away. I have missed two mortgage payments already and it was hard to pay the mortgage even when I was working--we bit off more than we could chew and had no safety net...

A friend of mine recommended a "short sale." What is a "short sale" and how would it benefit me to sell my house this way?

Ben R. Charlotte

Dear Ben,

I am sorry to hear about your situation. Unfortunately, it is all too common in the current economy. But not to worry, you do have options.

A short sale may be the way to go, but this is something you will have to discuss candidly with your Realtor.


A short sale is what happens when the proceeds of a real estate sale fall short of the balance owed on the property--when the offer on the table is less than what you owe. In a short sale, the mortgage lender, (or bank) agrees to accept a discount of the balance due the current owner's financial hardship, (i.e. in the case of a lost job).

The negotiation of a short sale is done through bank's loss mitigation department, with the home owner, and often the seller's real estate agent.

The home owner is the allowed to sell the mortgaged property for less than the outstanding balance of the loan, and the bank forgives the loan in exchange for the total of the sale proceeds. In this case, the lender has the right to approve or disapprove of a proposed sale--they want to get the most they can for the mortgage, but also know that in many cases the deal offered is a good business decision.

Often the borrower will still owe some amount above and beyond the sale and the home seller will have to make this difference up.

Generally, short sales happen when there are extenuating circumstances, and the real estate market is in such a state, that the lender does not feel that they will otherwise profit, or make back their investment.

The biggest advantages for you would include avoiding a foreclosure on your credit history, and a short sale is typically faster and less expensive than a foreclosure.


I hope that this answers your questions, and my best wishes for a happier and more prosperous 2009.

Rich Ferretti
www.richferretti.com

Want more information about the Charlotte area real estate market? Check out www.richferretti.com