Missed part one? Read it here.

Now that we know what to look for, and where and we know you can purchase it, it is time to start looking. There are three different kinds of homes being marketed today

Short sales:
These are sales that the seller owes more than the house market value. These all require the approval of the lender or lenders involved, because they are the ones that are going to lose money in the transaction. These sales can take a very long time to process, especially if there is more than one lender involved. Waiting times can be as much as six months before you will know if your deal is acceptable. In the meantime, things may change for you, for the seller and of course during that time the seller is accepting offers that compete with yours (including raising the price, which is what the lender wants). A lender may go along with a short sale if the percentage of price reduction is manageable against the cost of foreclosure. As a buyer of a short sale, you need tremendous patience. Nothing will move fast, unless the bank has preapproved the amount of the short sale.

Foreclosures:
Homes that are owned by the bank are called REOs or Real Estate owned. These are liabilities on the banks balance sheet and they are motivated to sell them but terms can be somewhat daunting.

• The home will be sold “AS IS” no repairs or replacement will be done. This does not mean that you are not entitled to an inspection or full disclosure, it just means that the bank is not going to do any repairs whatsoever. You must make sure you have a clear idea of the condition of the property.
• The home will be sold with a limited deed meaning that the bank is not responsible for liens that may have not been cleared through the foreclosure.
• The bank will require a sales addendum (among other things) that allows them to market the property until closing and if they get a higher offer, they have the right to accept that offer and cancel yours.

Regular sellers:
These are the people that have decided to sell their home and there is no financial problems requiring a bank to be involved. These owners want to sell but sometimes have a higher assessment of the market value for their home. The secret to working with them is to make sure you have competent representation on your side to show them what the actual value should be. If the owner is realistic in his pricing, this is the easiest purchase to make.

There are other things to watch for. The ads for auctions make them sound like you are going to get the deal of a life time. But in reality, now that the market has shifted, the auction is a place to create enthusiasm among uneducated buyers and get the price up. If you have ever been to an auction, you know what I am talking about. The pitch becomes quite fevered and before you know it, you have bought something you don’t want for more money than you want to pay. Definitely not the way to buy a home you intend to live in.

In negotiations that involve banks, you a dealing with people that do not have an emotional commitment to the home, but they do care about the money. Don’t think that you will be able to out negotiate them. They are working on perhaps thousands of deals and you are only working on one. They have heard it all before.

With a regular owner seller, terms can become an acceptable way to get what all parties want. A fair deal. A seller may be more inclined to providing interim financing, or willing to offer a lease purchase, or maybe pay closing costs. The higher up the price scale, the more creative the deal can become.

Well, that kind of sums up the market. This is an incredible opportunity to buy a property that will suit your needs for a price that is better than you expected. It is a time to not be afraid. And working with a competent team to help you realize your dream is the best way to get it done.

How can we help you move forward?

The first thing to assure happiness in your family life is to make sure you live in a home that you can afford. Today, millions of families have found themselves in circumstances they would have never imagined. Home values have declined well below what people owe, and there is little hope that prices will recover quickly. Couple that with the highest unemployment and underemployment in decades and what you end up with is what economists call “de-leveraging”. Most of us call it being deeply in debt and trying to figure out how to get out of the whole.

So, if you are in this position, what should you do? First sit down and honestly assess your financial situation and develop a plan of action. Stop any impulse buying, cut back on any unnecessary expenses. Quit using credit cards as piggy banks and develop a plan to pay off the most expensive balances on the credit cards first, then when the card is paid off, add that money to the next credit card so you can accelerate the payoffs. See if you can sell any cars that have loan or lease payments that are excessive. Exchanging your current car for a cheaper one can save money on payments and insurance. Pay off anything you can, but remember that you need to keep cash for a rainy day as well. Do not keep money in a bank where you have credit cards or loans. Try to work out payment plans with anyone you can. If you are sincere, lenders will work with you rather than lose all of the money.

You need a place to live. If you can continue making payments on your home, do so. But if you are in a “hardship” situation, meaning you have lost your job, fallen into ill health or are trying to sell your home but you owe substantially more than it will sell for, talk to your lender about a loan modification or short sale. Make sure you talk to the person who can help you get a decision. Banks are not in business to assume a loss on your behalf, but in cases that demonstrate an actual hardship, you can get relief. Loan modifications usually result in lower payments for a longer term, or an adjustment to the principal balance to help bring payments in line with what you can afford (not what you would like to pay).

There are significant risks to you concerning short sales. You should seek the advise of an attorney before you sign any documents. You need to make sure that you stay in control of the process. For instance, did you know that in a short sale, you can still be held liable for the difference between what the bank gets and what you owe? The bank has five years to exercise their claim. Do you want that hanging over your head? It may be better to actually go through a foreclosure rather than the short sale. While a foreclosure hurts your credit rating, it clears you of responsibility for any remaining debt if the home has been occupied. Plus, negotiating a short sale is difficult at best, especially if you have more than one lender.

Keep in mind that we are all taught that not paying our debts is a bad thing, but when circumstances will not allow you to manage a plan to get out of debt, there are credit counseling groups that can help. Make sure you choose a reputable one, non profits are usually the best. Talking with an attorney about bankruptcy is another option.  One thing is certain, you won’t be able to get on track if you can’t get off the treadmill. Millions are in your position, and getting out of it should be your highest priority. If you feel trapped because you made the mistake of getting over your head, or the circumstances of today’s economy have put you too far behind, do what you need to do to get out of that trap and on with your life.

How can we help you? Call us to see if we can offer practical advice.