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Mike Mondy, REALTOR ®
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4 Common Pitfalls To Purchasing A Foreclosure Property
Due to the mortgage crisis that our country faced over the last several years, there are continually more and more foreclosure properties that are being put up for sale everywhere you turn. Of course, this can be very tempting for homebuyers as people can sometimes get properties for 30% or even less on the dollar.
However, if you are considering a foreclosure property for your next purchase, then there are some common pitfalls that you will need to avoid along the way to protect yourself and your future asset. Let’s review some areas to be aware of before making any serious offers.
1. Avoid Making Emotional Offers: When you are planning on putting a bid down on a property, you need to be extremely confident with the home’s current condition, its true market value, and what will be needed to fully restore the property.
Too many buyers will think that they found an amazing deal and fear that they will lose the home to another bidder. So instead of taking the time to truly do their homework and complete the proper inspections and analysis, they can end up locking up a property for more than it’s actually worth.
2. Estimate Neighborhood Values: Consider what other comparable properties are selling for and talk to a real estate agent who has a working knowledge of the area. In fact, it’s a wise decision to thoroughly review these questions and any other recommendations your Realtor may make:
- Is this neighborhood a desirable location and how are crime rates?
- What schools would be available for my kids or future buyers?
- Were there any other foreclosures or investor sales that could negatively affect the future value of my home?
- How long do I plan on living there and how could that affect things?
- What type of appreciation should I expect?
3. Get Preapproved: Before you even start looking at homes, you must get preapproved on a mortgage in order to know exactly what you can afford. Sadly, many buyers can miss out on some phenomenal deals or spend hours of wasted time because they avoid this step. Show banks that you are a serious buyer and have your financing in place!
4. Get Professional Help: Not only should you seek the expertise and of an experienced Realtor, but you may also need guidance from a real estate attorney or financial consultant as well. Each professional can ensure that you are making the right choices throughout the process and can protect you from any issues you may come across along the way.
Remember that there is a lot more than meets the eye when you are trying to buy a foreclosure property. Negotiating with the banks, filling out paperwork properly, and undergoing all the necessary inspections can be a very detailed and tedious procedure.
Therefore, we encourage you to give us a call today to get started. We have years of experience assisting other clients with buying foreclosures for their next home or investment property. Discover how we can help you to make a smart and profitable investment as well!
The Heating Season is Upon us!
Here we go with the “Winterize your Vacant Home” 2011 edition. Sadly, this nice warm fall is bound to end one day.
Late October/early November is considered the beginning of the heating season here in the Washington DC metro area. If your DC home is vacant you need to either winterize it your self or hire a pro. The water needs to be turned off and the pipes drained. Most people can do this themselves by turning off the water and turning on the faucets. Don’t forget to drain the toilets. The water heater needs to be drained and that isn’t that hard to do either it has a valve on it. There should also be a valve to shut off the gas to it.
Boilers are another matter. The water should be drained and I have a forced air unit so I don’t know much about boilers. If you use a company to inspect and repair your boiler, call them.
Even if the heat is left on your home still needs to be winterized. If the furnace stops running and the pipes freeze, trust me, the home will be destroyed. I have seen how a home looks after a few pipes have burst and it isn’t a pretty picture.
**Bonus tip**
If your home is going to be vacant do not forget to let your insurance company know because if you have a claim, and they find out it is vacant, they may not pay out. Insurance companies are all about collecting premiums not paying claims.
Short Sale Rules are Changing for HAFA
Short Sale HAFA Changes
As guessed the Treasury Department has changed the rules regarding a short sale and the HAFA program.
Will the short sale actually be true to its name?
Currently short sales are taking many months with many of them not being approved or losing buyers that finally wander off. No one would call them short.
In a nutshell here are some of the changes:
- Those seeking a short sale must get an answer within 30 days.
- Servicers will no longer be required to verify a borrower’s financial information.
- Servicers are no longer required to determine if the debt-to-ratio incomes exceeds 31%.
- Second lien holders no longer must accept 6% of the unpaid balance.
The Government is clearly focused on making short sales a viable option. This does not appear to be the case with the Banks that sometimes pass up a short sale offer and end up with less proceeds on a Trustee sale. Only time will tell if the program will actually start to work but I am currently working on HAFA certification to understand the whole process.
Below are some of the basics of the HAFA program for short sales.
HAFA Basic Eligibility Eligibility Requirements For Short Sales
The home must be owner-occupied principle residence.
- It must have a first trust deed mortgage(loan) in place prior to January 1, 2009.
- The mortgage must be delinquent or delinquency is likely.
- The unpaid loan balance is no more than $729,750 for a single family home.
- Your monthly payment is more than 31 percent of your gross income.
HAFA short sale advantages.
- Buyer’s will know where they stand in the purchase.
- Seller’s will walk away from the property more dignity.
- Fewer deals with fall through at the last minute.
- Uniformity of forms used in the process.
- 10 day business response from lender upon presentation of executed offer.
- If Seller not approved for HAFA may be considered for deed-in-lieu of foreclosure.
- Mandatory deficiency release.
- $3,000 in moving expenses.
Stayed tuned for more HAFA short sale updates.
What is a HAFA Short Sale?
HAFA Real Estate Short Sale Information for Washington DC, Maryland and Virginia.
Looks like whether we like it or not, short sales are going to be with us a while.
No one wants to lose their home but some circumstances are beyond one’s control. The short sale may be a better option that an actual foreclosure.
First you should talk to an attorney or financial advisor.
Making these decisions will have substantial effects on your credit and only these professionals can advise you of your best options. Real estate brokers are licensed to provide real estate information and cannot give legal advice or tell you how a short sale will ultimately effect your credit standing.
Beware of people promising impossible results – they know where to find you.
Short sales are anything but short or easy, HAFA is an attempt to change that.
The Government has put into place a program called HAFA or Home Affordable Foreclosure Alternatives. This program is for those that don’t qualify for HAMP or Home Affordable Modification Program. While the program has been offered since April 2010, it has been a rough start. The program runs through December 31, 2012. The goal of HAFA is to standardize the process and make it quicker.
HAFA Basic Eligibility Eligibility Requirements
- The home must be owner-occupied principle residence.
- It must have a first trust deed mortgage(loan) in place prior to January 1, 2009.
- The mortgage must be delinquent or delinquency is likely.
- The unpaid loan balance is no more than $729,750 for a single family home.
- Your monthly payment is more than 31 percent of your gross income.
Here are some of the advantages of the HAFA program:
- Buyers will know where they stand in the purchase.
- Sellers will walk away from the property with more dignity.
- Fewer deals with fall through at the last minute.
- Uniformity of forms used in the process.
- 10 day business response from lender upon presentation of executed offer.
- If Seller not approved for HAFA may be considered for deed-in-lieu of foreclosure.
- Mandatory deficiency release.
- $3,000 in moving expenses.
My prediction is this program will increase in use in the next several years. Like many Government programs it is very complex and education of your real estate agent will be critical. I am actually going to enroll in the Maryland Association of REALTORS® Certified HAFA specialist program.
There has been lots of critical talk and finger pointing on the HAFA program. While it is not perfect, I believe that for many people it will give them a way out of an impossible situation and allow the real estate market to stabilize. It may be another 6 months before the program is really rolling.
Web Resources:
That One Thing you Might be Missing to Set You Above the Rest …
With over 90% of home buyers searching online for a new home your home must make a great first impression. The first impression is a lasting impression! In a buyers market sellers compete with sellers. If buyers are not impressed what they see online they will move on to the next listing. Mike’s Staging Service works with you and your Realtor to put your home on the “must see” list for today’s home buyers. We offer a marketing plan and photos to assist with the sale of your home.
Since When is a $370k/year Income NOT Enough to Qualify for a Rental Property?
I get calls and e-mails almost every day from people looking to call the DC Metro area “Home Sweet Home”. Many are moving from places hundreds, if not thousands, of miles away while some are just moving within the area.
I got a call last week from someone interested in renting a beautiful DC rowhouse in Adam’s Morgan for $7,000/month. When we got to talking about the application process , the subject of Income Qualification requirements came up.
“How much income do I need to be earning in order to qualify?”
A very standard question with a very standard answer. Most Landlords require that the housing payment ($7,000/month in this case) be no more than 30-35% of the total monthly income. This means that someone needs to be earning roughly $21,000/month (or $252,000/year) in order to qualify.
“Great! Between all of us, we make $370,000/year!”
I had to ask, “What do you mean … all of us?”
I came to learn that this income was the sum total of 4 adults who were looking to rent the property together. Nothing wrong with that … it happens all the time, doesn’t it? There was only one problem, though …
About 90% of properties listed with real estate companies will not allow the qualifying income to be derived from more than 2 occupying applicants.
I know, for the lack of a better way to put it … it sucks. In the case of these 4 adults, the 2 highest-paid applicants earned a combined yearly income of only $190,000 (or about $15,800/month). The numbers, unfortunately, just didn’t add up in their favor.
So what should someone do in this situation? Well, either you’d need to only look at rentals up to about $5,200/month (based on the example) OR try your luck renting directly from a homeowner who has not listed their property with a real estate company (there are plenty of them listing properties every day on Craigslist).
If you have any questions regarding the rental application process, please do not hesitate to contact me. I’ll be happy to help as much as possible!
DC Metro Market Activity – April 2010
The First Time Homebuyer Tax Credit deadline has passed and there is some really good news …
The world has not ended!
Home sales are definitely up for the month of April 2010 versus the same time last year. Click below to view our Market Activity Report in video form!
For more specific information about market activity in YOUR home’s neighborhood, please contact me and I’ll be more than happy to help!
How to Apply for a Rental Property in DC or Maryland
If you’re considering renting a property listed on the local MLS in DC or Montgomery County, you only need to follow a few simple steps in order to complete the application process. These steps are:
1.) Complete the Standard Area Rental Application 
Nothing out of the ordinary – very standard information required. One application should be filled out for each adult applicant and, in most cases, there cannot be more than 2 applicants when it comes to income/credit qualification (click here to find out WHY). The application should be filled out completely, signed and dated.
*** Click HERE to Download the Rental Application!
2.) Include Funds for the Application Fee
Most Real Estate companies will change a non-refundable application fee of $30-50 per adult applicant. These funds should be in the form of a check or money order. Sometimes this is slightly discounted if the applicants are a married couple, but not always.
3.) Include Funds for the First Month’s Rent
This is something unique to rental properties that are listed by real estate companies. Although the First Month’s Rent is not cashed/deposited until terms have been agreed to and a lease has been signed, these funds are due upon application … almost the same as a “Good Faith deposit”. The reason the first month’s rent is due with the application is because these funds are used to pay Realtor’s commission(s).
Also important to know:
Processing time can take anywhere from 24-72 hours depending on the real estate company that represents the homeowner. This timeframe can also be influenced by an employer who is difficult to reach for the purposes of verifying an applicant’s employment/income. Sometimes it’s helpful to include additional information with the application in order to speed up the process (ie. an “Offer Letter” from an employer regarding new employment – this will often fully satisfy the employment/income verification requirement).
Once an application has been processed, presented to the homeowner and accepted then the first month’s rent will be cashed/deposited and the security deposit (usually equivalent to one month’s rent as well) will become due. If there are pets involved then the pet deposit will become due as well. Once all funds have cleared, a move-in can be scheduled and keys may be given to the new tenant(s).
Want more information?
This is the application process in a nutshell. If you have any specific questions that were not answered here or maybe just want to talk about the process in general, please do not hesitate to Contact Me.
What Comes to Mind When You See this MLS Photo?
Today’s “Worst MLS Photo” takes us to the Potomac Luxury Home Rental market and, more specifically, a beautiful 6 bedroom/6 bath Estate home offered at $6,000/month.
I actually viewed this property yesterday and must say the house shows much better than the online photos had originally led me to believe. I’d say it’s worth every penny of the $6,000 monthly but I almost didn’t even go to see this house because of the pictures. One of them, in particular, really got my attention … not in a good way, unfortunately …
What do you think about it? I’m almost not even sure what to make of it …
I’m not going to question the person’s taste (or fashion sense) who decided to decorate their large finished basement in this matter. What I am going to question is why on earth one wouldn’t remove something this unsightly for the sake of taking a valuable picture to be used in a marketing context? The worst part is that this house is also “For Sale” at a price of $1.9 million … with the same dreadful picture …
I’m still shaking my head about this one …
If you or someone you know needs to find quality renters for a Luxury Home in Potomac, Bethesda or anywhere else in the DC Metro area, just CONTACT ME and you can rest assured knowing that your home’s online presence will be impressive and emphatic for all the right reasons. No unsightly photos … Guaranteed!
10 Questions to Ask Before Making an Offer on a Short Sale
In the beginning, all homes were created equal. Homes would appreciate at a modest rate of 1-2% per year and home values were very much predictable. A typical home sale was between a seller who named his price and a buyer looking for a good deal.
Then the Maryland and DC Real Estate market suffered dramatically due to global economic conditions and the Short Sale, as we know it today, was invented.
If you’re thinking about making an offer on a Short Sale, it’s important to have the right set of expectations when beginning the process. It’s even more important to ask the right questions before writing the offer as there may be very valid reasons why the process could either take much more time than the average or be totally doomed from the beginning.
Let’s discuss the 10 Most Important Questions to ask before making an offer on a short sale:
1.) Have the owners accepted any offer(s) since the home was listed?
- If your offer is accepted, will it have been the first offer accepted (think … “guinea pig”) or is there a chance that the short sale approval process has been advanced by a prior offer/contract that fell through at the last minute? This could make a difference of MONTHS when it comes to the time you can expect to wait.
2.) How many days will the bank(s) take to process the short sale package?
- Should you expect to wait 30 or 60 or 90 days just to hear back whether your offer has been accepted? Different banks process short sales under different timeframes which is why it’s crucial to know this up front.
3.) How many loans do the owners have?
- Do you remember the days of “80/20″ mortgage loans? This was where the buyer would finance 100% of the home purchase but the mortgages would be split in two. Wouldn’t it be somewhat of a nasty surprise to wait 4-5 months, obtain short sale approval on the homeowner’s loan and think you’re in the clear only to then learn that there’s a second mortgage that also needs to be approved? This actually happened to someone I know (and NO … they were not working with me or else this would have never happened …)
4.) How many banks are involved?
- So you find out there are two loans that need to be approved for the Short Sale to make it to the closing table. You could assume that they’re both with the same bank, but oftentimes this is not the case. What happens when one bank is really easy to work with and the other bank is not? Sometimes, this information alone could be enough to decide whether to pursue the deal or avoid walking into the crossfire altogether.
5.) Has a negotiator been assigned to the case?
- Have you ever called in to fix a problem/error and can’t find a human being to talk to? Sitting through hours of “On Hold” music and navigating through automated menus is enough to drive any man crazy. Yet this is exactly what goes on when a homeowner or real estate professional calls a Short Sale bank for negotiation purposes … except for when there’s a “negotiator” assigned for more direct contact. This kind of direct-line is crucial and often makes a huge difference in total wait time for the prospective buyer.
6.) Has a BPO been completed?
- Has the Short Sale bank sent someone to evaluate the property’s price? This is what’s called a BPO (Broker’s Price Opinion) and I’d call it a big benchmark in terms of the total process. If the BPO has already been done and you haven’t submitted your offer yet, this will definitely save you some wait time. If not, that doesn’t mean you shouldn’t move forward it just means that you need to take it into consideration.
7.) Is the listing agent the only one in charge of advancing the process or is there a title company sharing the workload?
- Remember the earlier mention of Realtors and homeowners waiting hours to get connected with the right person who can actually help them? Well, an experienced Realtor (and one who expects to have a life outside of real estate) will delegate some of these more time-intensive tasks of contacting the bank(s). It’s a simple enough concept but you’d be amazed to find out just how many Realtors try to do this all by themselves (and to everyone’s detriment as we all have to wait longer if the agenda is advanced at a snail’s pace).
8.) How many months are the owners behind in payments?
- I should say that while it’s important to ask this question, one may not always get an answer because no one’s obligated to tell you. The homeowner’s financial situation is really their own business but if you can find out … more power to you. What if they’re so far behind in payments that their days are numbered? What if the property you’re trying to buy is destined to end up as a foreclosure no matter how much effort you put into the process?
9.) Are the owners actively involved in speaking with their bank(s)?
- Ideally, the owner(s) should be speaking regularly with their bank(s). As you can imagine, as a homeowner it helps to show you’re genuinely interested in having your Short Sale approved. When the bank is calling to collect past due payments and no one answers or returns the call … it sends a clear message (a bad message).
10.) Is there a foreclosure sale date currently scheduled for this property?
- If the actual foreclosure sale is already scheduled for the short sale property you’re interested in … keep looking. The odds that you’ll actually end up closing this transaction are about the same as the odds of seeing snow falling in DC Metro during the month of May.
Do you have a specific question you’d like to have answered? Please contact me using the form below and I’ll be happy to help!