Friday, November 5, 2010

Is this how your Banker treats you !!

On when the Shark bites !! Do you feel like the sharks are circling around the sinking ship? For, far too many that is what is happening, between short sales, foreclosures and REO’s it’s a feeding frenzy out there.

What can be done, you want to buy a home, but your not sure where to turn. You heard a friend say he had a friend who got a great deal on a foreclosure, so you start to think the foreclosures are the way to go. Let’s get a few facts and terminology out of the way first.

The time line is simple by nature, but starts to get cloudy as different variables come into the equation.

  • [1] If an owner is upside down on a property, in other words he/she owe more than the home is worth, they are going to have two (2) options.
  • Option 1: Negotiate with their bank for a lower rate, maybe extend the terms, and manage their monthly expenses.

  • Option 2: Work with an experienced team of Realtor’s and attorneys to sell their property in a Short Sale situation. (This is the best way for someone who is trying to sell their PRIMARY residence) An experienced team: Realtor and Attorney can help negotiate with the bank, price the property to sale, and deal with the bank when an offer comes through.

  • [2]If an owner for whatever reason waits too long, or has an investment/2nd home, the bank will begin the foreclosure process (obviously if the owner is behind in their payments). Typically it is thirty days, and the bank can and will pull it from the court if in that time frame the owner makes payments, or gets an offer for a short sale. A short sale is better for the bank and the owner, but is harder for a buyer.
  • Once the property goes to foreclosure, and a judge rules in favor of the bank the property becomes an REO of the bank (REO = Real Estate Owned) The term foreclosure is bantered about very loosely, yet it means a onetime event, when the bank takes possession of the property.
  • [3]Once the property becomes an REO it is sent to the banks Asset Management Department, which could be an internal division or a private company the bank contracts with. The Asset Manager will begin the process of evaluating the property. What shape is it in? What is the true value of the property? What are the market conditions in the neighborhood?
  • Once the Asset Manager has evaluated the property they will begin selecting the Realtor that they feel can best market the property.
  • Advertising the property, a viable list of prospects, a specialization in REO’s and a particular neighborhood.

  • The agent may be required to spend money on cleaning the property, frequent trips to the property to oversee maintenance work, advising the bank on additional items that might help sell the property.

So how does all this affect a buyer?

SHORT SALES: Short Sales take more time, and can become very emotional. There are three parties involved: Owner, Buyer and Mortgagor. The Mortgagor technically does not have the authority to convey title, but they are the last one with the authority to accept or reject an offer. In all Short Sales, the contract will say: “Subject to 3rd Party Approval” The Short Sale can typically take anywhere from 90 to 180 days to close. So, it is not for someone who needs a place in 45 days.

REO: An REO is typically a more traditional transaction. The bank has determined a range of value, they have assessed what will need to be done to the property and have either agreed to do it or sell it “AS IS” SO BUYER BEWARE!

GETTING FINANCING: The final piece of the puzzle is financing, obviously a CASH OFFER IS KING, but if you need to finance the property keep in mind that you will need a qualification letter, a certificate of funds at the time of the contract. Once the bank has countered and approved on the price and terms, they will want to do their own contract. Please have your attorney review it before signing the contract. It would be best to have at lease a 75/25 LTV ration in a mortgage, and a credit rating over 750 with income that can be verified. The underwriters, thanks to our government, will be asking for information in duplicate, and if anything changes they will ask again. So be nice to your loan officer and ask questions, don’t get mad, be patient.

The last thing I would say is that buying a property from an individual is still the easiest way to buy real estate. Financing for a purchase is going to be consistent throughout the entire process. An owner/buyer sales transaction has less emotion once the contract has been negotiated, and in today’s market an owner that is not in a short sale has been taking care of their property, and what you see in the property is going to be there when you purchase the property. So, keep in mind when looking at property look at the properties that are not REO’s, you might find out you are getting a better deal.

So, let Barry Ginn or Charlie Fraser help you to find a good deal on Hilton Head Island or surrounding lowcountry area.

Copyright content & photo Charlie B Fraser 2010

No comments: