Elaine VonCannon, ABR, SRES, REALTOR, Notary Public, Team Manager
As a REALTOR in Williamsburg, VA, I have seen many of inconsistencies with mortgage companies during a down market. Frankly, this frustrates buyers and sellers, me, my staff and colleagues.
I have mortgage company incompetencies, slowdowns and backlogs to share. I have collected some stories from other agents in my RE/Max Capital office in Williamsburg, too. These snafus in the mortgage approval system impact buyers and sellers in a negative way.
Short Sales Frustrations
It is common for a seller to short sale a property, and to have the lender(s) make the seller wait six months for approval - and then deny it! More often than not this crucial decision leaves the seller in financial ruins. The sale of the home is never closed, and the property now exists as bank 'inventory' and may not even hit the real estate market for a year or two. Wasting time on short sales leaves homebuyers and home sellers hung-up in financial limbo, and real estate agents without a closed deal. This cannot be good for the economy.
FHA Owned Properties: HomeSteps and HomePath
The FHA is a government agency, backed by tax dollars. If a buyer happens to put an offer on an FHA owned property, they have to use the recommended program. The federal government, in its infinite wisdom, has instituted the HomeSteps program through Freddie Mac and HomePath through Fannie Mae as public loan programs for the home buyer to help assist in the process of closing deals on FHA owned properties. Private lenders work through the program while adhering to government guidelines.
Though the HomePath and HomeStep Programs are enticing for what they offer, the process is slow and unwieldy. Some real estate agents have found the formula applied to each loan approval is not always the same. One agent in my office had a buyer turned down because HomePath indicated they did not have enough income. When the agent confronted the loan officer, she wanted to know why the 10-month income verification was not applied, instead of 12-month verification. She said her clients would qualify with a 10-month formula, and the loan officer agreed it was allowed. Her complaint is that formulas are not being applied consistently. Even those with good credit and stable work histories are finding it hard to close on HomePath loans.
HomePath Lending Program
Fannie Mae's HomePath program offers a traditional mortgage with 3% down, and no appraisal or premium mortgage insurance (PMI) is required. In addition, Fannie Mae offers another 3% down loan that includes home purchase and light to moderate renovations on primary or second homes or investment properties. A separate loan funds manufactured homes with the same 3% down payment.
HomeSteps Lending Program
The Freddie Mac Loan Program, HomeSteps, is stricter. The HomeSetps website recommends a 5% down payment with the possibility of qualifying for special programs offering down payment assistance. An appraisal is required on HomeSteps property purchases. Only certain homes will qualify for this program. A public review on the HomeSteps loan program is just as discouraging as HomePath. According to one buyer who complained publicly on CityData.com, the lender was Wells Fargo and the buyers made an initial offer on a Homesteps property, then made a lower offer once it was determined the house had 'illegal problems.' She inquires, "Is it normal to wait three weeks for a reply?"
Often buyers become frustrated with these slow moving property deals and move on. More often then not, the sale never closes.
Bank of America Backlog on Foreclosure Contract & Loan Approval
The Bank of America foreclosure department also drags its feet on closing real estate sales. I had a buyer ready to close on a Bank of America owned foreclosure and it took them two months to produce a contract. My buyer had an 800 credit score, but it took so long to approve his application, he became frustrated and pulled money out of another investment to pay cash for the property. I was lucky he had assets and was not totally reliant upon bank financing.
Bank of America Loan to Income Ratio Askew?
Another client I had was prepared to close on a property with Bank of America financing and he had a 780 credit score. The loan officer waited until one week before closing to inform him he did not qualify because his debt to income ratio was too high. When we considered lending alternatives, five other banks approved his loan, and even the USAA approved it. Why was Bank of America's loan to income ratio different than the rest?
The backlog in application requests, slow customer service, and inconsistencies with loan approvals are all reasons for concern about the mortgage lending industry today. Everyone involved in closing real estate deals becomes frustrated: real estate agents, buyers, sellers, lawyers and contractors. Even the federal government has become suspicious of Bank of America's (and other mortgage lenders) incomplete foreclosure paperwork and processes.
Though the federal government has been investigating some issues, lender inconsistencies and slow or no customer service are rampant in this real estate market. Buyers need to build extra time into their home sales process and agents need to exercise patience and attention to details for property deals to close.
For more information about purchasing bank owned properties, residential or commercial properties, or listing properties for sale, visit http://www.voncannonrealestate.com.
Wednesday, February 2, 2011
Monday, January 17, 2011
Debunking the Myth of More Net Gain with For Sale by Owner
Elaine VonCannon, ABR, SRES, REALTOR, Notary Public, Team Manager
Are you thinking of selling your home on your own, without the aid and professional advice of a qualified REALTOR? You may want to re-examine your decision to do so, because chances are good that you will not increase your net gain by selling your own home.
Do you believe your savings on commission will be your reward after you attend a seminar or two on selling your own home? A home sale is a complex series of transactions with multiple parties. Not only is it time consuming, consultation and coordination with professionals at every level is necessary. Attendance at a seminar or two does not make you an expert on home selling.
The average person will buy two to three homes in one lifetime, unless they are a property investor. A top producing REALTOR will average 5-10 transactions per month. A REALTOR with knowledge and experience in the profession will be able to enhance your bottom line on a home sale. Here are some common questions I am frequently asked by For Sale by Owner sellers.
Q: I recently attended a seminar on selling my own home. Won't this enable me to do it on my own?
A: The seminar was probably sponsored by a lawyer, closing attorney, titling company, or lender. The facts you can obtain in three hours or less are not enough to teach you how to get more money for your largest investment: your home.
Q: How do REALTORS sell homes quickly?
A: A staggering 80% of home sales are done through a Multiple Listing Service. REALTORS have access to this. With a listing on MLS sellers have the entire membership of the MLS working for them. Sellers may have as much as several thousand members depending on the area or residence. An MLS listing is the most effective way to bring in qualified potential buyers.
Q: What information is most critical when selling a home?
A: A seller needs to know what the state requires as well as what the lender requires when it comes to home sales transactions. He or she also needs to know the timeframe for all transactions. If time frame is not adhered to the contract can become null and void.
Q: I live in a residential community and am selling my home. How do I deal with the Home Owner's Association effectively?
A: Do you know the timeframe for the Home Owners Association (HOA) packet in your area? If the HOA package is not received in the required timeframe of your state then the buyer may cancel the contract with no penalties to the buyer. These matters are of the utmost importance when dealing with an HOA.
Q: Why does a home seller even need a real estate agent?
A: If there is no middle party to negotiate between the buyer and seller, you can become deadlocked on terms, have your property tied up, or end up in litigation. If your property is tied up for months you might have missed the right buyer who is willing and able to pay the price you want. Also a REALTOR will not have the emotional ties to the transaction that a seller has. The REALTOR is also separate from the buyer's objectives.
Q: Doesn't hiring an attorney take care of contracts?
A: If you think an attorney drawing up a contract makes you free and clear of worries and responsibilities - you're wrong. The attorney does not have the time to stay on top of this to make sure everything required is done on the home before closing. If you do want the attorney to handle the details, you'll pay a lawyer's fee, which is usually $100 per hour and up.
Q: How does a REALTOR arrive at a market price on a home?
A: A REALTOR will price your home much like an appraiser would. A REALTOR compares your home to what has sold in the area in the past three months. They know the inflation record in your area. A REALTOR's research also consists of checking court records to see what has sold in this area. This covers home sales not listed on MLS, but by law has to be recorded at the court house for a specific area.
Q: How can a REALTOR possibly improve my bottom line on home sales, when I'm saving on commission?
A: On every listing I have sold, I have procured for my sellers $10,000-$50,000 above what they thought their property would sell for - after they had paid all the fees including commission. A majority of For Sale by Owner's homes have sold for less than what a REALTOR would have obtained.
I would like to reiterate the importance of the seller selecting a REALTOR who knows the ins and outs of contractual agreements and has some experience behind him or her. Hiring an experienced REALTOR to help sell your home will the wisest investment you've ever made.
Visit VonCannonRealEstate.com to view the listing engine on the website.
Are you thinking of selling your home on your own, without the aid and professional advice of a qualified REALTOR? You may want to re-examine your decision to do so, because chances are good that you will not increase your net gain by selling your own home.
Do you believe your savings on commission will be your reward after you attend a seminar or two on selling your own home? A home sale is a complex series of transactions with multiple parties. Not only is it time consuming, consultation and coordination with professionals at every level is necessary. Attendance at a seminar or two does not make you an expert on home selling.
The average person will buy two to three homes in one lifetime, unless they are a property investor. A top producing REALTOR will average 5-10 transactions per month. A REALTOR with knowledge and experience in the profession will be able to enhance your bottom line on a home sale. Here are some common questions I am frequently asked by For Sale by Owner sellers.
Q: I recently attended a seminar on selling my own home. Won't this enable me to do it on my own?
A: The seminar was probably sponsored by a lawyer, closing attorney, titling company, or lender. The facts you can obtain in three hours or less are not enough to teach you how to get more money for your largest investment: your home.
Q: How do REALTORS sell homes quickly?
A: A staggering 80% of home sales are done through a Multiple Listing Service. REALTORS have access to this. With a listing on MLS sellers have the entire membership of the MLS working for them. Sellers may have as much as several thousand members depending on the area or residence. An MLS listing is the most effective way to bring in qualified potential buyers.
Q: What information is most critical when selling a home?
A: A seller needs to know what the state requires as well as what the lender requires when it comes to home sales transactions. He or she also needs to know the timeframe for all transactions. If time frame is not adhered to the contract can become null and void.
Q: I live in a residential community and am selling my home. How do I deal with the Home Owner's Association effectively?
A: Do you know the timeframe for the Home Owners Association (HOA) packet in your area? If the HOA package is not received in the required timeframe of your state then the buyer may cancel the contract with no penalties to the buyer. These matters are of the utmost importance when dealing with an HOA.
Q: Why does a home seller even need a real estate agent?
A: If there is no middle party to negotiate between the buyer and seller, you can become deadlocked on terms, have your property tied up, or end up in litigation. If your property is tied up for months you might have missed the right buyer who is willing and able to pay the price you want. Also a REALTOR will not have the emotional ties to the transaction that a seller has. The REALTOR is also separate from the buyer's objectives.
Q: Doesn't hiring an attorney take care of contracts?
A: If you think an attorney drawing up a contract makes you free and clear of worries and responsibilities - you're wrong. The attorney does not have the time to stay on top of this to make sure everything required is done on the home before closing. If you do want the attorney to handle the details, you'll pay a lawyer's fee, which is usually $100 per hour and up.
Q: How does a REALTOR arrive at a market price on a home?
A: A REALTOR will price your home much like an appraiser would. A REALTOR compares your home to what has sold in the area in the past three months. They know the inflation record in your area. A REALTOR's research also consists of checking court records to see what has sold in this area. This covers home sales not listed on MLS, but by law has to be recorded at the court house for a specific area.
Q: How can a REALTOR possibly improve my bottom line on home sales, when I'm saving on commission?
A: On every listing I have sold, I have procured for my sellers $10,000-$50,000 above what they thought their property would sell for - after they had paid all the fees including commission. A majority of For Sale by Owner's homes have sold for less than what a REALTOR would have obtained.
I would like to reiterate the importance of the seller selecting a REALTOR who knows the ins and outs of contractual agreements and has some experience behind him or her. Hiring an experienced REALTOR to help sell your home will the wisest investment you've ever made.
Visit VonCannonRealEstate.com to view the listing engine on the website.
Friday, January 7, 2011
A Primer on Bank Owned Properties for Sale in VA
Elaine VonCannon, ABR, SRES, REALTOR, Notary Public, Team Manager
For perhaps the first time in history, bank owned properties are numerous in just about any real estate market. First time homebuyers, investors, and the average homebuyer in the U.S. markets are eager to purchase bank owned property.
On the surface, bank owned properties seem like a great deal. Often, they do offer significant savings. Yet the purchase of a bank owned property, whether it is a short sale or a foreclosure, also comes with specific parameters and cautions for the buyer and the seller. Buyers must remember that a bank owned property purchase is vastly different from the routine property acquisition.
Bank Short Sales Statistics in Southeastern Virginia
Halfway through 2010, there are over 50 bank owned property listings in Williamsburg, James City County, Yorktown, Northern York County and sections of New Kent County and Charles City. In Hampton and Newport News Virginia, there are approximately 175 bank owned homes for sale. In the Northern Neck Counties on the Chesapeake Bay, there are 28 short sales and foreclosures for sale. These numbers indicate the recession is not over. Homebuyers can expect bank short sales and foreclosures to be listed for some time to come.
Short Sale Process
For property owners who are underwater, or owe more on the home then it is currently worth (and/or cannot afford their present mortgage due to reduction in income, unemployment, or change in life circumstances) a bank short sale may be a viable option.
Bank short sales are a tedious process. Those banks who accepted TARP money, such as Bank of America or Wells Fargo (the former Wachovia) are more inclined to short sale a property. These banks actually have the leverage to take the loss on the loan.
Some banks are not so amicable about a short sale. Instead these banks allow properties to go into foreclosure. Statistically, an average of 75% of short sales are withdrawn or often end in foreclosure. Banks can hold the inventory this way, and wait for property values to increase.
Buyers and sellers need to know that a short sale may take anywhere from four weeks to eight months or more to complete. If a buyer and seller are participating in a short sale, they must be patient.
Bank Short Sale Issues
There are some tricky issues with short sales of properties. To complete a short sale, a good attorney is necessary. The attorney will negotiate with the bank to obtain the best possible conditions for sale of the property. When there is a second mortgage on a property, there is little chance the company will receive any proceeds from the short sale. Since the second mortgage stands to loose the most from a short sale, the company may hold up the process.
Making a short sale on a property does not ensure the property owner will leave free and clear from financial responsibilities. Mortgage companies may still elect to hold the former homeowner responsible for financial losses even after a short sale is completed. A knowledgeable REALTOR will retain a qualified real estate attorney to ensure that the final contract includes verbiage requesting the remainder of debt owned by the first or second lien holder is forgiven. Inserting this clause may or may not work, but it should be written into the contract.
Foreclosures
The best way to find a foreclosed property (or a short sale) is to retain a qualified REALTOR in the desired area. This REALTOR will conduct a special search on the MLS for bank owned properties.
Foreclosed properties may be recently vacated, and some may have been left empty for a year or more. Some property owners elect to speak with their lender about their inability to maintain the loan, then voluntarily vacate the property instead of waiting for foreclosure. The homeowner will send the deed and keys to the lender and leave the premises. If a homeowner leaves in this manner, some banks may even forgive the unpaid balance.
Mortgage companies and banks like to privately "extend and pretend." This means the lender acts as if the loan is performing so they don't have to declare it as a non-performing loan. If the loan were classified as non-performing, the bank would have to pay more reserve money to ensure the investment. Bank owned properties stand vacant longer in this market for this precise reason.
Once the lender takes possession of the property, it has the option to auction the foreclosure at the courthouse. Often these home auctions will only net 50% of the home's value. If a lender cannot obtain enough money for the foreclosed property through public auction, it may hold it and leave it vacant or put it on the real estate market.
Condition of Bank Short Sales and Foreclosed Properties
Short sales and foreclosures are sold 'as is,' without negotiating repairs. The property can be inspected, but even if something is found wrong, the property owners are not required to do anything. The buyer, on the other hand, may need to meet certain conditions for the lender. Some may require moisture and termite inspections, or well and septic inspections, and theses costs are the buyer's responsibility. Do they want to bear it? The seller will more than likely not want to pay for inspections or upgrades to present systems.
Some short sales and foreclosures are in pristine condition, whereas others are 'buyer beware' since they have repair issues. It just depends on the situation. An inspection is well worth the money, and certainly a good decision for a short sale or foreclosed property. Buyers and REALTORS should be on guard for extensive damage, wear and tear and possible structural problems. Avoid purchasing homes where large capital investments are needed to make the home livable: faulty sewers or wells, asbestos, bad roofs, lead or leaky waterlines and malfunctioning electrical are some of these. Even a small or negligible repair issue may grow greater the longer the house is uninhabited and the problem is ignored. Vacant homes are more likely to be filled with rodents and pests and even snakes and small animals. Look for signs of these when viewing the property.
Even if you are not the type of person who wants to take the risks of purchasing bank owned properties, do not let it defer you from purchasing a home altogether. All investments are a risk. It is often better to know what these risks are up front. If, after reviewing the conditions of buying bank owned properties, you decide it's not for you, then consider purchasing a home through a traditional real estate transaction instead. There are still plenty of great bargains on home purchases.
Visit http://www.voncannonrealestate.com to view bank owned properties for sale in VA.
For perhaps the first time in history, bank owned properties are numerous in just about any real estate market. First time homebuyers, investors, and the average homebuyer in the U.S. markets are eager to purchase bank owned property.
On the surface, bank owned properties seem like a great deal. Often, they do offer significant savings. Yet the purchase of a bank owned property, whether it is a short sale or a foreclosure, also comes with specific parameters and cautions for the buyer and the seller. Buyers must remember that a bank owned property purchase is vastly different from the routine property acquisition.
Bank Short Sales Statistics in Southeastern Virginia
Halfway through 2010, there are over 50 bank owned property listings in Williamsburg, James City County, Yorktown, Northern York County and sections of New Kent County and Charles City. In Hampton and Newport News Virginia, there are approximately 175 bank owned homes for sale. In the Northern Neck Counties on the Chesapeake Bay, there are 28 short sales and foreclosures for sale. These numbers indicate the recession is not over. Homebuyers can expect bank short sales and foreclosures to be listed for some time to come.
Short Sale Process
For property owners who are underwater, or owe more on the home then it is currently worth (and/or cannot afford their present mortgage due to reduction in income, unemployment, or change in life circumstances) a bank short sale may be a viable option.
Bank short sales are a tedious process. Those banks who accepted TARP money, such as Bank of America or Wells Fargo (the former Wachovia) are more inclined to short sale a property. These banks actually have the leverage to take the loss on the loan.
Some banks are not so amicable about a short sale. Instead these banks allow properties to go into foreclosure. Statistically, an average of 75% of short sales are withdrawn or often end in foreclosure. Banks can hold the inventory this way, and wait for property values to increase.
Buyers and sellers need to know that a short sale may take anywhere from four weeks to eight months or more to complete. If a buyer and seller are participating in a short sale, they must be patient.
Bank Short Sale Issues
There are some tricky issues with short sales of properties. To complete a short sale, a good attorney is necessary. The attorney will negotiate with the bank to obtain the best possible conditions for sale of the property. When there is a second mortgage on a property, there is little chance the company will receive any proceeds from the short sale. Since the second mortgage stands to loose the most from a short sale, the company may hold up the process.
Making a short sale on a property does not ensure the property owner will leave free and clear from financial responsibilities. Mortgage companies may still elect to hold the former homeowner responsible for financial losses even after a short sale is completed. A knowledgeable REALTOR will retain a qualified real estate attorney to ensure that the final contract includes verbiage requesting the remainder of debt owned by the first or second lien holder is forgiven. Inserting this clause may or may not work, but it should be written into the contract.
Foreclosures
The best way to find a foreclosed property (or a short sale) is to retain a qualified REALTOR in the desired area. This REALTOR will conduct a special search on the MLS for bank owned properties.
Foreclosed properties may be recently vacated, and some may have been left empty for a year or more. Some property owners elect to speak with their lender about their inability to maintain the loan, then voluntarily vacate the property instead of waiting for foreclosure. The homeowner will send the deed and keys to the lender and leave the premises. If a homeowner leaves in this manner, some banks may even forgive the unpaid balance.
Mortgage companies and banks like to privately "extend and pretend." This means the lender acts as if the loan is performing so they don't have to declare it as a non-performing loan. If the loan were classified as non-performing, the bank would have to pay more reserve money to ensure the investment. Bank owned properties stand vacant longer in this market for this precise reason.
Once the lender takes possession of the property, it has the option to auction the foreclosure at the courthouse. Often these home auctions will only net 50% of the home's value. If a lender cannot obtain enough money for the foreclosed property through public auction, it may hold it and leave it vacant or put it on the real estate market.
Condition of Bank Short Sales and Foreclosed Properties
Short sales and foreclosures are sold 'as is,' without negotiating repairs. The property can be inspected, but even if something is found wrong, the property owners are not required to do anything. The buyer, on the other hand, may need to meet certain conditions for the lender. Some may require moisture and termite inspections, or well and septic inspections, and theses costs are the buyer's responsibility. Do they want to bear it? The seller will more than likely not want to pay for inspections or upgrades to present systems.
Some short sales and foreclosures are in pristine condition, whereas others are 'buyer beware' since they have repair issues. It just depends on the situation. An inspection is well worth the money, and certainly a good decision for a short sale or foreclosed property. Buyers and REALTORS should be on guard for extensive damage, wear and tear and possible structural problems. Avoid purchasing homes where large capital investments are needed to make the home livable: faulty sewers or wells, asbestos, bad roofs, lead or leaky waterlines and malfunctioning electrical are some of these. Even a small or negligible repair issue may grow greater the longer the house is uninhabited and the problem is ignored. Vacant homes are more likely to be filled with rodents and pests and even snakes and small animals. Look for signs of these when viewing the property.
Even if you are not the type of person who wants to take the risks of purchasing bank owned properties, do not let it defer you from purchasing a home altogether. All investments are a risk. It is often better to know what these risks are up front. If, after reviewing the conditions of buying bank owned properties, you decide it's not for you, then consider purchasing a home through a traditional real estate transaction instead. There are still plenty of great bargains on home purchases.
Visit http://www.voncannonrealestate.com to view bank owned properties for sale in VA.
Wednesday, December 22, 2010
How to Research and Purchase a Good Investment Property
How much do you really know about investment property? Accurate research and professional expertise applied to the purchase of an investment property builds a solid foundation for financial success. You may want to work with a REALTOR who can help to identify the great opportunities in investment properties in the area of your choice. Or, you may choose to do the work on your own. A REALTOR can provide the inside line on properties with potential in the geographic area where you are looking for property. If you do choose to work with a REALTOR, you will save time, and you may have more choices and opportunities.
Research the Property's Past and Present
Some essential information must be obtained about the property's past. For example, do you know the history of property, or even how old it is? What sort of upgrades have been made to the home? Is the roof waterproof, and is the plumbing and electrical in working order?
What's the Neighborhood Like?
Once the overall condition of the property has been assessed, tax assessment records must be examined to determine property value trends. A good realtor will be familiar with the neighborhood where the property is located and if he or she is not, the REALTOR should check the neighborhood at different times of the day and night and speak to some neighbors. If there is a homeowners association, check the guidelines, assess fees, and be certain they allow rental of properties.
Assess the Bottom Line
For what purposes are you, the investor, going to use the property? To rent? To house your business? Or, to rehabilitate the property and sell it at a profit? Once this is determined, you can assess the bottom line.
Are you paying cash for your investment property? If not a mortgage will have to be paid. Have your REALTOR determine if rent and applicable fees will cover the mortgage, property management and maintenance. Consider property management if you do invest in property. Research fees and services provided by different property management companies, or ask your REALTOR if they provide this service, because many do. If you do not want to collect rents and contract repairs, find a property manager with the skills to negotiate, be your intermediary, and facilitate business in your absence.
For investors who rehab and sell buildings at a profit, a decent turnaround is 60-90 days from the time of purchase to the time the property is put back on the market. Three to four contractors should be researched and they should provide written bids with time estimates on their projects.
Document Fund Availability with Your Offer
Once you find that dream investment property, don't forget that offers need to be accompanied by your financial institution's statement of fund availability or a lender's approval letter. This will help make certain your offer will be accepted over other offers that may not come with appropriate paperwork.
There are still plenty of great deals on investment properties in this real estate market, and there are some less than desirable properties as well. Do your research. Or, hire a professional who will do it correctly for you. With proper planning and decision making, your real estate investment should be a profitable and worthwhile endeavor.
Visit VonCannonRealEstate.com for more information on investing in commercial or residential properties.
Research the Property's Past and Present
Some essential information must be obtained about the property's past. For example, do you know the history of property, or even how old it is? What sort of upgrades have been made to the home? Is the roof waterproof, and is the plumbing and electrical in working order?
What's the Neighborhood Like?
Once the overall condition of the property has been assessed, tax assessment records must be examined to determine property value trends. A good realtor will be familiar with the neighborhood where the property is located and if he or she is not, the REALTOR should check the neighborhood at different times of the day and night and speak to some neighbors. If there is a homeowners association, check the guidelines, assess fees, and be certain they allow rental of properties.
Assess the Bottom Line
For what purposes are you, the investor, going to use the property? To rent? To house your business? Or, to rehabilitate the property and sell it at a profit? Once this is determined, you can assess the bottom line.
Are you paying cash for your investment property? If not a mortgage will have to be paid. Have your REALTOR determine if rent and applicable fees will cover the mortgage, property management and maintenance. Consider property management if you do invest in property. Research fees and services provided by different property management companies, or ask your REALTOR if they provide this service, because many do. If you do not want to collect rents and contract repairs, find a property manager with the skills to negotiate, be your intermediary, and facilitate business in your absence.
For investors who rehab and sell buildings at a profit, a decent turnaround is 60-90 days from the time of purchase to the time the property is put back on the market. Three to four contractors should be researched and they should provide written bids with time estimates on their projects.
Document Fund Availability with Your Offer
Once you find that dream investment property, don't forget that offers need to be accompanied by your financial institution's statement of fund availability or a lender's approval letter. This will help make certain your offer will be accepted over other offers that may not come with appropriate paperwork.
There are still plenty of great deals on investment properties in this real estate market, and there are some less than desirable properties as well. Do your research. Or, hire a professional who will do it correctly for you. With proper planning and decision making, your real estate investment should be a profitable and worthwhile endeavor.
Visit VonCannonRealEstate.com for more information on investing in commercial or residential properties.
Thursday, December 9, 2010
10 Tips on Investing in Distressed or Foreclosed Properties
1. Search on the world wide web for distressed or foreclosed properties as a starting point. Use a professional REALTOR to identify great foreclosure deals for you. You may be successful at searching the web on your own, but keep in mind some of the information is outdated, some may be incorrect, and some of the available properties are not even listed. A REALTOR subscribes to updated MLS listings and can offer you the most current information available.
2. If you search yourself for distressed properties and purchase from the selling agent, you are paying a commission to someone with a vested interest. Obtain objectivity in the sale by working with your own REALTOR. You won't pay any more. Technically, everyone works for the seller, since they pay the commission.
3. With distressed or foreclosed properties, time is of the essence. Purchasers must close on the date specified by the agency, and cannot close after this without penalties of $25-200 per day.
4. It takes 1-3 weeks to qualify a loan. If you are approved for a loan, make sure you are qualified by your lender as soon as possible. If you are paying by cash, make certain funds are available. If finances are in order, the REALTOR will then submit an offer. When the offer is accepted by both seller and buyer, the REALTOR will submit the ratified contract to the lender and closing agent. These steps will begin the process of a successful real estate transaction.
5. When purchasing a distressed property, always obtain 3-4 bids from different contractors to estimate costs of repairs, if you do not plan on doing the work yourself.
6. If you are going to sell the property after rehabilitating it, ask your REALTOR to research similar properties in the neighborhood to ascertain market price.
7. Keep copious records for tax deductions. Any expenses related to the purchase, repair, or maintenance of the property may qualify. Meticulous records are key to a profitable real estate venture.
8. The title you receive after purchasing a distressed or foreclosed property is a special warranty deed rather than a general warranty deed. Some buyers are alarmed by this, but there is no need to worry. The purchase of title insurance protects the buyer. Each lender purchases insurance to protect the loan as well. Titling insurance should be obtained by the property purchaser. It is always offered by the closing agent. Consider using an attorney instead of a titling company as your closing agent. An attorney is only $50-75 more than a titling company. A real estate attorney can remedy any situation that may arise. Therefore, they are more efficient representatives on time sensitive foreclosure properties.
9. Foreclosure properties require special addendums and special contracts by the individual bank and HUD office (where applicable).
10. Foreclosure properties are potentially the most profitable, but require the most attention to detail. A REALTOR experienced in foreclosure deals is highly desirable because the paperwork must be in order to submit a proper bid, and timeliness is critical.
Visit VonCAnnnonRealEstate.com for more information on foreclosures for sale in VA.
2. If you search yourself for distressed properties and purchase from the selling agent, you are paying a commission to someone with a vested interest. Obtain objectivity in the sale by working with your own REALTOR. You won't pay any more. Technically, everyone works for the seller, since they pay the commission.
3. With distressed or foreclosed properties, time is of the essence. Purchasers must close on the date specified by the agency, and cannot close after this without penalties of $25-200 per day.
4. It takes 1-3 weeks to qualify a loan. If you are approved for a loan, make sure you are qualified by your lender as soon as possible. If you are paying by cash, make certain funds are available. If finances are in order, the REALTOR will then submit an offer. When the offer is accepted by both seller and buyer, the REALTOR will submit the ratified contract to the lender and closing agent. These steps will begin the process of a successful real estate transaction.
5. When purchasing a distressed property, always obtain 3-4 bids from different contractors to estimate costs of repairs, if you do not plan on doing the work yourself.
6. If you are going to sell the property after rehabilitating it, ask your REALTOR to research similar properties in the neighborhood to ascertain market price.
7. Keep copious records for tax deductions. Any expenses related to the purchase, repair, or maintenance of the property may qualify. Meticulous records are key to a profitable real estate venture.
8. The title you receive after purchasing a distressed or foreclosed property is a special warranty deed rather than a general warranty deed. Some buyers are alarmed by this, but there is no need to worry. The purchase of title insurance protects the buyer. Each lender purchases insurance to protect the loan as well. Titling insurance should be obtained by the property purchaser. It is always offered by the closing agent. Consider using an attorney instead of a titling company as your closing agent. An attorney is only $50-75 more than a titling company. A real estate attorney can remedy any situation that may arise. Therefore, they are more efficient representatives on time sensitive foreclosure properties.
9. Foreclosure properties require special addendums and special contracts by the individual bank and HUD office (where applicable).
10. Foreclosure properties are potentially the most profitable, but require the most attention to detail. A REALTOR experienced in foreclosure deals is highly desirable because the paperwork must be in order to submit a proper bid, and timeliness is critical.
Visit VonCAnnnonRealEstate.com for more information on foreclosures for sale in VA.
Monday, November 29, 2010
Renovations and Upgrades: Bring it to the Bank - Part 1
Elaine VonCannon, ABR, SRES, REALTOR, Notary Public, Team Manager
Renovations and upgrades can increase the value of your home by thousands of dollars when done strategically, intelligently and professionally. Even if you renovate for personal reasons, consider the key areas that will put money back in your pocket. The kitchen and the bathrooms are first choice upgrades that translate into more money later. Bedrooms can also create incredible appeal or end up a serious turn off. Make certain your renovations or upgrades reflect the property values of your neighborhood. Don't overdo it with costly materials if you cannot recoup your costs when you sell your property.
Five Secrets To Upgrading The Kitchen The kitchen is the heartbeat of a home; everyone goes to the kitchen. When you are entertaining guests the flow often moves to the kitchen. The kitchen is also a key component for any homebuyer. If you follow a few basic suggestions your upgrade decisions will serve you well in the long term. If you are still dwelling in the house think about what works best with your lifestyle.
Always consider functionality and durability when you construct kitchen countertops. First, don't use tile countertops. Grout is difficult to clean and ages quickly unless it is sealed properly. If you have a lot of children or cook every night, you may not want to use newer, porous material since it scratches easily. Second, when altering the kitchen cabinets you can paint wood, but use washable paint, not water based paint. If you do not want to paint or replace all the cabinets change the hardware or consider adding new doors. Third, wallpaper in the kitchen is not a good idea. The heat and grease builds up and it is not very durable. Most people either love or hate wallpaper. Eighty percent of my buyers do not prefer wallpaper. Fourth, evaluate the cost of flooring alternatives like high-grade vinyl, wood flooring or ceramic tile. Do not use "stick 'em" tiles because they do not wear well and can detract from the value of your kitchen. Fifth, update the sinks, faucets and light fixtures for a bigger pay off. Most importantly be sure the kitchen is bright, airy and cheerful. These recommendations will increase the attractiveness and value of one of the most important rooms in the house.
Bathroom Do's and Don'ts The bathroom is another room buyers love to examine carefully; you will want it to have a lot of appeal. If you can see a ring around your tub for each child then it's time to replace or reface it. The shower and bathroom tiles must be clean, replace tiles that are in bad shape. Ceramic tiles are the best choice for flooring and new sinks. Be certain the grout and caulk are orderly and neat. New counters, sinks, light fixtures and cabinetry will enable you to get more return on your investment. Do not use wallpaper, since it does not hold up well in a moist environment.
Everyone Needs Personal Space In a home the bedrooms become each person's sanctuary. The layout and bedroom size can affect the appeal of your space. If you have small bedrooms consider taking a wall or two out and opening the space up. For example, five small bedrooms can be transformed into three larger bedrooms. If the home lacks in closet space closet organizers can help maximize space. Freshen up the light fixtures; even match them to individual décor. A chair rail or crown molding also adds value. Of course, upgrading the carpet or wood floor also makes the rooms more enticing. When you replace the carpet buy high quality padding, despite the added expense. Cheap padding will not be a long lasting upgrade.
Time is Up... Tune In next Time!
Now that you have some tools, you are ready to make your first steps towards a better home. Thinking strategically is the key to increased value and perfect home improvements. Two more important tips: keep all of your permits on file when you decide to resell and consider hiring a professional when renovating your home. Good luck with your current projects! Visit http://www.voncannonrealestate.com/articles/Renovations_and_Upgrades_Bring_it_to_the_Bank_Part_2.php for Part 2 of "Renovations and Upgrades: Bring It To The Bank" to learn more about the other rooms in your home, exterior maintenance and the importance of garages, fences and more.
Renovations and upgrades can increase the value of your home by thousands of dollars when done strategically, intelligently and professionally. Even if you renovate for personal reasons, consider the key areas that will put money back in your pocket. The kitchen and the bathrooms are first choice upgrades that translate into more money later. Bedrooms can also create incredible appeal or end up a serious turn off. Make certain your renovations or upgrades reflect the property values of your neighborhood. Don't overdo it with costly materials if you cannot recoup your costs when you sell your property.
Five Secrets To Upgrading The Kitchen The kitchen is the heartbeat of a home; everyone goes to the kitchen. When you are entertaining guests the flow often moves to the kitchen. The kitchen is also a key component for any homebuyer. If you follow a few basic suggestions your upgrade decisions will serve you well in the long term. If you are still dwelling in the house think about what works best with your lifestyle.
Always consider functionality and durability when you construct kitchen countertops. First, don't use tile countertops. Grout is difficult to clean and ages quickly unless it is sealed properly. If you have a lot of children or cook every night, you may not want to use newer, porous material since it scratches easily. Second, when altering the kitchen cabinets you can paint wood, but use washable paint, not water based paint. If you do not want to paint or replace all the cabinets change the hardware or consider adding new doors. Third, wallpaper in the kitchen is not a good idea. The heat and grease builds up and it is not very durable. Most people either love or hate wallpaper. Eighty percent of my buyers do not prefer wallpaper. Fourth, evaluate the cost of flooring alternatives like high-grade vinyl, wood flooring or ceramic tile. Do not use "stick 'em" tiles because they do not wear well and can detract from the value of your kitchen. Fifth, update the sinks, faucets and light fixtures for a bigger pay off. Most importantly be sure the kitchen is bright, airy and cheerful. These recommendations will increase the attractiveness and value of one of the most important rooms in the house.
Bathroom Do's and Don'ts The bathroom is another room buyers love to examine carefully; you will want it to have a lot of appeal. If you can see a ring around your tub for each child then it's time to replace or reface it. The shower and bathroom tiles must be clean, replace tiles that are in bad shape. Ceramic tiles are the best choice for flooring and new sinks. Be certain the grout and caulk are orderly and neat. New counters, sinks, light fixtures and cabinetry will enable you to get more return on your investment. Do not use wallpaper, since it does not hold up well in a moist environment.
Everyone Needs Personal Space In a home the bedrooms become each person's sanctuary. The layout and bedroom size can affect the appeal of your space. If you have small bedrooms consider taking a wall or two out and opening the space up. For example, five small bedrooms can be transformed into three larger bedrooms. If the home lacks in closet space closet organizers can help maximize space. Freshen up the light fixtures; even match them to individual décor. A chair rail or crown molding also adds value. Of course, upgrading the carpet or wood floor also makes the rooms more enticing. When you replace the carpet buy high quality padding, despite the added expense. Cheap padding will not be a long lasting upgrade.
Time is Up... Tune In next Time!
Now that you have some tools, you are ready to make your first steps towards a better home. Thinking strategically is the key to increased value and perfect home improvements. Two more important tips: keep all of your permits on file when you decide to resell and consider hiring a professional when renovating your home. Good luck with your current projects! Visit http://www.voncannonrealestate.com/articles/Renovations_and_Upgrades_Bring_it_to_the_Bank_Part_2.php for Part 2 of "Renovations and Upgrades: Bring It To The Bank" to learn more about the other rooms in your home, exterior maintenance and the importance of garages, fences and more.
Wednesday, November 24, 2010
Look Past the Bottom Line for a Property's Potential
This year, investment in the stock market is making many downright jittery. Though overall the stock market does seem to be hovering around the 10,000 mark, many investors are plagued with uncertainty about short and long term investments in the stock market. Will stocks go up or down this week? Is now to time to keep money in the market? Or take money out of the stock market?
As a real estate professional, I always advise people to continue to invest in property. With so many bank owned properties flooding many different markets, real estate investors are actively purchasing homes and investment properties and obtaining some great deals right now.
John Starke, an Investment Advisor and Financial Principle with American Beacon Partners, says that many investors have grown tired of the risk involved in purchasing equities, mutual funds, and other types of investments. Prior to the sharp downturn in the market in 2008, investors’ goals were to accrue money through appreciation. “Rather than nervously watch their portfolios go up and down, investors want a more stable income,” noted Starke. He sees a rise in interest in Real Estate Investment Trusts (REITs), Tax Free and Corporate Bonds, and even some Corporate CDs. “Many investors are pulling their money from equities and mutual funds and opting for investments that pay a decent, regular return on their money,” said Starke.
In my everyday real estate transactions, I see investors pulling large sums of money from the stock market and putting it into the purchase of homes and properties in Virginia. I have taken the time to ask real estate investors their opinion about stock market investments. Many have decided that the stock market is not for them right now. One investor, J. D., purchased a property in King William County, Virginia that was in foreclosure for $90,000. She will spend approximately $4,000 to prepare the property for the rental market and be able to collect a monthly income of $1,000 from her investment. J.D. told me “I feel the time is right to start investing in real estate again. I stopped four years ago when property prices got out of hand. I intend to do even more real estate investment now.”
Another client, who plans to retire in a few years, is selling one commercial property investment in order to purchase a strip mall in the Western Virginia town where he plans to retire. He will pay the purchase price and invest approximately $40,000 into the strip mall to prepare it for the commercial rental market. He told me, “I am tired of having a business that I have to work at everyday. I want to have an investment that will work for me as I am planning to retire in about two years.” His upcoming shift in lifestyle is motivation for his new commercial property investment. Note that he’s not selling one business and putting the money into the market. This may have been the trend for a retiree five years ago – but not in the new economy.
Finally, H.G. in Hampton, Virginia made a wise move with money he once had in the stock market. He purchased a condominium for $50,000, invested $2,500 in the property renovations, and is now receiving $850 per month in rental income for the unit. HG said, “I am making more of a return from my property investment than I would in the stock market, and I also receive a tax deduction to boot.”
There are of course risks in real estate investments. A tenant could default on the rental agreement, or a property could remain vacant for months on end. That is why it is imperative that real estate investors hire experienced and knowledgeable property managers to maximize their investment. All of the property investors mentioned in this article are using my property management services for their real estate investments. Other risks include unforeseen maintenance and repair issues. This is why it is important for property investors to put a portion of their profits aside to reinvest in the home, condominium or townhouse they purchase.
Where property investment is concerned, even these risks, when anticipated and well-planned for, are small compared to the uncertainty of stock investments.
Shawn Tully, Senior Editor at Large for Fortune magazine, published “2010's Coming Stock Market Crash: 1987 all Over Again” in May 2010. He states that stocks are still overpriced. He predicts a low return on investment (or a loss) as an inevitable outcome of this scenario. Tully bolsters his opinion with these astute observations: “Here's how I see the odds. The chances are about one in three that we suffer a huge, wrenching correction in the next year or two similar to the one in 1987. That possibility is so high because stocks are so startlingly expensive. Another high probability event is that markets go on a long sideways grind, with smaller drops along the way. What's extremely unlikely is that the market rises substantially from current levels and stays there for any extended period.”
Experts within the financial industry may be reluctant to put forth the strong opinion that Tully articulates. Still, there is no denying that investors have undergone a major shift in perspective since the financial crisis of late 2008 culminated in a recession, took hold of the United States and spread to other countries.
People will always need a place to live. With more and more families sadly experiencing foreclosure and dislocation, renting will be their most likely option. More rental properties will be necessary to fulfill housing demands. Investors need to take a serious look at property investment in their areas, and take steps to purchase viable homes even if they are in need of some repair or upgrades.
Visit http://VonCannonRealEstate.com to view potential investment property listings in Virginia in Williamsburg, Hampton, Newport News, Yorktown, Richmond and Northern Neck areas such as Matthews, Northumberland and King and Queen Counties.
As a real estate professional, I always advise people to continue to invest in property. With so many bank owned properties flooding many different markets, real estate investors are actively purchasing homes and investment properties and obtaining some great deals right now.
John Starke, an Investment Advisor and Financial Principle with American Beacon Partners, says that many investors have grown tired of the risk involved in purchasing equities, mutual funds, and other types of investments. Prior to the sharp downturn in the market in 2008, investors’ goals were to accrue money through appreciation. “Rather than nervously watch their portfolios go up and down, investors want a more stable income,” noted Starke. He sees a rise in interest in Real Estate Investment Trusts (REITs), Tax Free and Corporate Bonds, and even some Corporate CDs. “Many investors are pulling their money from equities and mutual funds and opting for investments that pay a decent, regular return on their money,” said Starke.
In my everyday real estate transactions, I see investors pulling large sums of money from the stock market and putting it into the purchase of homes and properties in Virginia. I have taken the time to ask real estate investors their opinion about stock market investments. Many have decided that the stock market is not for them right now. One investor, J. D., purchased a property in King William County, Virginia that was in foreclosure for $90,000. She will spend approximately $4,000 to prepare the property for the rental market and be able to collect a monthly income of $1,000 from her investment. J.D. told me “I feel the time is right to start investing in real estate again. I stopped four years ago when property prices got out of hand. I intend to do even more real estate investment now.”
Another client, who plans to retire in a few years, is selling one commercial property investment in order to purchase a strip mall in the Western Virginia town where he plans to retire. He will pay the purchase price and invest approximately $40,000 into the strip mall to prepare it for the commercial rental market. He told me, “I am tired of having a business that I have to work at everyday. I want to have an investment that will work for me as I am planning to retire in about two years.” His upcoming shift in lifestyle is motivation for his new commercial property investment. Note that he’s not selling one business and putting the money into the market. This may have been the trend for a retiree five years ago – but not in the new economy.
Finally, H.G. in Hampton, Virginia made a wise move with money he once had in the stock market. He purchased a condominium for $50,000, invested $2,500 in the property renovations, and is now receiving $850 per month in rental income for the unit. HG said, “I am making more of a return from my property investment than I would in the stock market, and I also receive a tax deduction to boot.”
There are of course risks in real estate investments. A tenant could default on the rental agreement, or a property could remain vacant for months on end. That is why it is imperative that real estate investors hire experienced and knowledgeable property managers to maximize their investment. All of the property investors mentioned in this article are using my property management services for their real estate investments. Other risks include unforeseen maintenance and repair issues. This is why it is important for property investors to put a portion of their profits aside to reinvest in the home, condominium or townhouse they purchase.
Where property investment is concerned, even these risks, when anticipated and well-planned for, are small compared to the uncertainty of stock investments.
Shawn Tully, Senior Editor at Large for Fortune magazine, published “2010's Coming Stock Market Crash: 1987 all Over Again” in May 2010. He states that stocks are still overpriced. He predicts a low return on investment (or a loss) as an inevitable outcome of this scenario. Tully bolsters his opinion with these astute observations: “Here's how I see the odds. The chances are about one in three that we suffer a huge, wrenching correction in the next year or two similar to the one in 1987. That possibility is so high because stocks are so startlingly expensive. Another high probability event is that markets go on a long sideways grind, with smaller drops along the way. What's extremely unlikely is that the market rises substantially from current levels and stays there for any extended period.”
Experts within the financial industry may be reluctant to put forth the strong opinion that Tully articulates. Still, there is no denying that investors have undergone a major shift in perspective since the financial crisis of late 2008 culminated in a recession, took hold of the United States and spread to other countries.
People will always need a place to live. With more and more families sadly experiencing foreclosure and dislocation, renting will be their most likely option. More rental properties will be necessary to fulfill housing demands. Investors need to take a serious look at property investment in their areas, and take steps to purchase viable homes even if they are in need of some repair or upgrades.
Visit http://VonCannonRealEstate.com to view potential investment property listings in Virginia in Williamsburg, Hampton, Newport News, Yorktown, Richmond and Northern Neck areas such as Matthews, Northumberland and King and Queen Counties.
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