When Can You Buy Real Estate After Foreclosure?

If you lost your Ft. Walton Beach home due to foreclosure, you probably haven’t given up on the dream of owning a new home. The good news is that a number of guidelines have changed which may allow  you an opportunity to buy that new home sooner than you think.  

There are a few guidelines that lenders follow to determine when you’ll qualify for financing after foreclosure. Arming yourself with this information may help you qualify again for a mortgage.

Foreclosure With Extenuating Circumstances

Generally, lenders will take into consideration any extenuating circumstances surrounding the foreclosure on your Florida real estate.

Was there a death or illness that prevented you from earning money to pay your mortgage? Did you have a job transfer that came with a steep pay cut? Were you severely injured and temporarily disabled as a result?

You can add a memo that explains any lapses in credit worthiness to potential lenders. This report can be as long or as short as needed.

Many lenders will shorten the waiting period for documented extenuating circumstances. Traditionally the waiting period after a foreclosure is seven years. However, these waiting period guidelines may change and you would be best served by getting up to date information from a qualified mortgage professional.

Deed-in-Lieu of Foreclosure and Short Sale

You may be wondering what the waiting period for financing is if you have exercised a deed-in-lieu of foreclosure or successfully negotiated a short sale. Fortunately many lenders offer options if you were able to avoid an actual foreclosure.

Traditionally the waiting period for a deed-in-lieu of foreclosure can be four to seven years. If there were special circumstances surrounding the deal, you might be able to qualify in as little as two years. The lender may have certain down payment or credit score requirements as a condition of approval.

Getting financing after a short sale generally has the shortest waiting time before qualifying for a new home loan. Generally the lender will only require a two-year waiting period before they’ll approve financing. Once again, a call to a licensed mortgage professional will give you the most up-to-date information.

The good news about financing after foreclosure is that it is possible. Your dreams of owning a home can be fulfilled even if  you have experienced a foreclosure in your past.

3 Ways To Purchase Foreclosed Properties

The process of buying a foreclosed home is slightly different from the process of buying a non-foreclosure home.  If you want to invest in Destin foreclosures, therefore, it is important to understand the different ways by which to purchase a foreclosed home.

There are three main ways to buy a foreclosed home.

Buying before the auction
Some delinquent homeowners may want to sell their homes before facing an actual foreclosure.In this instance, the homeowner, in agreement with the lender, agrees to sell the home for less than the amount owed on the mortgage.This is called a short sale. Short sales are “pre-foreclosures”, of sorts. By broadening your home search to include short sales, you can identify homes that may be sold at a discount.

Buying at the auction
Another way by which you can invest in foreclosure homes is by buying the home at auction. From area to area, the legal requirements for the sale of a foreclosed home at auction may differ. If you plan to buy at auction, you’ll want to be familiar with your area’s customary judicial proceedings.

Buying after the auction
Buying after the auction means buying bank-owned properties. This can be the most lucrative and safest means of investing foreclosure properties. This is because lenders often reduce the sales prices of their home inventory in order to “sell it quickly”. It can be expensive for banks to own foreclosed homes, and few banks are equipped for managing owned homes. Check with your local real estate agent to see what, if any, bank-owned homes are available for sale in your area.

The process of buying a distressed home is different from the process of buying a “traditional” one. Therefore, regardless of which path you follow to buy a foreclosed property, have an experienced real estate professional on your team.

Short Sales Outnumber Foreclosure Sales For Third Straight Quarter

Foreclosure-tracker RealtyTrac reports falling foreclosure sales nationwide as banks get better at selling homes via short sale.

In its Q3 2012 report, RealtyTrac says that 193,059 homes in some stage of foreclosure were sold, accounting for 19% of all residential home sales. In addition, pre-foreclosure sales — also known as “short sales” — climbed 22% on a year-over-year basis.

For the first time since 2007, the number of short sales outnumbered the number of homes sold in foreclosure over three consecutive quarters.

The average price of a short sale home fell by 5 percent as compared to a year ago which may reflect an eagerness on the part of mortgage lenders to dispose of distressed properties before they fall into foreclosure. Foreclosures can increase a lender’s losses, and foreclosed properties be expensive to manage.

Compare the average Q3 2012 sale price of a home in short sale versus one in foreclosure :

• Average sale price of a residential property in short sale : $191,025
• Average sale price of a residential property in foreclosure : $161,954

It’s not just the higher home sale prices that have pushing banks to settle on short sales, either. Short sales are less costly, too. Foreclosing on a home requires banks to pay court costs, among other fees, and which positions the short sale outcome as a clear winner for many banks. 

For homebuyers in Florida , the banking industry’s shift toward short sales is welcome news.

Buying a short sale has been a notoriously slow process with a lack of defined timeline. As banks improve their distressed sales division, they’re getting faster and more efficient. This makes it “easier” for a buyer to buy a home in short sale.

However, don’t buy a short sale without the help of an experienced, licensed real estate professional.

The negotiation process is different for a short sale than with a “traditional” home purchase. Time lines are different, responsibilities are different, and purchase contract language may be different, too. The same is true for buying a foreclosure.

Foreclosure Rate Drops For The 12th Straight Month

Foreclosure activity continues to slow throughout the United States.

According to data from RealtyTrac, a national foreclosure-tracking firm, the number of foreclosure filings dipped below 215,000 in September 2011, a 6 percent decrease from August.

A “foreclosure filing” is defined as any foreclosure-related action including Notice of Default, Scheduled Auction, or Bank Repossession.

September marks the 12th straight month in which foreclosure filings fell year-over-year.

There are several reasons why foreclosure filings are down, including an increase in the amount of time it takes banks to move a foreclosure through its pipeline. It now takes a nationwide average of 336 days from the date of initial default notice to bank repossession.

Some states work quicker than others, however, because of a combination of state law and personnel.

Homes in New York take an average of 986 days to foreclose, for example, the longest in the country. Homes in Texas foreclose the quickest, registering just 86 days.

As in prior months, bank repossessions remain concentrated by state. Just 6 states accounted for half of the country’s REO last month:

• California : 16.6 percent
• Georgia : 8.5 percent
• Florida : 8.3 percent
• Texas : 6.2 percent
• Michigan : 6.1 percent
• Illinois : 5.2 percent

Collectively, these 6 states represent just 36 percent of the nation’s population.

By contrast, the bottom 6 states were home to just 192 repossessions last month — 0.3% of the national total. Those 6 states were Alaska, Wyoming, District of Columbia, North Dakota, South Dakota, and Vermont.

For home buyers in Destin , shopping for foreclosed properties can be an excellent way to get “a deal”. Foreclosed homes typically sell at discounts as compared to “non-foreclosed” homes, but are often sold “as-is”. This means that homes listed for sale may be defective or out-of-code.

Before placing a bid on a foreclosed home, make sure that you’re represented by an experienced real estate professional. 

Hope For Homeowners Appears Hopeless………

HUD had announced a program that was to start on October 1, 2008, to help those homeowners who are  (a) past due on their mortgages and/or (b) upside down (owe more on their home than it’s worth).  Without going into details, this program was to help keep people at risk of foreclosure in their homes.

The national training was held a couple of weeks ago in Atlanta.  My partner attended.  The training was on Thursday and Friday, all day each day.  Mike, my partner, called at about 10:30 on the first day to tell me that he was leaving.  He had asked some questions and found out that (a) at this point, it isn’t a program that any investors are willing to do, (b) in its current form, the Wall Street securitizers aren’t willing to purchase this loan as there are too many ways that fraud can be committted and (c) unless Congress passes additional legislation, this program won’t ever bgin.

We have now gone back to find other ways to help those who called us for the H4H program.  We had gotten applications on a large number of people but hadn’t put them into process nor pulled their credit.  We had to try to figure out options for these people, which we have and are still working on.  However, it did cause me to try to figure out how homeowner’s can be helped and I wanted to share.

A business associate that I did a conference call with last week, Jeff Misaud of fhasuccessdesk.com, told me about ‘the Three Stages of a Foreclosure” that an owner goes through:

1. Denial – most people avoid dealing with the fact that they are already late or that they won’t be able to make their mortgage payment.  If mail comes to them from their mortgage company, they lay it aside and never even open it.  They think that if they avoid it, it will go away.
2. Disgust – this is the phase when a large number of people start experiencing depression.  In many cases of married people, fighting amongst themselves begins.  Financial stress is probably one of the number one causes of divorce and it is at this point that the reality is starting to hit and people realize that they are going to literally lose the roof over their head.
3. Destruction – many people who are being foreclosed upon cause damage to the house in retaliation of the foreclosure.  We have seen holes punched in the walls, cabinets and fixtures removed, appliances taken, and in one case, someone took the entire stairs out of the interior of the house.  There is nobody to blame for what has heppened so people blame their mortgage company and feel that in damaging the house, they are causing the mortgage company to have to pay out money, which evidently makes them feel better, at least temporarily.

The first thing a person needs to do when they realize that they can’t make their mortgage company is to CALL THEIR SERVICER (the company to whom you make your payments).  Now is NOT the time to avoid what is happening – you must be proactive not reactive.  Keep in mind that your servicer does NOT want to take your home in most cases!  If you ignore the problem, it will still be there and the best way to help yourself is to contact your servicer right away and explain what is happening.  In a lot of cases, they will put you through to other individuals or organizations that may be able to help you.

If you are upside down and/or late on your mortgage, there are FREE housing counseling companies that may assist you.  A list of these can be found at http://portal.hud.gov/portal/page?_pageid=73,1827662&_dad=portal&_schema=PORTAL. At this same webpage is a list of other ways to avoid foreclosure and keep your home. It is suggested that you contact one of these counselors and ask them to assist you (they are paid by the Government from money appropriated by Congress when they passed HR3221).

If you are finding it difficult to make your mortgage payment, you will need a new, tightened budget.  Prioritize your bills and pay those most necessary for your family: food, utilities and shelter.  Failing to pay any of your debts can seriously affect your credit rating, but if you stop making your mortgage payments you could lose your house.

A homeowner should know the statutes pertaining to foreclosure in their individual state.  Contact an attorney, if necessary, and you may find that there are ways to either prolong or completely cancel a foreclosure action!  This additional time will allow you, perhaps, to sell the house and avoid the foreclosure or, in extreme cases, to have the foreclosure overturned and never filed again.  It’s certainly worth the time, and in some cases, expense, of finding out.  There are financial and legal services that are available to you to assist with these statutes.  You can check out this webpage, http://www.hud.gov/local/fl/homeownership/foreclosure.cfm, for additional information on the statues, as well as your rights and/or resources available in any given state in the US.

Be extremely leary of foreclosure rescue companies.  While there may be a large number of them that can and do help, we have found that, for the most part, a lot of these companies are scams and will have you out of even more money with no results.

If you have contacted your servicing company and aren’t getting any results, and the housing counselors aren’t able to help you, there are companies springing up that are known as loan modification companies.  These companies, for a fee, will work with your investor/servicer to have either the rate on your current loan lowered, either termporarily or permanently, have the term (# of years/months of your mortgage) extended, and/or in more rare cases, forgive part of the debt to help lower your payment.

While there are some excellent loan modification companies, there are some unscrupulous ones who charge you high fees and don’t do any work towards modifying your mortgage.  It is very important that you screen these companies or get a referral from someone (we work with a highly reputable company that is getting great results for our clients).  Don’t use Google or the Yellow Pages to find one of these companies!

I know that having problems making your mortgage payment can take a toll on you, both physically and mentally.  It’s important that you be involved in trying to resolve this and, if you need assistance, you hire someone to help you that has proven results.  This is your home we are talking about……not just a house!

USDA Rural Housing (100% Financing) Has Low Foreclosure Rate!

 

Evidence that the USDA Rural Housing program works to get qualified buyers into homes can be found by checking out their foreclosure website.  Our office is in the Panhandle of Florida, and between here and Tallahassee (Leon) County, there are a total of 5 properties that are in foreclosure. 

I have been using this program for over 10 years and based on the number of properties that have sold under it, this low number of foreclosures represents USDA’s committment to making sure that the buyers who use this program show an ability to repay the mortgage

A USDA Rural Housing loan allows a client to finance the entire sales price PLUS any and all closing costs and prepaids that the seller isn’t paying.  A seller is not limited to 3% or 6% and can, in fact, pay all of the closing costs and the prepaids for the buyer.  It truly is a no money down program for qualified buyers.

If a buyer’s credit and/or debt to income ratio doesn’t qualify for this program, there is a Direct USDA Rural Housing mortgage which allows lower income families to purchase a home at a payment that they can afford; sometimes, their payments are subsidized.  If your lender tells you that you do not qualify, please ask them to give you the contact information for this program!

I May Stir Up a Controversy Here……

As one of the approved lenders on HUD’s Hope 4 Homeowner’s website, we have been inundated with phone calls from homeowners who are either (a) in foreclosure, (b) close to having a foreclosure action filed on them, or (c) struggling to pay their mortgage because of the current economic CRISIS we are experiencing here in the US and abroad.  This program appears, on the surface, to be a possible solution to many of these people but at this point, nobody in the country is even able to do it because HUD isn’t yet set up to insure the loans.  It’s very depressing – you have no idea of the stories we hear day in and day out.  “I lost my job”, “My husband left me”, “My wife passed away”, “My hours were cut at work”, and one that I understand, “I’m in the mortgage business and my pay is now about 20% of where it was 2 years ago”.  I don’t think that people outside of our industry really understand just how bad it is and may get to be in the not too distant future.

Yesterday, I was contacted by a national news program that is reporting on the state of the housing industry, and Florida in particular, by “putting a face to those people that are struggling”.  They wanted me to provide them with the name of a family that I knew of that they could focus.  I had the perfect family: a friend of mine and her husband and their 4 kids.  They bought their house in February, 2007 for $208,000 and did a conventional, 100% fully-verified 30 year fixed rate mortgage.  At the time, she was making between $75 and $90k a year as a salesperson at a furniture store – she is a decorator and sold condo packages (I’m in a resort area in Florida).  He is a liquor salesman and was making good money, as well.  In February of this year, their income had come down by about 35% from where they were at the end of 2006 and they tried to refinance (they didn’t come to me because of pride and I could kick them for that now.)  The mortgage company they were using told them the loan was approved, to not make their mortgage payment, and to use the $2,000 that was earmarked for the mortgage to pay down some credit card debt, which they did.  UNFORTUNATELY, this mortgage company wasn’t aware of our declining market status, evidently, and put the cart before the horse.  They hadn’t received the appraisal when they told them this, and it came in at $168,000 – 20% less than they purchased the house for 12 months prior and 20% less than they owed.  “Sorry – your application is denied” was what they next heard.  Since that time and now, their 14-year old son, who was the #1 athlete in our county for baseball, basketball and football, was seriously hurt in a boating accident this summer, her husband was involved in a car accident that totaled his car and the other driver had no car insurance, and their 16 year old son was involved in a car accident.  They have been trying to work with their investor and are 60 days late as of right now, but to no avail at this point.  Hopefully, getting them on the national news and having them mention their mortgage company may help not only them, but others whose circumstances are the same.

Now to the controversial part: There are an estimated 750,000 homes in the US in foreclosure.  The number of foreclosure actions being filed was 71% higher last month than the same time frame last year.  There was a total of $850,000,000,000 ($850 billion) earmarked for a bailout.  Why in the WORLD did/is this money going to banks, investment companies, etc???  If these funds had been allocated to 17 MILLION distressed homeowners, they could have each gotten $50,000, had it applied to their mortgages, and had their mortgages recast (reamortized over the remainder of the term based on the new principle) to help lower the payments of many and keep many more in their homes.  The banks and lenders would STILL have gotten the money, but the way it would have been done would have made a HUGE difference.  Do I have a suggestion as to how to determine what homeowners would have gotten this money?  I have suggestions, but definitives would be hard to come up with, I’m sure.  Would it have been “fair” across the board?  No, but neither is the way it is being handled now.  Would this amount ($50,000) satisfy all of the foreclosure actions?  Probably not.  BUT WHY WASN’T IT EVEN AN OPTION ON THE TABLE???  Instead, we have given this money to banks who are not willing to help out most “Joe the Plumbers” at a time when our housing industry crisis needs to be resolved to help aid in the recovery of our entire economic system.  John McCain is right: we have to get the housing industry repaired ASAP to help with the rest of our economy.  Barack Obama had it right – recovery starts at the bottom with the little person (although he wasn’t talking about the housing market – I think it was an entire other subject to which he was referring but this statement is true as it relates to fixing the housing market).

Do I say this to you because I feel that in getting the market fixed it will help me to grow my income?  NO.  Unless you are talking to a great number of people who wind up crying on the phone and feel that they are going to lose their homes (I am doing these in Alabama, Georgia, and Florida, with the higher number so far coming from Georgia) you can’t even imagine how horrible and how extremely widespread this issue is.  I am sure that all of us know someone in this situation and our heartstrings are tugged continually.  When you talk to the number of them that we, and those other lenders listed on HUD’s Hope 4 Homeowners website have talked to, it’s like a humongous ache that stays in your heart and eats at you trying to figure out how to help these people.

I am not in this business for philanthropic reasons – this is my career –  but I have to tell you: I have NEVER IN MY LIFE done more work for clients that I know I will never get paid on in my life.  It’s an embarrassment to our country, in my opinion, that we think so much of banks and those entities who’s entire purpose in being created was to “protect our money” <cough cough>.  In doing so, they have cost many of our brethren their homes. 

 

Florida Real Estate Foreclosures: Inflated Fact or Fiction?

Florida has gotten the reputation for being “the foreclosure capital of the nation”.  What they don’t tell you is that the basis of this “fact” is the the Lis Pendens filing, which is the first step in the foreclosure process.

A Lis Pendens is file and it can take 6, 8, 12 8, and even 24 months in some cases to actually get to foreclosure.  During this time (after the filing of the Lis Pendens and prior to the foreclosure), many of these properties are being sold (either as a short sale or a regular sale), or some of the homeowners are getting loan modifications and restructuring their mortgages or some owners are getting a deferrment of payments.  When one of these solutions occurrs, the foreclosure is stopped, thus the number of “foreclosures” in Florida is actually less than what is being reported as fact.

Another piece that is being reported incorrectly is that “there are a disproportionate number of people being left homeless in Florida” due to this “high number of foreclosures”.  In some areas of our state, over 70% of the properties on which Lis Pendens are being filed were purchased by speculators as investment properties with the sole intention of selling them fast for a profit.  The majority of these speculators are residents of other states who took advantage of exotic loan products (Ie: stated income or no doc).  As these products have gone away, so have the speculators.

Due to this distortion of the number of foreclosures in Florida, investors have tighted their guidelines concerning loan to value and property and/or occupancy type that they will finance in Florida.  Several years ago, it wasn’t uncommon for investors and banks to allow a mortgage lender or broker to secure 100% financing on a 2nd home or investment property for their clients and we are now limited to 75 – 80%.  Some investors, including Chase and Suntrust, have recently gone so far as to make the decision to get out of the condo and investment financing markets altogether in the state.  Chase has even ceased financing 2nd home properties in Florida, regardless of the property type (single-family detached, attached, condo, etc.) and are limiting primary home purchases of detached properties to 90% and of attached properties (townhomes, duplexes, etc.) to an 80% loan to value!

While the pendulum on financing properties in Florida has swung in an entirely opposite direction from where it was several years ago, there are still programs available to buyers of ALL property types in Florida and of all occupancy types (primary, 2nd home, or investment) if you work with the right lender or broker.  No matter what you may be hearing in the media, 100% financing for primary homes is alive and well (VA Mortgage, USDA Rural Housing Mortgage, Community Assistance Programs, Community Second Mortgages) and there is also an FHA Mortgage, which only requires a 3% down payment (3.5% after December 31, 2008).

With the tax advantages offered with home ownership, as well as the new tax credit created with the signing of HR3221 for up to $7,500 for those individuals who haven’t owned a home in the last 3 years, now is an advantageous time to buy and get the benefits of these tax credits/deductions.  Interest rates are still low and purchase prices have dropped.  Florida residents who are considering buying a primary home and keeping it for a long time (over 4 years) should jump in with both feet.  BUY NOW OR KICK YOURSELF LATER!