Frank Beltrami, Century 21 M&M Real Estate agent in Oakdale states “With the large number of bank owned homes (REO’s) on the market, low interest rates and the $8,000 Homebuyers Tax Credit, we have a ‘perfect storm’ situation for first time homebuyers.”
The California foreclosure crisis is in full swing with no end in sight.
In July 2009, the number foreclosure filings seemed to peak. After that, for four months in a row, we saw declines in foreclosure activity most likely due to the federal loan modification incentive (HAMP), the new California law requiring a 90 day delay before a foreclosure sale, and the large number of homes already in the foreclosure pipeline.
Then in December 2009, foreclosure filings increased 14% from November.
Real Estate Owned (REO) simply means that the lender reclaims the property through the foreclosure process.
During 2010, 2.4 million homes nation-wide, are expected to be lost through the foreclosure process. John Melo, CEO of Century 21 M & M states, “Due to this ongoing foreclosure crisis, most of those homes will be in the high end of the market and it has been predicted that home prices in that high end, homes over $400K, will continue to fall during the spring and summer of 2010.”
With foreclosures dominating the housing market, bargain hunters will find lots of opportunity in this market. The question is, how do you find and buy a foreclosed home (REO)? And what precautions should you take to make sure you are getting the best deal?
- Most important, find a real estate agent that specializes in REO’s. A lot of these Realtors have long-term relationships with the banks. See Century 21 M&M’s list of Bank Owned homes, and agents handling Bank Owned Homes.
- Get pre-approved (not pre-qualified) for a mortgage. Unless you plan to pay cash, you will need a recent pre-approval letter from a lender. This letter describes how much money you can borrow based on the lender’s assessment of your credit score, income and expenses.
Have your real estate agent look at recent home sales of comparable properties in the area, also known as ‘comps’. When you know the comps then you can write a competitive offer base on recent sales.
- Remember, most REO homes are for sale ‘as is’. With so many REO’s on the market and many of them in sub-standard condition, it is important to budget accordingly. Go over every inch of the property with a qualified contractor who can spot problems and tell you how much it will cost to remedy them.
- Finally, be patient and be prepared to write many offers. After you have carefully calculated what you want to spend, stay focused. Today’s low prices represent golden opportunities, but often attract dozens of buyers who may bid until the home is no longer a bargain, or in your price range.
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