Kansas City North Real Estate Blog

5 Tips for Buying a Foreclosure in Kansas City

Get prequalified for a loan and set aside funds, and you’ll be ready to purchase a foreclosed home.

When selling a foreclosed home, set a price well under market value so the home will sell quickly. Image: Image Source/Getty Images

When lenders take over a home through foreclosure, they want to sell it as quickly as possible. Since lenders aren’t in the real estate business, they turn to real estate brokers for help marketing their properties. Buying a foreclosed home through the multiple listing service can be a bargain, but it can also be a problem-filled process. Here are five tips to help you buy smart.

1. Choose a foreclosure sale expert.Lenders rarely sell their own foreclosures directly to consumers. They list them with real estate brokers. You can work with a real estate agent who sells foreclosed homes for lenders, or have a buyer’s agent find foreclosure properties for you. To locate a foreclosure sales specialist, call local brokers and ask if they are the listing agent for any banks. 

Either way, ask the real estate professional which lenders’ homes they’ve sold, how many buyers they’ve represented in a foreclosed property purchase, how many of those sales they closed last year, and who they legally represent.

If the agent represents the lender, don’t reveal anything to her that you don’t want the lender to know, like whether you’re willing to spend more than you offer for a house.

2. Be ready for complications. In some states, the former owner of a foreclosed home can challenge the foreclosure in court, even after you’ve closed the sale. Ask your agent to recommend a real estate attorney who has negotiated with lenders selling foreclosed homes and has defended legal challenges to foreclosures.

Have your attorney explain your state’s foreclosure process and your risks in purchasing a foreclosed home. Set aside as much as $5,000 to cover potential legal fees.

3. Work with your agent to set a price. Ask your real estate agent to show you closed sales of comparable homes, which you can use to set your price. Start with an amount well under market value because the lender may be in a hurry to get rid of the home.

4. Get your financing in order. Many mortgage market players, such as Fannie Mae, require buyers to submit financing preapproval letters with a purchase offer. They’ll also reject all contingencies. Since most foreclosed homes are vacant, closings can be quick. Make sure you have the cash you’ll need to close your purchase.

5. Expect an as-is sale. Most homeowners stopped maintaining their home long before they could no longer make mortgage payments. Be sure to have enough money left after the sale to make at least minor, and sometimes substantive, repairs.

Although lenders may do minor cosmetic repairs to make foreclosed homes more marketable, they won’t give you credits for repair costs (or make additional repairs) because they’ve already factored the property’s condition into their asking price.

Lenders will also require that you purchase the home “as is,” which means in its current condition. Protect yourself by ordering a home inspection to uncover the true condition of the property, getting a pest inspection, and purchasing a home warranty.

Be sure you also do all the environmental testing that’s common to your region to find hazards such as radon, mold, or lead-based paint.

My team personally represents several local banks and has negotiated many fantastic deals for our buyers as well. If you'd like to know more about bank owned properties or might be interested in actually purchasing one, we would invite you to give us a call.  Please call Ron Henderson at 816-651-9001.

Don't Pay $29,900 for a Home And Expect to Move In Right Away

I was driving into the office this morning and heard an ad on the radio. Maybe you’ve heard it too, and it just really makes me shake my head in disbelief.

It goes like this: A lady has invited her friend over to see her new home and the friend comments about how nice it is. The lady then says, “Yeah, and can you believe this was a foreclosure? I bought this house for $29,900 and my payment is only $190 per month!”

Then the ad goes on to say you should call them for a list of foreclosures in your area.

OK. Here’s where I have to set the record straight! Sure, you can purchase a foreclosure for $29,900. In fact, there are over 100 homes priced between $29,000 and $30,000 in the Heartland MLS right now. What they don’t tell you on the radio though, is that these homes are super tiny and in just poor condition or they are larger homes in absolutely terrible condition. Take it from me, the majority of these homes smell terrible!

Secondly, no bank is going to loan you less than $50,000 unless it’s an FHA 203k loan in which case you would be borrowing additional funds for the repairs and your monthly payment would no longer be $190. Which, by the way, does not include taxes and insurance.

Bottom line, there is no such thing as a $30,000 move-in ready home for $190 per month. Oh, and to get the list of foreclosures, you likely have to pay a fee. You can easily get the list for free from a Realtor®. Just don’t expect them to show you every home on the list!

-Elizabeth Gilbert, Licensed Administrative Assistant

A typical $29,900 foreclosure looks like this:

 

 

 

Foreclosure in Seven Bridges Platte City Missouri

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Realtors Strive to Reduce Stress in Short Sale Transactions

According to the most recent Realtors® Confidence Index, buyers continue to be discouraged with the extended short sale process, resulting in foreclosures that could have been prevented. New resources from the National Association of Realtors® aim to help Realtors® and consumers successfully navigate the short sale process to help more homeowners avoid foreclosure.

“Our members report that short sales are often riddled with delays and red tape,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, Realtors® are dedicated to help streamline and improve the short sale process for both buyers and sellers.

via www.realtor.org

I would certainly agree with the frustrations over the amount of time it takes to get a short sale approved. Some of the lenders I've worked with jump on board relatively quickly, but others like Bank of America can drag out 6-12 months.

I think I've been more successful than most, but I've had 3 short sales this last year that ended up going into foreclosure. Honestly though, all three sellers simply waited too long before contacting me. When your already 6 months late on your payments and they're sending you a final notice of sale (via certified letter) it's much harder to stop the foreclosure at that point.

What's a Pre-Foreclosure?

What are Pre-Foreclosures?

Pre-Foreclosure is the term used for homes that have been scheduled for a foreclosure sale but have not yet gone to auction or been sold off. Often times this period of time can range from anywhere from a month to a year, depending on the customs and laws of the state or county. Just because they have not yet been sold off does not mean they cannot be purchased, as many home owners look to sell their home before a foreclosure sale takes place.

How Preforeclosures Begin

The process of foreclosure begins when a homeowner defaults on their loan. Generally when this occurs, the lender involved will issue the homeowner a notice of default, and for all intents and purposes this begins the preforeclosure period. From here on out many things may happen—the homeowner may raise the money to pay off their default debt to the bank or lender and stay in their home, the lender issues a Notice of Sale and arranges to put the property up for sale at a later date, or the homeowner finds someone willing to buy their home and avoids a foreclosure sale. This last option is becoming increasingly common, as investors and home buyers alike often look to find great homes for sale at extremely low prices through the preforeclosure market.

Low Prices on Pre Foreclosure Homes

Buying or investing in preforeclosure homes can be extremely lucrative, because often times a homeowner will be willing to sell off real estate in danger of foreclosure for very low prices simply to avoid a foreclosure sale. Many buyers end up finding deals of anywhere up to 50% off the true market value of a property.

Finding the Right Pre-Foreclosures

Since real estate sold by agents and brokers dominate the market, it can be hard to find properties available through this means. A good idea is to consult a pre-foreclosure specialist to find property available in your area, as well as information on how to go about purchasing these valuable properties.

If you have questions about buying a pre-foreclosure home in the Greater Kansas City area, please contact Ron Henderson at 816-651-9001 for more information.

Kansas City Bank Repos - Deal or No Deal?

This home was purchased in June 2007 for $532,500  It's a beautiful 4 bedroom, 3.5 bath, 4 car garage custom built home located in The Highlands of Weatherby.

Just last month, one of my clients was able to purchase this same exact model home, located just 2 streets to the East, for only $440,000. That's almost a $100,000 discount!  How did they do it?  The home my clients purchased was a bank repo!

Most consumers today understand there are some fantastic deals out there and they typically know that bank owned properties are some of the very best.  What they don't realize is that you have to be ready to go with your financing all lined up because sometimes the best deals go fast.

I do list some bank owned real estate in Kansas City myself and I get a lot of calls about these homes, but what most callers don't realize is that the bank is looking for a "non-contingent" offer.  This means you either must be renting at the time, already have your current home under contract, or be able to financially afford to buy that new home before you've sold your current home.

To get a REAL deal on a new home like the one above takes a little upfront planning and it takes a buyer that's willing and able to leave their options open and maybe even take a small risk to get a deal done.

If you'd like to see what might be possible for you, please call Ron Henderson at (816) 651-9001 so we discuss your options and prepare you to get the very best deal on a new home.

Moving UP in Kansas City

I have to be honest.  I just don't understand why more home sellers are not willing to consider selling their current home and "moving up" to a larger home in this market.  I suppose it's because I'm in real estate every day and I see so many incredible deals being made that I get so excited about these wonderful opportunities.

If you listen to the news media, they'd have you believe the sky is falling. I've spoken with so many home owners recently that think they couldn't possibly get their home sold in this market and that's simply not true.

Real estate is a local market and although it may be true that some areas of the country continue to have difficulty, for the most part the Kansas City area isn't effected like that. 

Having said this, there are some great opportunities in Kansas City if you plan ahead, retain a great Realtor, and are realistic about the sale of your current home.  Let me give you an example.

This last September, a good friend of mine told me he and his wife needed to sell their current home.  They live in a two-story home and now that the kids are gone, they're tired to trekking up and down the stairs all the time.  John said they wanted a nice home with the master bedroom on the main level. 

After taking a look at their home, we took some extra time to tile the master bathroom floor, repaint some bedrooms, replace some light fixtures and then have it professionally staged and photographed (two services I personally provide to all my sellers).  It was a beautiful home with large bedrooms, a finished basement, updated kitchen including granite counters, etc. 

We put this home on the market at $177,000 and received a full price offer in 3 weeks!  The sellers were obviously very happy and realized that although they may have had to sell the home for about $5,000 less than they would have in a "normal" market, the quick sale time made it worth it

Now the best part. When looking for their next home, we stubbled upon a bank repo that was well underpriced at $320,000.  This home was only 4 years old and had sold brand new for $390,209. We made an offer at $300,000 and with the sellers putting 50% down, the bank took it! If you question whether they got the deal of the century, just check out these photos. 




 This home has over 4,000 square foot of finished area, 4 bedrooms, 4.5 bath, finished walkout basement with media room, surround sound installed both up and downstairs, gigantic granite island in the kitchen, a huge wall of windows in the living room that looks out onto their beautiful view of the woods behind their home.  The list goes on and on.


I figure the buyers easily got a $100,000 discount on this home and they couldn't be happier! This is only one of the many great deals I've been able to get for my client in 2008. I'm looking forward to helping more people get great deals like this in 2009 too.

**

Do's and Don'ts of Foreclosure

Dear Real Estate Adviser,
I just received a notice of default letter from my mortgage lender that says my house will go to auction sale in four months. Can I still sell my house before this happens? What are my other options?
-- Sue

Dear Sue,
It appears that you are right in the beginning of the foreclosure process, but as long as the house is still in your name you can save it. While you need to be careful, you also need to act quickly. Four months can seem like a long time but it can go by in a flash. So let's get right down to what your options are.

1. Sell the property. 2. Work out a deal. 3. Refinance with a subprime lender. 4. File Chapter 7 bankruptcy. 5. File Chapter 13 bankruptcy. 6. Short sale/deed in lieu of foreclosure. 7. Walk away from the house.

1. Sell the property: If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists.

2. Work out a deal: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.

3. Refinance with a subprime lender: Your credit is poor right now because of the mortgage delinquencies. This means most or all of the traditional banks will not work with you. However, if there is equity in the property, you may be able to find a lender who will refinance you -- at a higher-than-normal rate. These are called subprime loans, and they're increasingly common: About 20 percent of mortgages today are subprime.

4. File Chapter 7 bankruptcy: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.

5. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file for a Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.

6. Short sale/deed in lieu of foreclosure: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. When might a bank agree to either of these? Lenders spend close to or more than $30,000 to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.

7. Walk away from the house: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.

Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.

Here are two options NOT to consider. In other words, they're scams.

1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name. 2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70 percent of the equity available. The interest rate could be as high as 18 percent and the fees can be exorbitant. They are hoping that you'll blow the money and default -- which allows them to take the property from you.

Sue, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.