Kansas City North Real Estate Blog

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:

 

 

 

FHA Waives 90-Day Rule For Flipped Houses

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.

via portal.hud.gov

For those of you that were not aware, under the current FHA guidelines, if someone purchases a home to "FLIP" or "REHAB" or if a builder buys your current home in a trade and then wants to put it back on the market and resell it quickly, they have to wait a full 90 days before they can accept an FHA financing contract. Since most of the homes in lower price ranges today are purchased using FHA financing, this makes it difficult to efficiently flip a home in a reasonable time period. In many cases, it makes the deal to difficult to do at all so many homes do not get purchased and opportunities are lost.

How to invest in real estate without buying property

Q: I'd like to invest in real estate by buying stocks rather than property. Is there a way to do this?

A: So you want to take advantage of battered property values, but don't want tenants calling you in the middle of the night about a leaky faucet?

If that sounds like you, then yes, investing in real estate indirectly makes sense. There are ways to put real estate in your portfolio without buying a house, apartment ior office building. In fact, there are many ways to do it.

One of the most obvious is to invest in a real-estate investment trust. REITs are corporate structures that organize property into a holding company. There are unique rules to how REITs operate, making them different from a typical operating company.

And there are many REITs that trade on major stock exchanges. But remember that if you invest in just one REIT, you are assuming the risk of that particular company's property portfolio. For instance, if the company is heavily concentrated in Florida, a downturn there can mean big trouble for a REIT focused on that area.

One way around this problem is to buy a real estate investment trust mutual fund or exchange-traded fund (ETF) that invests in many REITS. Once such is the Vanguard REIT ETF (VNQ).

via www.usatoday.com