Sugar House vs Murray Convenience Showdown

Salt Lake City neighborhood Map

Which area reigns supreme on convenience and proximity? We are about to find out through a completely non-scientific process. Whichever location is closes in proximity to the following locations gets 1 point and the location with the most points wins. Sugar House is defined by 1300 East and I-80 and for our purposes, Murray is located at 5400 S and I-15.

Location Mins from Sugar House Mins from Murray Winner
Park City 31 37 Sugar House
Snowbird 32 34 Sugar House
Draper Rodeo Grounds 21 18 Murray
Salt Lake International Airport 11 14 Sugar House
Downtown Salt Lake City 9 10 Sugar House
Wendover 104 109 Sugar House
Rio Tinto Stadium 16 9 Murray
Fashion Place Mall 12 5 Murray

There you have it, Sugar House wins 5 to 3. It should be known that I live in Sugar House and I picked the locations so you can draw your own conclusions there. Nonetheless, you can see that both of these locations have great proximity to some of Utah’s most popular attractions. And even though Murray lost, you may still want to keep it on your shopping list with a $201,299 (84107 zip code) current average asking price you can get a lot of bang for your buck. North Sugar House zip 84105 comes in with a hefty $390,838 current average asking price and South Sugar House zip 84106 comes in with a more manageable $276,636 current average asking price.

Fannie Mae Foreclosures by State

Homepath.com can be a valuable source for getting a handle on the number of Fannie Mae foreclosures.  It can tell us what is happening on the neighborhood, city, and state level.  By searching Homepath.com, we can see the current active and pending Fannie Mae foreclosures for each state.  For example, when I typed “HI” for Hawaii in the search bar it returned 52 results.  This tells us, that Fannie Mae has a total of 52 active and pending foreclosure properties in Hawaii.

This is not an exact science, but it does give us quick snapshot of what the largest REO seller is doing in the market.  I was surprised to see FL has the highest inventory of Fannie Mae foreclosures with 11,513 units.  North Dakota, has the lowest with only 11 Fannie Mae foreclosures.   California has a very healthy level of only 1761 units.  Total current pending and active inventory for Fannie Mae is 44,844 units.

Top 5 Fannie Mae States

1)   Florida
2)   Illinois
3)   Michigan
4)   Ohio
5)   California

 Bottom 5 Fannie Mae States

1)   North Dakota
2)   Wyoming
3)   Alaska
4)   South Dakota
5)   Hawaii

As I have previously discussed, Freddie Mac and Fannie Mae foreclosures account for roughly half of all foreclosures.  This data is a good indicator of REO inventory across the board.  Just keep in mind, Fannie Mae tends to have a larger portion of the lower priced foreclosures.    Take a look at your neighborhood to see what is happening near you.  Or you can do what I did, and look at Hawaii and Virgin Island Fannie Mae foreclosures and dream of future fix and flip projects in paradise.

ALABAMA 721
ALASKA 41
ARIZONA 935
ARKANSAS 316
CALIFORNIA 1761
COLORADO 290
CONNECTICUT 598
DELAWARE 128
FLORIDA 11513
GEORGIA 1444
HAWAII 53
IDAHO 305
ILLINOIS 3858
INDIANA 1010
IOWA 361
KANSAS 204
KENTUCKY 352
LOUISIANA 394
MAINE 304
MARYLAND 1150
MASSACHUSETTS 356
MICHIGAN 2433
MINNESOTA 794
MISSISSIPPI 249
MISSOURI 814
MONTANA 59
NEBRASKA 108
NEVADA 622
NEW HAMPSHIRE 182
NEW JERSEY 1014
NEW MEXICO 308
NEW YORK 697
NORTH CAROLINA 1399
NORTH DAKOTA 11
OHIO 2099
OKLAHOMA 354
OREGON 364
PENNSYLVANIA 1604
RHODE ISLAND 145
SOUTH CAROLINA 721
SOUTH DAKOTA 45
TENNESSEE 559
TEXAS 924
UTAH 251
VERMONT 128
VIRGINIA 656
WASHINGTON 1349
WEST VIRGINIA 117
WISCONSIN 712
WYOMING 32

 

 

What Breaking Bad and Walter White Can Teach Us About Foreclosed Homes

I just made it through the Breaking Bad series and I could not help but notice Walter White’s house in the final episode.   I do not think it is clear if the house was actually foreclosed on, but the home definitely looked like a foreclosure.  Lets take a quick look back at the series and see what it taught us about foreclosures and the housing market.

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 Environmental Issues

Jesse used the basement of his aunt’s house for a meth lab.  He even had the lab going during an open house.  I doubt I have ever attended an open house with an active meth lab in the basement but you never know.  That is why it is always good to get the house tested for meth if you suspect anything.  You can also check with the local health department and the DEA database to see if the home is on their list .

But meth tests can get expensive.  That is why I would only order one if there are red flags present; reports of drug use from the neighbors, signs of drug use in the home,  area known for meth production, smell of cat pee, etc.

Disclosures

As Jesse’s parents discovered, it can get costly if you do not disclose known defects.  In the series, Jesse blackmails his parents into selling him their home at a discount because they did not disclose the existence of a meth lab.

When buying a foreclosure, you need to be careful since you often are not going to have the same level of disclosures you would if you were buying a house from a homeowner.  The bank is still obligated to disclose known defects, but their knowledge of the property is limited since they have only own it since the home was foreclosed.  In contrast, most homeowners have lived in the property for a longer time and will know if the basement floods in the spring or the roof leaks in the winter.

 Securing Properties

In the final episode, Walt’s house is a wreck.  There is graffiti inside and out, trash in the yard,  and the interior has been stripped.  In the real world, the banks have their foreclosed homes in much better shape…most of the time.  They would definitely have the graffiti removed right away (likely by a preservation company or a contractor hired by the REO agent), they would have the trash removed in the front (to prevent city fines), and they would have the pool in the backyard either operating or covered (for liability reasons).  

So what do you think?  Would you buy Walter White’s foreclosed home?

Now is the Time for First-Time Home Buyers to Buy a Foreclosure

Institutional investors are backing away from the feeding frenzy of the last few years and are leaving more room for the first-time home buyer buying a foreclosure to get a great deal.  According to RealtyTrac, institutional investors only accounted for 5.9% of all sales in Feb 2014.  And Fannie Mae is offering 3.5% closing cost assistance to all owner occupant buyers that close by June 30, 2014.  So this spring may be the perfect time for you, as a first-time homebuyer, to take advantage and get a great deal on an REO.  Here are some key reasons why it pays to buy a REO (Bank Owned Home):

  • You can be more confident that the title is clear at an REO sale since you will have time to review a title report before closing.
  • The property is more likely to be vacant which eliminates an eviction headache.
  • You can complete full inspections before you close including testing for mold, meth, and other hazards.  If something comes up on the inspection, you can either back out of the contract or negotiate with the bank.
  • The banks will have completed minor preservation including winterization, trashout, and sales clean which is not always the case with other types of foreclosures.
  • And depending on your situation, the biggest advantage to an REO is you can more easily finance the sale.  If you were to buy a foreclosure at the courthouse auction, they typically want all the cash within 24-48 hours.  You could always get a hard money loan but they are expensive.  With an REO, the banks are willing to accept offers with buyers that are using conventional financing or FHA financing.

Fannie Mae and Freddie Mac Still Control a Large Percentage of REO Inventory

Trying to determine the percentage of REO inventory that is owned by the Federal Housing Finance Agency (FHFA), the entity in charge of Fannie Mae and Freddie Mac, is not an easy task.  But after some research, I believe it is safe to say that Fannie Mae and Freddie Mac are still controlling about half of all bank owned inventory.

The FHFA’s 3rd Quarter 2013 Foreclosure Prevention Report shows acquisition, disposition, and inventory levels for the FHFA.  According to the report, FHFA had 56,794 acquisitions, 50,277 dispositions, and an inventory of 148,060 foreclosed units at the end of the quarter.

This data can be compared to a grand total of 119,485 bank repossessions (what FHFA calls acquisitions) in the 3rd quarter of 2013 as estimated by Realtytrac.  The FHFA accounted for 56,794 of the 119,485 total; or 47% of the total market.  In other words, Fannie Mae and Freddie Mac are still controlling about half of the REO markey.

How do you use this knowledge to your advantage?  You can easily see the majority of FHFA inventory by going to Fannie Mae (Homepath.com) and Freddie Mac’s (Homesteps.com) websites.  There, you can do a more targeted search for your city and neighborhood and identify properties you may be interested in to purchase.  You can also use these sites as a tool to monitor foreclosure activity in your neighborhood, see which properties that are in pre-list, and find out who are the REO brokers in your area. If you want to learn more about finding REO deals and negotiating with the bank on the sale of foreclosed homes, you can take a look at Foreclosed: An Insiders Guide on How REO Homes are Marketed and Sold by Banks.

Speaking at Chicago Area Real Estate Investors Association (CAREIA)

Please come out and network with the Chicago Area Real Estate Investors Association (CAREIA) while I present the information found on my book  FORECLOSED An Insiders Guide on How REO Homes Are Marketed and Sold by Banks.  I will be the keynote speaker and I look forward to the opportunity.

When:  Monday January 13th 7:00 pm to 9:30 pm.

Price: $15 for non-members, free for members.

For more information, you can go to the CAREIA website.  I hope to see you there!

5 Things You Must Do When Buying an REO

Order All Needed Inspections

When you buy a bank owned home your are buying a property that has been through a foreclosure process.  Foreclosure properties often face several threats: 1) a prior owner without enough money for routine maintenance, 2) longs periods of time sitting vacant with no inspections or routine care, 3) target of vandalism and theft, 4) and possible major structural issues that contributed to the foreclosure.  Many of these items will be apparent from a casual walk through but many of them will not.  That is where the inspection comes in.

By ordering all of the needed inspections for the property you can mitigate your chances of a nasty surprise after the close of the property.  If you suspect water damage, be sure you order a mold inspection.  Is there a well and septic?  Make sure to get those checked out.  By completing a thorough inspection prior to close, you can make sure the bank pays for their share of fixing up any major problems.

Push Your Lender

The bank takes closing deadlines very seriously.  It is going to be hard to close on time if you do not have the money to buy the home from your lender by the closing deadline.  If the lender is not use to lending on REO properties, the lender may take a “they will close when I have the money” attitude.  If you sense this attitude from your lender, you may want to get a new lender.  The lender needs to order the appraisal right away and you need to get all requested documents into the lender as soon as possible or you may not make your closing deadline and end up having to pay fees to extend the closing.

Know Your Market

You do not know if you are getting a great deal on a property unless you know the market and know what other similar homes in the area are selling for.  As soon as you start shopping for an REO, get to know as much about the local market and as you can.  Watch what houses are listed for on sites like Realtor.com and Zillow and have your agent send you sold comps from the MLS so you can see what houses actually sold for.  Only when you have a complete picture of what similar homes are selling for can you negotiate in confidence and be sure you got a great deal on your REO.

Stay on Top of Your REO Agent

If your REO agent is any good, he or she may have lots of different interests competing for their attention including; keeping the bank happy, managing their staff, and responding to buyer inquiries.  The squeaky wheel gets the grease and it is your job to stay on top of your REO agent.  Your REO agent will provide you pre-list inventory and will be your a key source for what is happening with REO inventory in your area.  They will often know if the REO inventory is expected to increase or decrease in the area before anyone else.

Realize You are not Working With a “Normal” Seller

You are getting a great deal on the property for a reason.  You are helping the bank unload their unwanted inventory so they can use the money to do what they do best; make loans.  But the discount comes with strings attached.  The bank may demand you return the signed addendum and state contract back to them within 24 hours and then it will take them a week to get the same document signed and back to you.  Or they may require you to pay a fee if you do not close on time but expect you to extend the  closing without complaint if title is not ready.  It is best just to take these inconveniences in stride and be patient knowing that at the end of the day it is a small price to pay for getting a great deal on a property.

For more helpful hints and a complete guide to buying an REO, check out my book on Amazon for $4.99 FORECLOSED An Insiders Guide on How REO Homes Are Marketed and Sold by Banks.

5 Tips for Negotiating a Bank Owned Home (REO)

1) Be First!

Timing is everything in REO.  If you are the first buyer to offer, you will likely be the first one to get a counter back from the bank.  And hopefully you are the first one to accept that counter and head to the closing table getting a great deal on a REO.  But if you take your time, you are likely going to lose out to quicker buyers.

 

2) Understand First Look Programs

The two biggies, Fannie Mae and Freddie Mac, both use First Look programs.  The programs basically allow owner occupants to have the first chance at the property by not allowing investor offers for the first 10-20 days of the listing.  If you are an owner occupant, use this to your advantage and submit your offer before the First Look period expires.  If you are an investor, pay attention and re-submit your offer the minute the First Look period expires

 

3) Don’t Panic

Highest and best situations are common with REOs since they are often priced very competitively.  But being involved in a highest and best situation can make you act strange and pay way more than you normally would or run away just out of fear of paying too much.  The best way to handle a highest and best situation, is to find out the max you want to pay for the property and put the other offers out of your mind entirely.  And then you can work with your broker to draft an offer that will be the most appealing to the bank.

 

4) Look for Other Ways to Win

Sometimes when negotiating we get too focused on the sales price.  If you are coming to an impasse on sales price, see if you can get agreement on close date, earnest money or other terms and then move on from there.

 

5) Walk Away

Yes walk away.  If you can not come to terms with the bank, there will always be another REO coming down the line.  So don’t be afraid to say “no” and wait for the next deal.  Just make sure you get there first!

Why Getting to Know the REO Broker in Your Neighborhood is a Good Idea

In my book, I talk a lot about how to find the good REO deals.  I show you how to search the Multiple Listing Service (MLS) to find the available REOs and which websites to visit to see what is on the market.  But sometimes the best deals are not to be found on the MLS or online.  A lot of the times the REO Broker will have a inventory of homes he is getting ready to market that is not posted anywhere.  The broker is allowed to market this group of homes but he may not yet have a list price.

Why would the broker have a list of homes not yet on the market?  You may think he should just put this group of homes on the market right away and be done with it.  But remember, these homes have just been through a foreclosure action and many of them are in states of disrepair, have trash throughout, and sometimes have been vacant for years.  The broker works with the bank to get them trashed out and cleaned out at a minimum.  And sometimes they will even do major repairs to the property including new carpet, paint and appliances.  This process usually takes anywhere from 20-60 days.

If you establish a working relationship with the REO brokers in your area, then you can review this group of homes before the general public.  That way, you already know if your are interested or not the day a house comes on the market and a list price is set.  This will place you in a huge advantage since timing is so critical in getting a good deal on a bank owned home.  If you want to find more ways to find a great deal on a REO, then you can buy my book on Amazon kindle for $4.99 by following this link.  Thanks for reading and happy house hunting!

 

The 4 Different Types of Foreclosure Deals

The 4 Different Types of Foreclosure Deals

When I first got into the real estate business, I heard the word “Foreclosure” a lot.  I always just assumed that a property was either in foreclosure or it was not.  It turns out that it is not that simple.  There are actually 4 different types of foreclosures.  Before we got into them it may be helpful to quickly explain the foreclosure timeline.  As soon as the buyer stops making payments the clock starts ticking on the foreclosure timeline.  The bank must follow laws regarding notices and how quickly they can file a foreclosure.  While they wait for the court or judge to follow through on the forelcosure, the property is in pre-foreclosure.  Once the foreclosure is approved by the court, a sheriff’s auction will be held for the property to be auctioned off to the public.  If no one buys the property at the auction, then it goes back to the bank and becomes a bank owned property (also known as a REO).

Pre-foreclosure is when you buy a property directly from the owner before it is foreclosed on by the bank. The foreclosure hasn’t happened yet. These properties can be a great deal if you find the owner that still has enough equity in their home and you can work a deal out with them. But the majority of the time, the owner has no equity, they are broke, and that is why their house is being foreclosed on. Since they owe more than their house is worth, there is no way for the owner to sell unless they get the bank involved.

Short Sale.  If the bank becomes involved, then it is called a Short Sale. The bank agrees to take a loss on the loan and sell the property for less than what is owed. The seller must first work out a deal with a buyer and then they have to  get the bank to sign off on the sale.  The short sale always occurs before the auction while the property is in the pre-foreclosure period.

Auction.  If the owner can not work out a pre-foreclosure or short sale, then the property will end up at the sheriff’s auction. At the sheriff’s auction, the property is auctioned off to the highest bidder provided they meet a minimum bid amount set by the Bank. If no one buys it at the sheriff’s auction, then the property becomes an REO.

REO/ Bank Owned.  REO and Bank Owned are two separate phrases to describe the same type of property.  REO (Real Estate Owned) somehow become an industry standard for describing bank owned properties although it does not make much since.  I guess they did not like BO (Bank Owned).

That about sums it up.  Don’t confuse regular auctions with sheriff’s auctions.  Sheriff’s auctions happen at the court house steps and that is where the property officially moves from being a pre-foreclosure to an reo.  But sometimes realtors and banks will use a regular auction format to sell a regular old home or an property that has already become an REO.