October, 2010 Newsletter
+++++++++++ October 1, 2010 +++++++++++++++++++
Introduction: Sales Continue Soft
Mortgage Rate Update: Rates More Stable
This Month's Tip: Buying Foreclosures
Introduction: Sales Continue Soft
Welcome to the October edition of the Home Buyer's Newsletter.
We wish that we had good news to report on the current level of
sales activity, but the market continues to be challenged, as
is evidenced by the August sales figures.
Existing-home sales rose in August following a big correction in July,
according to the National Association of Realtors®.
Existing-home sales, which are completed transactions that include
single-family, townhomes, condominiums and co-ops, increased 7.6 percent
to a seasonally adjusted annual rate of 4.13 million in August from an
upwardly revised 3.84 million in July, but remain 19.0 percent below the
5.10 million-unit pace in August 2009.
Lawrence Yun, NAR chief economist, said home sales still remain subpar.
“The housing market is trying to recover on its own power without the
home buyer tax credit. Despite very attractive affordability conditions,
a housing market recovery will likely be slow and gradual because of
lingering economic uncertainty,” Yun said.
On the new home side, sales of new single-family houses in August 2010
were at a seasonally adjusted annual rate of 288,000, according to
estimates released jointly on September 24 by the U.S. Census Bureau and
the Department of Housing and Urban Development.
This is unchanged (±16.7%) from the revised July rate of 288,000 and is
28.9 percent (±11.0%) below the August 2009 estimate of 405,000.
The median sales price of new houses sold in August 2010 was $204,700;
the average sales price was $248,800. The seasonally adjusted estimate
of new houses for sale at the end of August was 206,000. This represents
a supply of 8.6 months at the current sales rate.
Mortgage Rate Update: Rates More Stable
Conventional wisdom would probably say that mortgage rates
could not remain at the levels we saw in August, but once
again, September proved conventional wisdom wrong. 30-Year
fixed-rate mortgages fluctuated a bit but then returned to
the level they began the month, an average of 4.32% according
to mortgage company Freddie Mac. 15-year fixed-rate loans
decreased a bit, beginning the month at an average of 3.83% and
ending the month at 3.75%.
Fluctuations, though, especially in 30-year loans, have decreased
since the middle of the summer. This may indicate that we are
at or near the bottom of the rate trend. In addition, if a couple
of good economic reports surface that energize the bond market,
we could see a fairly substantial increase in rates in a relatively
short period of time.
For current average mortgage rates, see the rates page.
For more information on mortgages, visit the Mortgage
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This Month's Tip: Buying Foreclosures
This month's tip, on buying foreclosures, is brought to you by RealtyTrac, Inc.
RealtyTrac, Inc., the leading online marketplace for foreclosure properties, provides all
the resources that home seekers, investors and realtors need to locate, evaluate and buy
properties at below market value. Founded in 1996, RealtyTrac sets a new standard for
online real estate services by offering the largest database of pre-foreclosure and
foreclosure properties, with more than 650,000 properties across the country,
comprehensive property data, productivity tools and extensive professional resources.
RealtyTrac hosts close to 2 million unique visitors monthly, and is the exclusive
foreclosure data provider to AOL, Home Gain, MSN House and Home, The Wall Street
Journal Real Estate Journal and Yahoo! Real Estate.
Buying a Foreclosure Property Below Market Value: Five Tips from the Pros
House hunting can be a very daunting experience, especially in today’s real estate market.
Both investors and home buyers have been priced out of the market by escalating costs,
and good real estate deals are increasingly difficult to find.
But there are bargains out there, for people who know where to look.
“For people willing to do some homework, the foreclosure market offers some of the best
opportunities in real estate today,” explains James J. Saccacio, chief executive officer
at RealtyTrac, the leading online foreclosure marketplace.
Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure
information that was previously available only to professional real estate brokers and investors.
Today, homebuyers can use these services to assist them identify and research potential home
purchases, as well as the tools and professional resources they need to help them close the deal.
With interest rates ticking up and ARMs adjusting upward, experts predict an increase in the
number of foreclosure properties on the market. RealtyTrac, which provides all the foreclosure
data for both MSN House and Home and Yahoo! Real Estate, has already compiled a list of over
550,000 foreclosure properties across the country.
“Foreclosure properties can be a terrific investment, or give home buyers a much more affordable
option than traditional properties,” notes Saccacio. “But they’re not a way to get rich quick,
and a foreclosure purchase needs to be approached in an educated, intelligent manner.”
Saccacio offers five tips to help you close a deal on a foreclosure property:
1. Learn about the different types of foreclosure properties, and the foreclosure process.
There are three basic types of foreclosure properties, representing different stages in the
foreclosure process: notice-of-default (NOD) and notice of trustee sale (NTS), which are both
pre-foreclosure properties; and real-estate-owned (REO), a foreclosure property which has been
re-purchased by the bank.
For most consumers, buying a pre-foreclosure property from a private homeowner is the best option.
It’s important that both the buyer and the seller see the situation as a win-win situation,
in order to ensure a smooth process. In this case, the seller is able to get out from under
a mortgage without destroying their credit rating, the lender is saved the time and expense of
foreclosing on the property, and the buyer gets a below-market price on a home.
Foreclosure auction sales are typically the domain of the professional investor. These
properties are formally in default, and sold to the highest bidder at an auction. Buyers
are required to be physically present at the auction, and must pay 100% of the sale price
in cash, on the spot. Though foreclosure auctions can offer significant savings, they are
not for the feint of heart or the uninformed. Unless the buyer is already familiar with a
particular property, there is usually little time to examine it. And the buyer will be
competing against professional investors—and sometimes even the lender—at the auction.
Once the lender officially reclaims a home, it becomes a real-estate-owned property (REO).
While REO properties typically offer more time for evaluation and a more standard bank-managed
transaction, their prices are usually very close to full retail market value.
2. Secure financing early
It’s important for a buyer to be pre-qualified before engaging in discussions with a seller.
This ensures that the buyer is in a financial position to purchase the property, and is in
the strongest possible position to negotiate. It’s best to work with a lender who understands
the foreclosure process, and can guide the buyer through certain steps, such as ensuring that
a property is FHA-compliant. Another reason to consider pre-qualification is that not all
lenders finance foreclosure properties. Having approved financing in-hand makes negotiations
with both the seller and the lender easier, and may even make it possible for the buyer to
simply cure the default and take over the existing loan to reduce loan processing fees.
3. Engage a real estate agent as a “buyer’s representative”
Most people hire a real estate agent to sell their home. These “seller’s representatives”
are charged with making the sale and negotiating the best deal for their clients. “Buyer’s
representatives” have the home buyer’s interests at heart, and are charged with finding the
right property and negotiating the best price for their clients. Picking the right real estate
agent will make a buyer’s life much easier. There are agents who specialize in the foreclosure
market, with specific experience in REO properties. Look for an agent with foreclosure
transaction experience, as well as knowledge of local, regional and state laws. But it’s also
important to consider the agent’s knowledge of the area; their ability to close a deal; and
their access to other professionals (attorneys, lenders, mortgage and title professionals) to
ensure that the buyer is in good hands.
4. Do your homework
Stocks offer higher potential returns for investors than traditional savings programs, but
are also riskier. Similarly, purchasing foreclosure properties is somewhat more risky than
buying traditional real estate properties, but offer much higher potential savings. With
the right examination and due diligence, buyers can significantly reduce the risks. It
makes sense to give any property under consideration a thorough examination. Here are eight
steps for doing a professional-level exam. CHART: Examination process steps
· Identify desirable neighborhoods – Identify specific neighborhoods where you’d like to
live or own a home. This will limit your search to a manageable size for you and your real
estate agent, and give your a sense of relative property values.
· Cast a wide net – There are a number of Web-based services that can put hundreds of
thousands of foreclosure properties at your fingertips. Since the best savings are often
found in pre-foreclosure properties, it’s important to check the percentage of pre-foreclosure
(vs. REO) properties in any database before subscribing.
· Determine the property value –Look at the original purchase price, and recent comparable
property sales to determine the current value of the property.
· Find out the amount in default and the remaining loan balance – In order to determine a
reasonable offer price, you’ll need to know—at a minimum—how much money it will take just
to satisfy the debt to the lender.
· Run a legal investing report – Before purchasing any foreclosure property, make sure it
is free and clear of any bankruptcies, tax liens or other financial liabilities.
· Assess the condition of the property– If at all possible, visit the property, ask your
realtor’s opinion, and review pest and structural reports to make sure that the property
is in acceptable condition, or to determine how much of a rehab budget you’ll need to build
in to your deal.
· Build a positive relationship with the seller – Before purchasing the property, try to
make sure that you’re entering into a win-win situation with the seller, so that they’ll
do what they can to make the process easier and leave the property in good condition
· Leverage your timing – Knowing when a property is going to be auctioned gives you an
extra bargaining chip when negotiating with the seller or the lender.
5. Make a realistic offer
Despite what you may see on late-night cable TV, investing in foreclosure properties
isn’t a sure fire “get rich quick” formula. Lenders aren’t likely to give properties
away, particularly in a real estate market where prices continue to rise. And homeowners
in financial distress may be difficult to deal with, particularly early in the foreclosure
process. The keys to a successful foreclosure property purchase are diligence and patience.
As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home
owners can avoid a foreclosure and lenders can save the time and cost involved in going
through the process.
Another critical point in the process is immediately prior to the auction date, when all
parties might be most open to a last-minute solution. It’s not unusual to save from 10-30%
of the market value on a foreclosure property, and certain properties offer savings of 50%
or even more. An educated buyer—one who knows how much is owed on the property and what
its market value is—can usually come up with a realistic offer; one that offers significant
savings, while meeting the requirements of the lender.
Now go out and familiarize yourself with the resources and tools available to take advantage
of the opportunities offered by this formerly-hidden real estate market. With the experts
pointing toward significant growth in available foreclosure properties, there’s never been
a better time to line up your resources and get informed.
visit RealtyTrac here.
Next Month's Tip: Which Comes First?
The Home Buying Checklist
Many of our visitors have said that one of the most valuable
aspects of the Home Buyer's Information Center is the
Buying Checklist, where they can make sure that all
the bases have been touched. You can find
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Information Center to successfully purchase a home),
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that they have found the Home Buyer's Information Center a
helpful resource in their buying process.
Have a great month and good luck in all your endeavors!
The Team at the Home Buyer's Information Center