If you are thinking of buying a Lake Charles foreclosure or short sale you are going to have to have a lot of patience and put a great deal of trust in the hands of your Lake Charles real estate agent to negotiate your Lake Charles Foreclosure or Short Sale purchase.
The term “bank owned” most often refers to homes that have been repossessed during the foreclosure process and did not sell to another party at the foreclosure auction. Bank owned homes are also often referred to as REO homes which stands for “Real Estate Owned”.
Buying a Lake Charles Foreclosure
When you are buying a foreclosure the human touch is basically removed from the process. You are dealing with a lending machine (the bank). Money talks when buying a foreclosure. Unless you are an all cash buyer with few contingencies you are probably going to have to come very close to the asking price, and often go over asking. When you find a Lake Charles Foreclosure home for sale and it’s such a good deal that you decide to make a low ball offer to purchase your offer may not be accepted. 9 times out of 10 the buyer loses out on the house with a low offer. There is a reason that Lake Charles foreclosed homes are priced the way they are.
Banks are not looking to profit when they list a Lake Charles foreclosed property, The bank just wants to get the foreclosed property off their books, and more than likely the listed home price is going to be close to what is owed on the house plus the carrying costs the bank has incurred. If you are going to chase after Lake Charles foreclosures, then you have to learn to play by the bank’s rules!
Banks have a system in place when they list foreclosures for sale.
- The property will always convey in AS IS condition.
- Purchase will usually convey via special warranty deed with no title policy
- Seller chooses closing attorney/title company
- Seller will make no repairs
Remember the bank wants the house off their books they are tired of accumulating expenses!
As an experienced Lake Charles REALTOR and real estate negotiator, I am used to looking at comparative Lake Charles market data and recent Lake Charles homes sold in order to inform my buyer of current market value. Buyer’s trust and rely on me as their experienced agent of choice to guide them with my knowledge and advice when writing a purchase contract.
I not only spend time researching comparative Lake Charles real estate market values and conveying that information to my home buyer but I also point out the costs the buyer will incur and explain how foreclosures typically work and what the home buyer can expect.
What should you ask for? As little as possible because as little or possible, or nothing, is what you will get. You will most likely not get a home warranty and very little if no repairs. Remember, the bank is already losing money and they are not happy about losing more. And you can be pretty sure that you are going to find that the home needs repairs, especially when the people foreclosed on were probably not too particular about the condition in which they left it. Most foreclosures are not a bargain.
What is the Foreclosure Process?
Foreclosure occurs when a lender pursues its lien on a property. Foreclosure action generally begins after 90 days of nonpayment. Parties are able to bid on the property as part of the foreclosure sale.
Your timelines mean very little to the bank. Their timelines mean everything. You could sit and wait for a response from the bank forever, but once they respond then you are on the clock to perform.
What is a HUD Property?
I am frequently asked What is a HUD Home?
A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.
HUD stands for Housing and Urban Development. Consumers can access the HUD Home Store website to view current properties for sale listed by state. The HUD website allows public views and bidder views. In order to make an offer on a HUD property, the Bidder must be a registered REALTOR. Your Lake Charles Real Estate Agent should be a registered REALTOR with their Brokerage and can represent the Home Buyer or Investor in a HUD home purchase.
When viewing foreclosures it is not uncommon for there to be issues with the property. There could be missing flooring, damaged sheeetrock, wood rot etc. Even if you are an experienced contractor or handyman and can make do it yourself repairs yourself to the property , if you are obtaining financing to purchase all foreclosure overcoming the “as is” obstacles may be prove to be a roadblock.
Your Realtor will be able to guide you through the bid process HUD requires and share more insight of the HUD home with you. HUD will usually upload a property condition report and a HUD appraisal with the listed property to view. HUD also updates bid dates and timeframes they will accept specific property bids. It is not uncommon for HUD to not allow investor bids for a certain length of time, they prefer to sell the property to an “owner-occupant” which means the buyer is purchasing the house to live in (it is not an investment property or a “flip”)
If your agent places a bid for you and HUD awards you as the Buyer the bid, the HUD contract and all addendums must be completed and overnighted to the specific HUD contact office along with deposit check for the property. HUD typically requires a $1,000 deposit and allows a 45 day contract to close. Should you exceed 45 days, additional fees may accrue and HUD only allows extensions for 15 day periods. Inspections are at the Buyer’s expense and a buyer is responsible for turning utilities on for any inspections. Be sure to read and understand all the Addendums you are signing!
Submitting a Bid to Purchase a HUD Home
HUD HOME INSPECTIONS
WHAT IS A SHORT SALE
“A short sale is a property where the sellers owe more than the property is worth and rather than walking away they are attempting to sell it.” You the Lake Charles buyer will be negotiating with the Lake Charles seller. Once the seller accepts your offer is when the fun begins. The bank will have to agree to take less than the full amount due on the mortgage.
Buying a Lake Charles Short Sale
This is definitely not a project for everyone and will take a lot more patience and fortitude than buying a Lake Charles foreclosure.
Understand that a Lake Charles short sale property is most probably not going to be a bargain, because the seller still has to convince the bank to take a loss on the property rather than be stuck with yet another foreclosure. “This is where you hope that the Lake Charles listing agent knows what they are doing. A good Lake Charles short sale agent can make the sale go far smoother than an agent who does not know how to navigate the short sale process. Sometimes you might not hear anything for weeks at a time just because the agent does not know anything.”
A seller does not have to be behind on a home loan to seek a short sale. If sellers wish to pursue a short sale, they must owe more than what the home is worth, demonstrate the house cannot be sold for the amount owed, and suffer from a legitimate financial hardship that makes the mortgage unaffordable.
The next step in the short sale process is to assemble a short sale package. This package will include such things as a financial statement showing monthly expenses, income documentation, bank statements, tax returns, a listing agreement, purchase agreement, an estimated HUD statement and a financial hardship letter.
If the home is sold as part of a short sale, there will be a difference between the amount owed and what the bank collects. This is called the shortage or the deficiency. Sometimes this deficiency may be negotiable. Some banks will seek a promissory note for the deficiency, meaning that the seller may be responsible to pay the difference between what the home sold for and what is owed to the lender. Some lenders might choose to file a collection or a judgment for the amount owed. The seller should be certain that any amount of debt, or release from debt, is received in writing. If the deficiency is forgiven, the lender can write off the shortage with the IRS, which means the seller may be responsible for paying taxes on the amount of the deficiency. However, the Mortgage Debt Relief Act of 2007 generally allows taxpayers the potential for relief from tax on mortgage debt forgiveness.
A short sale will affect the seller’s credit score. To minimize the effect on a credit score, sellers should avoid making late payments on their mortgage and work with the bank to report the sale in the best possible manner. The advantage of a short sale vs. a foreclosure centers around the time a buyer can purchase a home again in the future. If a seller has completed a short sale, they will be able to buy a home again in the future much quicker than if the seller had gone through foreclosure. Short Sale Sellers can expect about a 3 year waiting time to purchase a home again. As with any purchase, check with a mortgage professional to confirm you are eligible to purchase another home.
Sometimes Sellers Change their Mind in the short sale process. Sellers often opt for loan modification, bankruptcy or foreclosure after the short sale has been negotiated with the bank and the approval letter has been obtained. Sellers may also lose their patience because the sales process is lengthy.
To move a Lake Charles short sale approval through can take many months, so patience and diligence is required. You have to be prepared to sit, wait, and possibly never get the property. One good thing in a short sale is that the sellers are usually still living in the property and in most cases taking care of it, unlike the sellers being foreclosed on.
Whether you decide to purchase a Lake Charles foreclosure, short sale or HUD property, be prepared for the long haul.
Copyright 2012© Marilyn Boudreaux
Marilyn Boudreaux, REALTOR® 337-499-9592
Century 21 Mike D. Bono & Co.’s
4410 Nelson Road
Lake Charles, LA USA 70605