My New Blog

Interested in getting in to foreclosures?  Foreclosures can be a great way to get in to your first home or to add to your investment portfolio.  Between now and the end of the year you may find some great bargains as lenders try to clean up their financial statements before 2008.  In other words, banks want to get the REO's (real estate owned--industry term for foreclosures) off their financial statements this year so they don't show up on next year's (2008's) financials.  Combine that with a traditionally slow market (over the holidays) --and you have some ripe opportunities to get some great deals. 

So, how to get the best deal? Here are 3 tips for securing the best foreclosure deals.

First, be ready to close QUICKLY--faster is better for banks and they may be willing to give you a better deal for a quick close. Go for 30 days or less if possible. 

Second, use CASH--as much as possible. In the eyes of the bank, the bigger the down payment, the more serious the buyer and the more likely the buyer is to qualify for a loan. I recently submitted and a bank accepted a very low offer on a foreclosure.  The listing agent was shocked that the bank took the offer, but commented that "Cash covers a multitude of sins".  In other words, while the offer might have otherwise bordered on offensive, it was a solid, cash offer and so they bit. 

Third, get EDUCATED.  Understand the foreclosure basics--like the fact that most deals are "as-is" but typically allow you 17 days to inspect and decide to buy or walk away from the deal. Hire an agent who has a foreclosure background. Foreclosures typically require additional paperwork (REO Addendums) and procedures.  An educated realtor can make the process easier. 

Go get'em.  If you have any foreclosure or real estate questions, or need some help with any Southern California foreclosure purchases, email me @ johnsonlaw@sbcglobal.net.  Good luck!

So, if you are thinking about making the first "jump" into home ownership--congratulations. Its a great time to get a great deal.  With short sales, foreclosures and others who "need to sell"--you can buy @ 2005 prices and better right now. 

Hopefully you've saved some reserves for some of those unexpected items...but often times...well, not so much because you just about to put it all down on your new castle (or castle in training).  Before you make that offer...consider a few things...

HOME WARRANTY:  Make sure your agent asks the seller for a one-year, premium (upgraded) home warranty.  This should be written in to your offer. If your new home has a/c, pool and/or spa, then make sure that you get the upgrades to cover those items. 

HOME INSPECTION: Pay for a home inspection. Having a home inspector may mean more up front fees that you have to pay (here in CA from $200 - $500 or so, depending upon size & inspector and you pay out of pocket immediately for it--not out of escrow.)  I assure you, its well worth the investment. A good, certified home inspector can give you a heads up on what might be "breaking down" or "needing replacement" in the future. If the inspector uncovers some material problems, ask the seller to fix them or to give you a credit in escrow for the cost to fix or replace.  Make sure the home inspector completes the inspection during your typical 17 days to inspect the home so that if something awful is uncovered, you still have the option to back out.

SHOP SMART:  If looking at older homes, before making an offer, take a look at some of the big ticket items.  These are not the exciting items--not like granite counter tops or new cabinets, but they can mean big bucks out of your pocket if they are older and at the end of their life.  Check out things like the water heater, the a/c, the forced air unit and the roof to see if they look original.  Your home inspector will be able to give you details, but you may want to consider them first--because that may help you determine your offer price. 

If you have questions about your home purchase or if you would like help finding a home, email me johnsonlaw@sbcglobal.net or give me a call. If you would like listings that match your profile sent directly to your "in box" (without having to log on to website and run the search each time), email me or call me w/your home search details (city, size, #beds--whatever is critical for you) and I will set it up for you.  

Happy Shopping!!!!

Given the high price of homes in Orange County, it can be tough to get in to a home.  If you have never owned a home OR if (generally) you have not owned a home or been on title for the last three years, you may qualify for some first time buyer programs (yes, even if you've owned before--typically as long as you have not owned for the last 3 years).

Some programs provide "silent" second mortgages--a second mortgage at a very low to no interest rate and you do not pay it back until you move out or stop using the home as your principle residence.  There are income limits.  For 2007, for the Orange County Mortgage Assistance Program (offers up to $40K toward your home purchase) a single person's income can not exceed $48,500 and a family of 4's income can not exceed $69,300.  Those amounts should increase in 2008.  Area limits (certain cities and unincorporated portions of the county) also apply--check out the Affordable Housing Clearing House for a summary on some of their programs. 

http://www.affordable-housing.org/

They also offer a 3 to 1 match program.  For example, if you have saved $5,000, they will "match" 3 to 1 and loan you $15,000 as a silent second.  And,  the best part of match program is, 20% of the loan is forgiven each year you live in the property. Live there for 5 years and ITS FREE MONEY because the loan is forgiven.  Again, income and other limits apply--but it sure is worth looking in to it. 

Many lenders do not know about these or do not encourage their clients to look into these programs--but they really increase the amount of home you might qualify for....Certain cities also offer these type of programs--so if you are interested in a particular city, check out their official city web site and look for a "homebuyer program". 

The beginning of the year is often the best time to apply for and try to utilize one of these programs since the programs are often 'cut off" each year once funding runs out for that year.

Happy house shopping--and if you need help finding a place to call home, feel free to email me.   Melinda johnsonlaw@sbcglobal.net

Is a short sale right for you?

If you have found yourself in a financial crunch and are thinking about a short sale, think carefully. It may seem simple. You are upside down on your loan and you cooperate with the bank to sell your home for an amount that, after commissions and costs, will be less than the loan balance.  The bank agrees to take this lesser amount and you have no more mortgage, no more late fees and much less stress.

Unfortunately, its not so  simple. There are many ramifications to a short sale, ranging from the more obvious negative impact to your credit to the not so obvious impact to your income taxes. Here are a few items to consider when doing your "short sale" homework.  

TALK WITH YOUR TAX ADVISOR:  Speak with your tax advisor to fully understand the financial consequences of a short sale.  I never claim to know much about taxes but as I understand it, the amount of your mortgage that is "forgiven" (the amount you do not pay back but would have owed but for the short sale) is considered "income"--and you will likely owe taxes on it. 

For example, if $75,000 of your mortgage is "forgiven" in the short sale, then as far as the IRS sees it, you just "earned" $75,000 and they'd like you to pay taxes on it. OUCH...that can hurt, especially when you are trying to dig out from under the financial situation you were just in.  So, please talk with your tax advisor before moving forward with a short sale.  Surprises from the IRS are never fun. Know what is coming your way.

CHECK OUT THE RENTAL MARKET.  Once you sell your home, you are going to need a new place to call "home". Make sure you've ran the numbers and know that are going to be better off renting versus trying to make it work on your current mortgage.  How much will it cost to move your family into a new place?  Will you have enough for a security deposit and first month's rent?  Your real estate agent should be able to run you a list of available rentals so you can check out options from the comfort and privacy of your nearest computer.

IS THERE ANOTHER OPTION? 

Talk with a lender or mortgage broker to make sure there isn't a product out there that could work for you.  If you can find a loan program that will work, you can avoid the negative credit and tax implications of a short sale. 

Talk with a realtor about what your home may rent for--depending on when you bought your home, you may get more rent for it than the amount of your monthly mortgage.  If you live near a college or trade school, could you rent a room? Its at least worth considering

WHEN THERE ISN'T ANOTHER OPTION.

If you've weighed the decision carefully and decided to move forward with a short sale, chose your agent carefully. You want a strong negotiator--banks are not thrilled about giving up loan balances.    You also want someone well versed in contracts.  You'll need someone who can advise you and help you understand the all the paperwork involved--its not a typical real estate transaction. 

If you would like help with a short sale, help evaluating if a short sale is right for you or have other real estate questions, please email me.  johnsonlaw@sbcglobal.net

Wishing you the best in your real estate decision, Melinda

If you enjoy reading thru real estate ads (yes, there are a bunch of us out there) you have probably noticed many homes listed as a "short sale".  A short sale might be called a "pre-foreclosure" sale or a "foreclosure avoidance" sale.  Generally, a short sale exists when the proceeds from the sale are not expected to pay off the loan balance, closing costs and commissions. 

Rather than walking away and letting the bank foreclosure on the property, the home owner (or more likely, his or her agent) contacts the bank and negotiates a minimum sales price that the bank will accept.  This often involves the agent providing a detailed price opinion (called a broker price opinion and it is very similar in detail to an appraisal). The bank may also require an independent valuation through an appraiser.  

The bank then agrees to accept less than the full amount of the loan balance in order to facilitate the sale and avoid owning a foreclosed home.  After bank approval, the agent will market the property, sometimes noting it as a short sale in the marketing materials.  Once an offer comes in, the bank has to approve it (unless it falls within a "pre-approved" range). 

If you are interested in purchasing a short sale, ask the listing agent if the short sale has been approved by the bank.  Some agents will market the property prior to contacting the bank.  If your offer is submitted to the bank for approval, know that there is often additional time involved versus the time involved in a traditional real estate sale (spent obtaining bank approval--banks are not in the business of buying and selling homes--they do loans--and so are inefficient at times when it comes to paperwork).  

The good news? Short sale sellers and banks are usually highly motivated...so can scoop up a good deal...but never assume a home is priced well just because its a short sale...do your homework. 

Go get'em! If you need help arranging a short sale or purchasing one, feel free to email or call.  johnsonlaw@sbcglobal.net (714) 864-5485.