Everyone thinks that buying a foreclosed property is the best way to get a “deal” in today’s market.  Well, maybe, but maybe not.

To get to the point of being a foreclosed property, the original owner had to stop making payments for some time.  It stands to reason that if they were no longer making payments and knew they would lose the home, that they would also no longer do regular maintenance and repairs.  Why would they?

So in most cases you can expect a foreclosure to need a little or a lot of work.

Things like air conditioning systems usually haven’t been serviced or even had filters cleaned in some time.
Small leaks may have become larger ones.
Wood rot issues have not been addressed.
If the seller was REALLY unhappy about things he may have even damaged the home, or taken away anything he could carry – including appliances, light switches, and plants.
The bank typically sells foreclosed homes “as is”, meaning they are not going to replace missing appliances or make repairs.  So the seller has to plan on being able to do (and to afford to do) all those things after closing.

Depending on what is wrong with the home, the home may not qualify for certain types of financing.  Meaning that the new buyer will have to put down a higher down payment or even pay cash for the home.

Companies that specialize in selling foreclosed homes do it because the VOLUME of transactions makes them money, not because they make very much on an individual home.  They are incredibly busy and will not have the time to answer every question in a timely manner so don’t expect the best in customer service.

All that having been said, there ARE some great deals out there on foreclosed homes if you are prepared for all the obstacles in the search for them.  The old saying “buyer beware” has never been more fitting.

First of all, what is a short sale? When an owner owes the bank more on his mortgage than the property is worth, then he is “upside down”. The only way to sell the home is for the owner to bring the difference owed to the table at closing or for the bank to “forgive” the difference in a short sale.

At first glance this sounds like a good deal for everyone. The seller avoids foreclosure, the bank has a buyer who will now make payments, and the buyer, hopefully, got the home at a great price.

Here’s how it shakes out in real life. The seller still takes a substantial hit on his credit. But he does get to walk away from the property. The bank loses money, but probably not as much as if the property had gone through the foreclosure process. The buyer gets the home for the new market value, which is less than what was owed.

However, that new value IS the value. Because if the bank could have sold it for more, they would have. Therefore, what the buyer pays is now what the home is worth. It is typically not such a steal that the new buyer can turn around and flip the property for more money.

The other problem with a “short” sale is that it can take a “long” time. There are countless hoops the seller must jump through before the lender will agree to the short sale. Most of those don’t begin until there is a contract on the property. So the buyer sits in limbo for months while the process drags its way through the bureaucratic system. A quick short sale might be 60 days. A more typical one four months plus. And it isn’t unusual to wait six months for a response from the bank – which might still be a rejection or a counter offer to the contract.

So while short sales may SEEM like a great idea, they are, in fact, a time consuming and frustrating experience that MAY have a good outcome for those patient enough to see it through.

It would be nice to live in a perfect world in which a contract was written on a home and everything proceeded according to plan, with no glitches on the way to closing. But you’d better be prepared because stuff happens.

Financing is a huge contingency, and many contracts are written with the contingency date on the financing bumping right on top of the closing date. That means that neither the buyer nor seller may know if the property is going to close until the last minute. A seller could end up paying a mover and then not moving or moving out unnecessarily. A buyer could plan on moving in on the last day of his lease only to have the closing delayed and nowhere to go.

Inspections can result in delays if the repairs required are not completed on time.

The best way to avoid surprises is to write the contract with those possibilities in mind and allow an adequate time for each step to be completed. ANYTHING in a contract can be negotiated so either the seller or buyer can counter any terms written they feel will allow the process to go more smoothly. The key is to write the terms into the contract in the beginning so that the contract doesn’t have to be amended later and run the risk of falling apart.

Home warranties are like health insurance for your home. Like health insurance, you hope you don’t have to use it. But when you do, you’re glad you have it. There are many good companies that offer home warranties, typically for a cost of a few hundred dollars a year.

Does that sound expensive? How about the cost of a new hot water heater AND the removal of the old one? How about a new air conditioning system that has to be replaced and energy standards that now require it be upgraded as well? A good home warranty will cover those things and many more.

As with any “health insurance” policy, don’t assume they are all alike. See what is covered and what is not. See if there is a co-payment or service call charge. See if there are any options to add other coverages in addition to the basic plan. Check out the financial stability and reputation of the company offering the plan. Talk to other warranty owners or real estate professionals for advice.

There are plans that cover new construction as well, after the builder warranty runs out. Again, check out your choices. Don’t assume that you don’t need a plan because the home is new and don’t assume a warranty will cover every single thing that could ever go wrong. Just don’t assume – anything.

More times than not, a home warranty is a good idea. Don’t let your home be caught without “health insurance” when it gets “sick”.

Can this blow up a sale?

Have you ever gotten into a battle over a $3 soap dish? If you have, then you’ve been involved in a contract that did not spell out in writing what personal property was included.

While everyone knows that they should never assume anything, those same people buy and sell homes all the time without putting in writing what personal property conveys and what does not. “Fully furnished” or “turn-key furnished” are descriptions, but are NOT substitutes for a full inventory that is a part of the contract.

Just listing what is NOT included may help to clarify the issue but the contract must still contain a written inventory to be clear in legal terms. Many sellers think that buyers assume that personal items are not included but what is considered “personal” is subject to interpretation.

Personal items are not the only source of misunderstandings. That chandelier that has been in the family for generations is considered included as a light fixture unless it is written into the contract as an “exclusion” and agreed upon by both parties. That goes for appliances, ceiling fans, child-proof pool fences, and the fancy shower head in the master bath. Even Aunt Betsy’s prize rose bush can become an issue.

Property is typically conveyed in the manner it appeared on the day of the contract. Substitutions are not allowed unless both parties agree in writing.

The phrase “in writing” is the operative one. Clear, written agreements leave no room for interpretation. If an inventory is not available on the day the contract is written, language can be added to state that a written inventory must be submitted and agreed to by both parties within a certain number of days or the contract is voidable.

EVERYTHING to be included must appear on the inventory. A ”turn-key furnished” home inventory will list everything down to the last teaspoon and soap dish. Do that and no one will be shouting for a lawyer because a $3 soap dish went missing at closing.

Is it time for YOU?

Now is the time to sell. Now is the time to buy. That may sound confusing, but it’s true. Everyone in the media says prices are down. And they are correct. That is exactly why buying or selling makes sense.

Here are 10 reasons you should buy or sell NOW:

1) Look at it this way. If the home you are selling will net you less, the home you are buying will also cost you less. If you wait till prices go up on your home, prices will have risen on the home you want to buy.

2) Another reason to go forward is that interest rates have stayed low. Once the economy bounces back, there is no guarantee that interest rates will remain at these rates. That not only means buyers can afford less home, but sellers will find buyers may be priced out of their home’s range.

3) If you need another reason to buy now, think about the homestead exemption. Buying now, while prices are low, locks your value in for homestead exemption. Your rates can never exceed the yearly cap percentage, calculated on the value of the home at its assessed value when you purchased it. So buying now, when prices are lower, will save you money year after year on taxes.

4) If you’re a buyer, you may be reluctant to buy now when everyone says that prices may go even lower. But if you look at the statistics in the areas you are considering you may find that prices have gone as low as they probably will, and may even be inching back up already.

5) Waiting longer to buy will not get you a “bargain”. True bargains don’t exist for the average home buyer. The so-called “bargains” to be had in the market will probably be in areas that were investor-driven, with highly leveraged owners who may have to sell short. But that doesn’t matter to the average buyer who is buying a HOME, not an investment.

6) Another reason it’s a great time to buy is that the selection has never been better. There is a greater inventory of available homes out there than in years past. That laundry list of “must-haves” is easier to find when there are more homes to choose from.

7) If you’re a seller it’s hard to make a move when everyone says “wait.” Yes, prices will go up later on. They always do. So get your calculator out again. Figure out how much it’s costing you to own and support the home each month. Don’t forget the taxes, the insurance, association fees and the maintenance costs. Add that to the mortgage payment and you’ll see how another six months or more will affect your wallet.

Ironically, it’s the best time to use a Realtor. With the slow-down in the market, agents aren’t running around with frenzied buyers constantly. They have more time to offer buyers and sellers. They also have access to current market data that can help a seller price and market a home effectively and can guide a buyer through the thousands of homes available to the ones that best meet the buyer’s needs.

9) Lenders are more eager than ever to help buyers and sellers. Sellers who find the next home they desire can sometimes get a bridge loan that enables them to buy the next home while waiting for the first one to sell – without a second mortgage payment. Buyers can find programs to meet almost any situation that will enable them to afford a home with a mortgage payment that fits their needs.

10) Finally, the market offers both buyers and sellers more choices than we have had for awhile. Waiting will likely only offer fewer choices and less appealing options.

So whether you are buying or selling, NOW is the time!

It’s easy to fall in love with a home that is decorated exactly to your taste. It’s easy to fall in love with a view or amenities or location as well. But you don’t live in a view. You don’t live in amenities. You live in a layout and a design that suits how you spend your time and your priorities.

That beautiful view may be great but if the amount of windows and doors leaves you with no space to put your furniture, you may ONLY be able to enjoy the view!

So what is important when it comes to a floor plan?

* Start with the number and type of rooms.

* How many bedrooms do you really need? Don’t plan for all the eventual family members you MIGHT add or all the company you MIGHT have. Plan for what is real and reasonable.

* Are there enough bathrooms so that everyone in the home can get ready at the same time or do you need to shower in shifts?

* Do you really need both a family room and living room? Many people feel they need both and then find that the only time the living room gets used is at major holidays.

* Do you entertain frequently? Then a large kitchen that is open to the rest of the home might be important so that you are not isolated from your guests.

* Closets. Is there such a thing as too many or too big? Sometimes an extra closet or an over-sized one can replace the need for a room by allowing the storage to replace additional furniture.

* Then look at details. Are there enough cabinets? Are there enough windows to give you the amount of light you desire without taking up valuable wall space? Is the shower big enough? Are linen closets located in convenient areas in the home and are there enough of them? Do you need room in the laundry area for messy things or storage? Is the garage big enough for your current and PROSPECTIVE vehicles and still leave room for bicycles, tool boxes, yard equipment, etc.?

* Finally, is there wasted space? Halls and foyers are generally not usable space. You may find a smaller overall home actually gives you more USABLE space once you look at room sizes and eliminate halls.

So when looking for a home, you need to look beyond décor and location and amenities and see what is important. Find the right floor plan and it will serve your needs well for years to come.

It doesn’t matter whether you are the buyer or seller, when it comes to contracts. No one wants to pay too much or accept too little. No one wants to be taken advantage of. Everyone wants to win.

A good contract is a balancing act between price and terms. Written well, there are things in the contract to benefit both sides. So why would someone write a contract that appears lopsided?

Let’s start with terms. One of the most common terms is the financing contingency. Unless the buyer is offering all cash, there is usually a financing contingency. But unless the terms of the contingency are spelled out, the seller is left wondering just what kind of loan the buyer is going for and if they have a snowball’s chance of getting it.

So a good financing contingency will spell out the details of what the buyer is attempting to do: amount of the mortgage, type of financing, down payment, etc. If a buyer fails to be approved for the financing spelled out, he has the ability to “walk” from the contract and all deposits are returned to him. Being pre-approved for a mortgage gives the buyer the ability to have a shorter mortgage approval date and therefore provide more security for the seller.

But that binder deposit is the only assurance that the seller has of the buyer’s good faith. So the larger the deposit, the more assurance the seller has of the buyer’s intent.

How soon is the closing date? A typical closing might be 30-45 days from the date of acceptance of the contract. However, this is negotiable. A faster closing might make the seller happy to have cash in hand. Longer closings will usually require some concession or a larger down payment to assure the seller that the property will close as scheduled.

Inspection clauses are built into the typical contract and are written to be fair to both sides. Changing those terms or timelines can tilt the favor to one side and make the contract less likely to be accepted.

In most states, written verbiage in a contract supersedes the typewritten. So be careful not to negate a portion of the typed contract by writing in unnecessary notes.

Finally, we get to price. If you are the buyer, how much to you offer? If you are working with a Realtor, that person should provide you with information regarding recent sales and market trends.

For example, if most homes in an area are priced very similarly for quality and other factors, then they should have similar market values. If those homes have sold for approximately 5% off list price and this home is listed realistically, then the seller will have the expectation of something around the same number.

A buyer who wants to test the seller may come in a bit lower, but too much lower and the result is an insulted seller who won’t take the contract seriously.

The reverse is true as well. The seller who refuses to budge on anything runs the risk of offending the buyer, who probably has a second choice lined up and may just move on.

No one intentionally writes a “bad” contract. Mis-information or advice is more common. But in real estate contracts are about “homes”. The seller is emotionally attached and the buyer is becoming attached as well. So both parties need to recognize that there is more going on than just business. A well-written contract with reasonable price and terms is likely to be negotiated and accepted. When that happens, both buyer and seller win.

The first step in finding a “deal” is to define what a “deal” is. Is a “deal” getting the biggest price reduction off the list price? Is a “deal” the property that will appreciate the most over the next five or ten years?

Very often the best way to decide if a property is a deal is to look at supply and demand. If the supply exceeds the demand, as it does in most of today’s market, then there is a better chance of getting a price reduction off the list price. However, if the demand is not there, will the property appreciate over the next few years at an acceptable rate?

If the demand is high, then it’s unlikely that a seller will reduce the price very much, if at all. Yet if that demand continues in the future then the value of the property will generally appreciate at or above market rates, making today’s full price a “deal” in the future.

So how can you determine “supply” on a property? One way is to look at its “duplicatability”. If this home or neighborhood can be duplicated right down the road at the same price or close to it, then the supply may always be adequate to meet the demand. If the home or neighborhood is located in a unique area or has features that cannot be duplicated, then the supply is limited.

To determine “demand” look at features that will always hold appeal, such as location.

For example, navigable water is generally a sound buy – they aren’t making any more. But not all navigable water is created equal. Historic data on sales in one area can be compared to another to see what demand has been like over time. Other neighborhoods that have locations on or near the beach, or downtown, or historic properties also can not be recreated.

Within a neighborhood, properties also have locations that make them unique. A water, preserve, or golf course view may make them special. Lot size, mature landscaping, privacy, or reduced traffic can be important features. Getting a “steal” on a property with an inferior location may look great today but down the road the next buyer will expect to “steal” it as well because other locations will have greater appeal.

The next step is to look at the past sales. Look both at the recent and the long term sales history. Look at the list vs. the sales prices, the number of days on the market, and the price increases over time. Look at the overall number of sales in an area or among comparable homes. Uniqueness does not in and of itself mean there is a high demand. Again, the only home with that feature may mean there was no demand to build more and demand will probably be low in the future.

Remember the old rule of the three most important things in real estate: location, location, location. Great locations hold their value in “down” markets.

Of course practical considerations have to play a part. Even if you have champagne taste and a beer budget you can still find the best property within your price range that fits your criteria.

Do not forget to do your homework. Check with the county to find out what is going on in the area over the next few years. Additional developments, road expansions and extensions are all a part of the public record. All those factors will affect future supply and demand so don’t overlook them. Do not rely on a seller or realtor to supply you with information that they may assume you already have.

The next thing to do when the property has been identified you want is to write a “clean” contract. That means a contract without a lot of contingencies and concessions. Writing a good contract is a balancing act between price and terms. Sellers look at the contract and must see something that is of benefit to each side. So a contract that makes a lot of demands on the seller and asks for a really low price runs the risk of rejection without a counter.

Having the financing worked out in advance so that the seller has confidence in the buyer’s ability to close is a major term that a buyer can address prior to writing the contract. Understanding the clauses in the contract that pertain to inspections and such can prevent extraneous clauses from being added that only complicate the contract negotiations.

Finally, remember this. Unless you are an investor, you are buying a “home”. Certainly you want to know that the home is worth what you are paying and that it will hold its value. But it is a home – the play you and your family and friends will enjoy for years. Sometimes, the best “deal” is to pay retail for the best property you can afford and then sit back while it appreciates in value. In a few years your friends may call you a genius for that “deal” you got!

You walk into a sales office for a builder or developer and there is already a salesperson there to help you – wrong! Legally, that salesperson represents the builder/developer and has a “No Brokerage Relationship” with you.

That means that, as helpful as they are, they always have the builder’s interests at heart. That’s where having a Realtor® working with you makes sense.

First of all, Realtors® know where to take you. Part of their job is to research builders and developers. They know which builders build which type of product and where. They know pricing, construction standards, design types, etc. They also know the reputation the builder has for delivering the home they promise and how they back it up with service.

Not all builders are created equally. Some builders have more construction quality or service issues after the sale than others. Some offer better warranties than others. Some are more financially sound and better able to ride out the peaks and valleys of this business.

Second, a Realtor® knows what you want. They will help keep you focused on achieving your goals and won’t let you get swept away by beautifully decorated models or a smooth sales pitch.

In addition, a Realtor® will make sure you make an informed decision regarding available upgrades. While you might be thinking a particular upgrade would be nice, the Realtor® may be ready to advise you that an alternative would be more desirable when the time comes to resell.

Your Realtor® can also be an asset during construction. There may be periodic inspections or walk-throughs and your Realtor® can be another pair of eyes. While you are mentally arranging the furniture the Realtor® is making sure the outlets are in the right places.

Realtors® stay on top of market conditions. They know which builders are “hungrier” and willing to offer incentives to buyers. They may even know upcoming incentives that could be made available to you earlier.

Because most builders have a strong relationship with the real estate community they appreciate and welcome Realtors®. Real estate commissions are budgeted into their cost of doing business.

That means that using a Realtor® to buy new construction won’t cost you a penny extra (and not using one won’t save you a dime). So take advantage of the expertise and advice a Realtor® has to offer the next time you are considering buying new construction.