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Making an Offer on a Short Sale What You Need to Know

Are you looking to buy a new home Are you thinking that now’s a great time to find bargains Before you make an offer, it pays to know a little about the seller’s situation.

If a home is being sold for below what the current seller owes on the property and the seller does not have other funds to make up the difference at closing the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You’re a good candidate for a short-sale purchase if:

* You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.

* Your financing is in order. Lenders like cash offers. But even if you can t pay all cash for a short-sale property, it s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.

* You don t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property or you need to be in your new home by a certain time a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:

* Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.

* A qualified real estate professional. You may have a close friend or relative in real estate, but if that person doesn t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as  lender approval required. )

* Title officer. It s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you ve waited for months for lender approval. If you don t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short-sale properties include:

* Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.

* Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you ve already negotiated, which may not be agreeable to you.

* No repairs or repair credits. You will most likely be asked to take the property  as is. Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

* Not all real estate practitioners are REALTORS . A REALTOR is a member of the NATIONAL ASSOCIATION OF REALTORS and is bound by NAR s strict code of ethics.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Negotiate Your Best House Buy

By: G. M. Filisko

Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.

Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Here are six tips for negotiating the best price on a home.
1. Get prequalified for a mortgage
Getting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.

2. Ask questions
Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages Has the home been on the market for a long time, or was it just listed Have there been other offers If so, why did they fall through The more signs that sellers are eager to sell, the lower your offer can reasonably go.

3. Work back from a final price to determine your initial offer
Know in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.
Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

4. Avoid contingencies
Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

5. Remain unemotional
Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.
Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.

6. Don’t let competition change your plan
Great homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions-such as waiving an inspection-that aren’t in your best interest.

More from HouseLogic
Determine how much mortgage you can afford (http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/)

Keep your home purchase on track (http://buyandsell.houselogic.com/articles/keep-your-home-purchase-track/)

Plan for a stress-free home closing (http://buyandsell.houselogic.com/articles/7-steps-stress-free-home-closing/)

Other web resources
More negotiating tips (http://www.freddiemac.com/corporate/buyown/english/purchasing/offer/negotiate.html)

Develop a homebuying strategy (http://www.nolo.com/legal-encyclopedia/article-29746.html)

G.M. Filisko is an attorney and award-winning writer who has to remind herself to remain unemotional during negotiations. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Short Sale, Foreclosure

Many a times, for some people questions comes to mind: What is a short sale – It is when the property owner will accept less sale price than the amount which is due as per the loan amount when the property is sold. Lenders sometimes accepts low amount to avoid the expense and time of a foreclosure. A short sale generally persists when the loans amount on the property is greater than what the property can be sold for. The short sale is the best alternative for owners who no longer can afford make their mortgage payment and want to avoid foreclosure which is more embarrassing.

Though a short sale seems to be the only solution to the problem avoiding foreclosure, the fact is there are other solutions which a short sale realtor can guide you through that will benefit the home owner as well as the lender. You need to be very careful when transacting with a third party company regarding the short sale. A lot of people understand they can make profit in short sale which might be true in some circumstances with the help of a short sale realtor.

Some of the best options to go for advice from short sale realtor to avoid foreclosure:

1. The value of your home is more than what you owe, you can get a good price to pay off the mortgages and avoid foreclosure. An advice from Short Sale Scholars can guide you the right way.

2. Advice from Foreclosure Realtor comes handy to show your lender that foreclosure is more costly & they are not likely to do any better foreclosure & remarketing.

3. Foreclosure affects your credit rating and to avoid all these painful time expert advice from Foreclosure Realtor and Short Sale Realtor come handy.

Any short sale investor knows that one of the biggest challenges they might face is dealing with the lender. The short sale process is lengthy, importantly when short sale investor has to deal with more than one lender to come up with best price for the property. If the foreclosure property is auctioned it is a more of a possibility that it is sold in lesser market value leaving you with no money in hand to go for another property to lease. Due to lack of funds after selling their foreclosure property owner will be left in cold with no money to buy another property with some down-payment. There are many reasons why we should avoid a foreclosure taking the help of Foreclosure Realtor. Foreclosure is a public preceding that property owner risks your own social status. If your mortgage sum is more than the current value of your property, you may finally to consider Short Sale with the help of Short Sale Realtor.

You need to hire an experienced Shore Sale Realtor as they are the specialist and will look after all your issues. Once you have a Short Sale Realtor whom you can trust, he will be authorized by you talk on your behalf to negotiate with lenders and short sale buyers. Expert advice from Short Sale Scholars comes effective in these situations for short sale investors and property owners as well to avoid foreclosure.
http://www.ShortSaleScholars.com

Article Source: http://www.articlesnatch.com

About the Author:
This is Euriq Gates as a story writer about short sale foreclosure

Read more: http://www.articlesnatch.com/Article/Short-Sale–Foreclosure/939443#ixzz1NNUepSyG
Under Creative Commons License: Attribution No Derivatives

7 Tips for Short Sale Success.

By: G. M. Filisko

Have to sell your home for less than it’s worth Our seven tips will help you get the best price.

When you owe more on your home than it’s worth, but you have to sell, you need to squeeze every dollar possible from the sale.

Here are seven tips for navigating the short-sale process.

1. Know who you owe
A short sale has to be approved by any company that has a mortgage or lien against your home. That includes your first, second, or even third mortgage lender, your home equity line lender; your homeowners or condominium association; and any contractors who’ve placed a lien on your home. Make a list and start talking to everyone early in the process. Ask what documents they’ll need from you.

2. Pick your short sale team
You’ll need to work with a team of short sale experts, including a real estate agent, real estate attorney, and your accountant. Look for agents and attorneys who advertise themselves as short sale experts. Interview at least three, and listen carefully for signs that they understand the complexities of the short sale process.
Agents should explain how they’ll arrive at a suggested price for your home. Ask them to show you a sample short-sale package or for an example of a prior short-sale success.

3. Get your documents ready
Gather the paperwork your creditors and mortgage lenders asked to see, like your listing agreement and a hardship letter explaining why you need to do a short sale. You’ll also need proof of what you earn and what you owe as well as copies of your federal income tax returns for the past two years.

4. Expect delays
Despite a federal rule saying banks participating in the federal government’s Making Home Affordable loan modification program (http://www.houselogic.com/articles/making-home-affordable-modification-option/) must respond to short-sale offers within 10 days, it may take weeks or months for your lender to decide whether to allow you to sell your home in a short sale–and even longer if you must negotiate with more than one lender or lienholder.
Your lender and lienholders don’t have to agree to your proposed short sale. They can reject your terms or make a counteroffer, which can create further delays.

5. Anticipate demands
Discuss with your short-sale team how you should respond to common short-sale demands from lenders. For example, are you willing to sign a promissory note agreeing to pay outstanding amounts after the sale is complete

6. Know the tax implications
Any unpaid amount of your mortgage “forgiven” by your lender through a short sale may be considered income to you under federal tax rules. Ask your attorney or accountant whether you qualify to exclude that amount as income on your tax returns under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Also ask if you’ll be required to report amounts “forgiven” by other lienholders, if applicable.

7. Consider how the short sale will affect your credit and what you must pay
Ask whether your lender will report the short sale to credit-reporting agencies. Having a portion of your debt forgiven may negatively affect your credit score, but a short sale typically damages your score less than a foreclosure or bankruptcy.
Ask you lawyer whether you’ll be responsible for paying back the lenders’ loss. If the lender says it will forgive any losses on the sale of your home, get that promise in writing.

Other web resources
More on short sales (http://www.nolo.com/legal-encyclopedia/article-30016.html)

IRS information on the Mortgage Forgiveness Debt Relief Act and Debt Cancellation (http://www.irs.gov/individuals/article/0,,id=179414,00.html)

This article includes general information about tax laws and consequences, but isn’t intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

G.M. Filisko is an attorney and award-winning writer. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Permanent Modifications on Fannie Mae and Freddie Mac Loans Reach 1.1 Million

Fannie Mae and Freddie Mac completed more than 2.1 million foreclosure prevention actions since the start of conservatorship including 1.1 million permanent loan modifications. These actions, designed to help borrowers stay in their homes, are detailed in the Federal Housing Finance Agency’s fourth quarter 2011 Foreclosure Prevention and Refinance Report. The report also shows that after nine months, fewer than 20 percent of Enterprise loans modified in the four quarters ended March 31, 2011, had missed two or more payments, an improvement over prior years.

With this report, FHFA releases new state data sets and launches an interactive Fannie Mae and Freddie Mac State Borrower Assistance Map, showing the number of loans owned or guaranteed by Fannie Mae and Freddie Mac, delinquencies, foreclosure prevention activities, Real Estate-Owned (REO) properties, and refinances in each state. In addition, the report now includes a graphic showing Delinquent Loans by State and Profiles of Key States, with detailed information about states with the biggest five-year decline in house prices and the highest number and rate of seriously delinquent loans.

Also in the report:

  • The Enterprises’ cumulative HARP refinancings increased 10 percent in the fourth quarter of 2011.
  • Half of all borrowers who received loan modifications in the fourth quarter had their monthly payments reduced by over 30 percent, and one-third included principal forbearance.
  • Serious delinquency rates for Fannie Mae and Freddie Mac loans remain below industry levels and continue to decline.
  • Florida had the highest number of serious delinquencies at the end of the fourth quarter.
  • California had the largest number of completed foreclosure prevention actions since the beginning of conservatorship in 2008.

Dissimilarities Between A Short-sale And Foreclosure

If you find yourself in a short sale vs. foreclosure situation, you may feel like a lost soul and not be aware of opportunities you have that may help you out. The mortgage company has the advantage here because they have vast knowledge about the whole process the absence of which can make things really hard for you.

If you are actually way too far behind your monthly payments, it may be time to consider it. One thing you can do is get in touch with a preforeclosure expert who may assist you in this situation. The expert in question may know of options that could help you out. Listen to what the expert has to say, though in the end what you assume is really up to you.

So do learn this business because knowing the difference can let you make the correct decision for you. With a short sale in the process, you put your house out for sale and get everything ready for implementing the sale as quickly as possible. This means pricing your home in a way to make it attractive to buyers. In this situation it is important to have a realtor in your court.

And don’t wait for a long time, because if you do your choice of short sale vs. foreclosure may just disappear. So you can’t fritter away any time, because if you do, a foreclosure may simply descend on your unawares.

Time may not be on your side when it comes to a choice as regards short sale vs. foreclosure. So it is very essential to take action immediately because if a foreclosure becomes unavoidable there is nothing you can do about it. So keep in mind that the time to act is when you begin to have difficulties paying your mortgage. This is positively not the time to run and hide, because you don’t want to lose all control and be just put out of house and home.

It is not a simple matter, but there are people who can give you good guidance as to how to proceed. It is of paramount importance not to fritter away time, but to act swiftly. If you do, you will have more options available to you and this can be a good thing for you and for your family.


Article Source: http://www.articlesnatch.com

About the Author:
There is a whole collection of articles and resources on Short Sale Homes, and they can be found at http://www.foreclosureshortsale.co/featured/things-you-should-know-about-preforeclosure. If you want to learn more about foreclosure and short sale visit short sale vs. foreclosure.

Ten Powerful Ways To A Stop Foreclosure

The thought of foreclosure on a home that you have spent most of your life in can be devastating to the average home owner, but there is hope if you have knowledge and the right guidance. To be in a better position to stop foreclosure, you must act quickly. Once you are 30 days late, fees and interest start to accumulate. Waiting too long to respond to a foreclosure notice could cause you to lose your home that you raised your kids in. The techniques listed below will assist you with stopping your home from being foreclosed.

What are some steps I can take to prevent a foreclosure?

1.Talk with the HUD counseling agency for more options.

2.Ask the bank to suspend your payments for a couple of months until you get back on your feet.

3.Argue that you did not understand loan agreement when you first bought the house.

4.Try a loan modification. With this option, the lender modifies several terms of your loan, like the payment, interest and sometimes the principal.

5.See if the bank will go for a Short Sale. This is when you are selling the property at the current market value, and the price is lower than your original loan.

6.Ask the bank if they will take a deed in lieu of foreclosure. Here, you voluntarily turn over the title to the lender to avoid foreclosure and damage to your credit report.

7.Try refinancing before letting your home foreclose. With this option, the lender will construct a new loan for you with a better interest rate and payment plan. This method is impossible if you are underwater.

8.Research the procedures on how foreclosure notices should be sent out, and if any of the steps were violated contact an attorney for a possible lawsuit. By doing this, it will slow down the foreclosure proceedings.

9.File Chapter 7 bankruptcy as a last resort because it stops all foreclosure activity. You should be aware that the lender might ask the judge for a lift of stay, which would allow the foreclosure to proceed.

10.File a Chapter 13 to stop the foreclosure. By doing this you are telling the bank that you need time to work out your financial situation. From there, you will be put on a payment plan to start paying back all of your creditors including the lender.

Keep looking into other options.

Ask for a repayment plan. Payments are increased to make up for the past due payments. You can make up these payments over a short or a long period of time. For example, if you are three months behind with a monthly payment of 400 a month, you can stretch out the $1200 over 12 months where you would pay a extra 100 a month on top of your regular payment.

Look into the Obama Plan-Harp-Home Affordable Modification Program. This plan is geared toward homeowners who are underwater in their loan. Harp allows you to rewrite your mortgage for a better interest rate and to convert from an adjustable rate to a fixed rate. For more information, go to www.hmpadmin.com

Look into the Obama Plan and Loan modification. In this plan, you are on a three-month trial period. During this time, you must make all your payments on time. Concluding the trial period, if there were no changes in your financial situation. The loan will continue to be modified at a reduced payment. Moreover, during the trial period, any foreclosure will be suspended. Be advised that if you have good credit when entering the trial period, it could hurt your credit. The reason it could damage your credit is the lender is reporting a modification of the loan and not the original loan.

What is mediation?
It is a process where the homeowner and the lender meet in person to exchange information and discuss ways to avoid foreclosure. A mediator facilitates this meeting.

Can mediation stop foreclosure?
Mediation can slow the foreclosure down, but it won’t stop it, unless you and the bank come to an agreement during mediation.

Do all states offer the mediation program?
No, some states offer the mediation program while others do not. Check with your lender or consult with a real estate attorney on this matter.

How does the process work?
After you default on your loan, 90 days to 120 later the bank will send you a Default and Election to Sell Notice along with a mediation form. You must note that every state is different with this procedure. If you choose mediation, you have 30 days to return the mediation form. After you return the document, a mediation will be scheduled for you and the bank. During the mediation, you try to work out various options with the bank on how to avoid foreclosure such as the options listed above and in the bullet point section. If no agreement is made, the bank will continue with foreclosing on your home.

Article Source: http://www.articlesnatch.com

About the Author:
Mark Clayborne is a Certified Credit Consultant with ten years of experience assisting consumer with credit issues. If you liked this article, then I invite you to sign up to read the first chapter of my book Hidden Credit Repair Secrets and get a Free Restore your credit E-class by clicking here

Read more: http://www.articlesnatch.com/Article/Ten-Powerful-Ways-To-A-Stop-Foreclosure/1769980#ixzz1NNT0UEp2
Under Creative Commons License: Attribution No Derivatives

Website Resources for Foreclosure Help

Here are some legitimate resources to help you fight the foreclosure crisis.

You’ve been warned about foreclosure scams. But sometimes it’s really hard to tell if something is a scam or not. Some less-than-reliable outfits have even taken to including “hud” or “gov” in their URLs to fool you into thinking they are legitimate foreclosure counselors. It pays to be wary. Below are some websites from government and non-profit agencies that can help you with foreclosure. Some are seeking volunteers and donations to help stop the foreclosure crisis.

HOPENOW.COM
Research your options with this web form (http://www.hopenow.com/homeowner-options.php)
Find your mortgage lender (http://www.hopenow.com/mortgage-directory.php)
Find a foreclosure counselor in your area (http://www.hopenow.com/hopenow-counseling.php)
Focused on helping homeowners in crisis, this alliance helps you determine your options

FTC.GOV
Find a foreclosure counselor (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm)
Raise your own credit score (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm)
Fix mistakes on your credit report (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm)
The Federal Trade Commission has expert advice

FINDAFORECLOSURECOUNSELOR.ORG
Find a legitimate foreclosure counselor near you (http://www.findaforeclosurecounselor.org/network/nfmc%5Flookup/)
This non-profit organization was created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts

MAKINGHOMEAFFORDABLE.GOV
Making Home Affordable (http://www.makinghomeaffordable.gov/)
Making Home Affordable: short sale documents (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html)
Making Home Affordable: deed in lieu documents (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html)
The official government site for loan modifications and foreclosure alternatives

PORTAL.HUD.GOV
Find resources to avoid foreclosure in your state (http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/local)
Consult state and local resources

MYFICO.COM
Improve You Credit Score
(http://www.myfico.com/CreditEducation/ImproveYourScore.aspx) Credit Q&A (http://www.myfico.com/crediteducation/questions/)
Credit Basics ( http://www.myfico.com/crediteducation/articles/)

Understand credit and your credit scores

ANNUALCREDITREPORT.COM
See your credit report (https://www.annualcreditreport.com/cra/index.jsp)
Get all the details on late payments and other information, but not your actual credit score

RESPONSIBLELENDING.ORG
The Center for Responsible Lending (http://www.responsiblelending.org/)
A non-profit organization that works to stop predatory lending practices

CREDITEDUCATION.ORG
Volunteer to be a credit counselor (http://www.crediteducation.org/Become-a-Volunteer.aspx)
Non-profit agency that works to provide financial literacy

LIVEUNITED.ORG
United Way (http://www.liveunited.org/income/)
Donate or volunteer to decrease the number of families that are financially unstable

NCRC.ORG
Donate to the National Community Reinvestment Coalition (http://www.ncrc.org/index.php)
Send a donation to help NCRC “ensure that people in traditionally underserved communities are treated fairly and justly when applying for credit, opening a bank account, getting a mortgage, a loan, or other financial product or service.”

IRS.GOV
The Mortgage Forgiveness Debt Relief Act (http://www.irs.gov/individuals/article/0,,id=179414,00.html)
Get the details about when you might owe taxes on any debt that is canceled through a short sale or deed in lieu of foreclosure

OCC.GOV
Download a PDF on identifying a loan modification scam (http://www.occ.gov/ftp/advisory/2009-1.pdf)
The Office of the Comptroller of the Currency provides detail about scams, including “10 Warning Signs of a Loan Modification Scam.”

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

5 Tips for Buying a Foreclosure

By: G. M. Filisko

Get prequalified for a loan and set aside funds, and you’ll be ready to purchase a foreclosed home.

When lenders take over a home through foreclosure, they want to sell it as quickly as possible. Since lenders aren’t in the real estate business, they turn to real estate brokers for help marketing their properties. Buying a foreclosed home through the multiple listing service can be a bargain, but it can also be a problem-filled process. Here are five tips to help you buy smart.

1. Choose a foreclosure sale expert. Lenders rarely sell their own foreclosures directly to consumers. They list them with real estate brokers. You can work with a real estate agent who sells foreclosed homes for lenders, or have a buyer’s agent find foreclosure properties for you. To locate a foreclosure sales specialist, call local brokers and ask if they are the listing agent for any banks.

Either way, ask the real estate professional which lenders’ homes they’ve sold, how many buyers they’ve represented in a foreclosed property purchase, how many of those sales they closed last year, and who they legally represent.

If the agent represents the lender, don’t reveal anything to her that you don’t want the lender to know, like whether you’re willing to spend more than you offer for a house.

2. Be ready for complications. In some states, the former owner of a foreclosed home can challenge the foreclosure in court, even after you’ve closed the sale. Ask your agent to recommend a real estate attorney who has negotiated with lenders selling foreclosed homes and has defended legal challenges to foreclosures.

Have your attorney explain your state’s foreclosure process and your risks in purchasing a foreclosed home. Set aside as much as $5,000 to cover potential legal fees.

3. Work with your agent to set a price. Ask your real estate agent to show you closed sales of comparable homes, which you can use to set your price. Start with an amount well under market value because the lender may be in a hurry to get rid of the home.

4. Get your financing in order. Many mortgage market players, such as Fannie Mae, require buyers to submit financing preapproval letters with a purchase offer. They’ll also reject all contingencies. Since most foreclosed homes are vacant, closings can be quick. Make sure you have the cash you’ll need to close your purchase.

5. Expect an as-is sale. Most homeowners stopped maintaining their home long before they could no longer make mortgage payments. Be sure to have enough money left after the sale to make at least minor, and sometimes substantive, repairs.

Although lenders may do minor cosmetic repairs to make foreclosed homes more marketable, they won’t give you credits for repair costs (or make additional repairs) because they’ve already factored the property’s condition into their asking price.

Lenders will also require that you purchase the home “as is,” which means in its current condition. Protect yourself by ordering a home inspection to uncover the true condition of the property, getting a pest inspection, and purchasing a home warranty.

Be sure you also do all the environmental testing that’s common to your region to find hazards such as radon, mold, lead-based paint, or underground storage tanks.

More from HouseLogic
What you need to know about the homebuyer tax credit (http://www.houselogic.com/articles/homebuyer-tax-credit-what-you-need-know/)

How to claim your homebuyer tax credit (http://www.houselogic.com/articles/claim-your-homebuyer-tax-credits/)

Other web resources
How to buy a foreclosure from Fannie Mae (http://www.fanniemae.com/homepath/homebuyers/buying_fanniemaeowned.jhtml)

What to consider when buying a foreclosure as your first home (http://www.nolo.com/legal-encyclopedia/article-29589.html)

G.M. Filisko is an attorney and award-winning writer who purchased a foreclosed condominium and found herself in the middle of a months-long dispute between the former homeowner and the bank over whether the foreclosure was conducted properly. Six months after paying the full purchase price, she was finally able to enter the property. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Top 5 Craziest Foreclosure Rescue Attempts

Treasure hunting, demolition, forgery–even a telethon. Our picks for the top five most bizarre foreclosure rescue attempts.

Three years after the recession hit, Americans still are losing their homes to foreclosure in record numbers. Not even celebrities are immune. Wanting to do anything you can to avoid losing your home is only natural. There are a wealth of resources on HouseLogic (http://www.houselogic.com/guides/finances-insurance/home-finance/foreclosure-guide) to help you take action. Still, some homeowners have tried other, less-proven methods. Here’s a countdown of some outlandish foreclosure rescue attempts:

5. I pimped my yard to PETA.
This past March, “Octomom” Nadya Suleman was reportedly approached by PETA when word got out about her mortgage woes. The offer: A billboard sign urging pet owners not to let their dog or cat become an “Octomom” in a campaign to raise awareness about controlling the pet population. Suleman ended up letting PETA advertise on her front yard for $5,000. In April, Suleman reached an agreement (

http://www.cbsnews.com/stories/2010/04/15/entertainment/main6399349.shtml ) with the mortgage holder for a sixth-month extension to pay off the $450,000 debt.

4. God made me do it.
Earlier this month, a Montana man, Brent Arthur Wilson, was convicted for removing For Sale signs and forging ownership papers on a foreclosed home in a bizarre effort (

http://www.msnbc.msn.com/id/38242178/ns/business-real_estate/) to keep a roof over his head. During his trial, Wilson claimed that “Yaweh,” or “the creator,” gave him the home. The jury was out for less than an hour before finding Wilson guilty. He now faces up to 30 years in prison and is scheduled to be sentenced August 19.

3. Buy my T-shirt, save my house.
To raise the $250,000 he needed to avoid foreclosure on his Port Washington, Wis., pad, former Saved by the Bell star Dustin Diamond sold T-shirts (

http://www.foxnews.com/story/0,2933,199934,00.html) with his photo and a caption reading, “I paid $15 to save Screeech’s house.” (The extra “e” in “Screeech” was to get around copyright laws.)

The down-on-his-luck comedian turned his money problems into a publicity ploy, telling his story on The Howard Stern Show and even scheduling an online telethon to raise more money. The appearance was canceled moments before it went on the air. Despite all that, it looks like Diamond is still going to lose his home. Wells Fargo started foreclosure proceedings in April.

2. If I can’t live here, no one can.
This past February, Ohio carpet business owner Terry Hoskins decided that he’d rather bulldoze his $350,000 house to the ground (

http://www.wwlp.com/dpps/news/strange/ohio-man-bulldozes-home-to-avoid-foreclosure-jgr_3244918) than let the bank have it. Hoskins also basically confirmed that he’d do the same to his carpet store if he had to. Thankfully, it didn’t come to that. Although Hoskins didn’t technically break any laws, the bank did hold a sheriff’s auction of his business property to pay off the $600,000 debt he owed.

1. Superman saved our house.
On a more positive note, a rare comic book (

http://www.foxnews.com/us/2010/07/27/faster-speeding-bullet-superman-saves-familys-home/) (an Action Comic #1-the issue that introduced Superman to the world) was recently found in the basement of a couple facing foreclosure. Although it hasn’t been valued yet, Stephen Fishler, co-owner of ComicConnect.com, guarantees that the comic will bring in more than enough to pay off the mortgage at auction time. Other rare finds like this have been valued at more than $1 million.

The NATIONAL ASSOCIATION OF REALTORS® is dedicated to providing resources that help families facing foreclosure take every step they can to keep their home. To find out how to (legitimately) fight foreclosure, visit the HouseLogic Foreclosure Resource Guide (

http://www.houselogic.com/guides/finances-insurance/home-finance/foreclosure-guide/).

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

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