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IS A BANK OWNED PROPERTY RIGHT FOR YOU?

Monday, July 26th, 2010
Forclosed Home owned by the bank

Forclosed Home owned by the bank

There has been A LOT of chatter recently on the huge number of bank owned homes that the large lending institutions are preparing to release on the market.  Combined with today’s 40-year low interest rates, the idea of investing in a bank owned property is peaking the interest of possible homebuyers.  Before you invest in a bank owned property, do your homework to insure that this is the best decision (financial and time) for you and your family.

KNOW THE DIFFERENCES

SHORT SALE

  • A short sale property is one in which the owner is delinquent in paying their mortgage payments.
  •  The bank has not yet foreclosed it on, but it may be IN THE PROCESS of being foreclosed on.
  • Many times a Real Estate agent will negotiate a stay of execution on the foreclosure and allow the owner to attempt to sell the property for a price that is typically BELOW the total mortgage amount on the property.
  • The bank is basically agreeing to take a loss on their loan amount in the hopes of avoiding a foreclosure proceeding and having to take physical ownership of the property.

BANK-OWNED OR REO (real estate owned)

  • In case of a Bank-Owned property, the lender has gone through the complete foreclosure process and actually taken title to the property and evicted the previous owner in order to sell the property.

THERE ARE PROS

  • Buyers who purchase a bank-owned property can get a property below even current market value. Often times this can be up to 10+% below current market value so there is the potential to get a great deal and instant equity.

THERE ARE SOME VERY COMMON MISCONCEPTIONS

  • While a bank’s goal is to get rid of their inventory as fast as they can, don’t expect the bank to consider silly low ball offers especially when the home is 1st listed for sale.
  • Banks generally won’t accept anything less than 10% under the asking price because the price has already been set aggressively to begin with
  • What most people fail to understand is that banks have to demonstrate to shareholders, investors and auditors that they attempted to get the highest price possible and like every other seller the banks goal is to maximize the price they receive for a property.

Patience is a virtue. In many cases the bank will take days to respond to your offer: banks do not conduct business on weekends and the process can be even longer if you find yourself competing with multiple offers on the property.                                                                                                                    

THERE ARE SOME CONS TO BE CONSIDERED BEFORE INVESTING TIME, ENERGY AND SAVINGS INTO A BANK OWNED PROPERTY

  • Remember you never get anything for free and there’s always a price to pay for a “smoking good deal”.

BE PREPARED TO GET YOUR HANDS DIRTY!

  • Once the bank has taken over, many times they shut off the utilities to reduce their costs.
  • This makes it much harder to inspect the property properly – HVAC, electrical, plumbing systems.
  • The bank has forcefully taken ownership and possession of the home before attempting to sell it.
  • The defaulting party was probably very upset prior to leaving the home.
  • Angry homeowners destroy property; remove appliances, plumbing fixtures, cabinets, light fixtures, and ceiling fans.

It’s not uncommon to see significant water damage, drywall damage and cement in drains to cause future owners

IT’S CALLED AS IS FOR A REASON! Some of the things the bank may be willing to remedy include:

  • Termite or other insect problems
  • Mold issues
  • Plumbing or heating system issues
  • Electrical issues especially if it involves a safety hazard
  • Septic systems ~ some states require a passing inspection in order to close, including Colorado
  • Structural issues
  • Don’t assume the bank will make repairs. Every bank is different.
  • Do not expect a bank to make ticky-tacky repairs – it is not going to happen!

GET A PROFESSIONAL INSPECTION

  • Conduct inspections even though the property is being sold “as is”.
  •  Proper contingencies should be in place to inspect the property for such things as the structure, pests, mold, radon, etc.

VERRBAL COUNTERS

  • After the initial offer is made in writing; counter offers are made verbally until agreement is reached.
  • It’s a slow process because the bank may be in a different time zone or the responsible people are tied up in meetings.
  •  It can take weeks of verbal countering before all parties sign a final agreement.
  • During that time, there is a danger that another offer will come in better than yours and the bank may accept it. This is especially likely to happen if negotiations go over a weekend.

THE CONTRACT

  • Most banks have their own contracts that they use.
  • Buyers will be expected to sign their standard form and will not be able to make any changes to it.
  • Remember the bank’s attorneys who wrote the contract are representing the bank, not the buyer.

DEALING WITH THE BANK

  • A bank will require a higher good faith deposit than a private party would. Expect to write a check for 3% to 5% of the purchase price when making an offer on an REO property. And, to protect their interest, the bank will probably require a buyer get prequalified with their institution within a few days of accepting an offer.
  • The bank will insist on an escrow and title company that they choose. They have previously negotiated fees with these companies, so they know what their expenses will be. They aren’t getting the business because they are good … they are getting the business because they are cheap!  Remember you get what you pay for!

DOUBLE CHECK EVERYTHING

  • Listing agents and escrow departments for the banks are overloaded with work.
  • Repairs may get ordered, but there is seldom a follow up to see that the work was done.
  • It’s up to the buyer or his agent to double check everything and assume nothing.
  • An agent that has experience working with banks and is not afraid of some extra work is needed.

DON’T MISS THE CLOSING DATE

  • One really important clause that you find in many bank owned contracts is the penalty if you do not close according to the stated contract date. In most cases there is a $100 dollar a day penalty for not closing on time! You better make sure your ducks are in order when buying one of these properties.
  • One last word of warning: Remember, buying a REO home is not for the faint of heart!

Our final thought to leave you with is: CAN YOU REALLY PUT A PRICE TAG ON PEACE OF MIND?  If you are interested in a new home in Colorado Springs with a new home warranty from Colorado Springs’ oldest and most trusted homebuilder, give us a call or visit us online at http://www.CampbellHomes.com.  Happy Shopping!

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ARE WE PROUD OF THE CITY WE CALL HOME – YOU BETCHA!

Thursday, May 27th, 2010

 

Garden of the Gods Colorado Springs

Garden of the Gods Colorado Springs

Each week New Homes for Sale Colorado Springs discusses useful information on homes, family, and community. Covering a different topic each week, this thought provoking and educational blog is provided by new homebuilder Campbell Homes in Colorado Springs, Colorado.   

 Those of us who live in Colorado Springs know that it is the BEST PLACE IN AMERICA TO LIVE!  And, many others are also in agreement with us:

On April 22, we proudly announced that

WELL THE WORD MUST REALLY BE OUT BECAUSE NOW WE HEAR THAT CALIFORNIA WORRIED!

The following is an excerpt of an article by Jan Norman. staff small-business columnist, published in the Orange County Register on May 13th, 2010.

“An average of 15 to 20 companies move from other states to Colorado Springs every year and 30% are from Southern California, said Dave White, executive vice president of marketing for the Colorado Springs Regional Economic Development Corp. “ Approximately 60 Southern California companies are currently looking at Colorado Springs for a possible relocation”, he added.

A couple of the most recent California catches are Billet Racing Products that moved from Laguna Niguel in September, and Corinthian Colleges in Santa Ana that just opened an enrollment center in Colorado Springs that will employ 600.

I called White because my recent update of California companies leaving the Golden State included half a dozen that landed in Colorado Springs. Readers demanded to know why, and rightly so.

It was a softball question that White teed it up and crushed it.

‘Every state in America is focusing on California,’ he said. ‘It’s low hanging fruit’ for those assigned to develop their local economies and add jobs.

Remember, he promotes Colorado Springs for a living but, he’s a Southern California transplant and professes to love California and Disneyland. But business is business.

Here are some of his favorite selling points for California firms to move to Colorado Springs :

  • California’s top income tax is 10.55%; Colorado’s is 4.63%
  • California’s top corporate income tax is 8.84%; Colorado’s is 4.63%  based only on sales within Colorado
  • Colorado’s worker’s compensation insurance costs 25% what California businesses pay
  • Colorado Spring Utilities’ electricity rate is 4.5 cents per kilowatt hour; Southern California Edison’s is 10 cents
  • Colorado Spring’s property tax rate is 0.4% to 0.5% of real value depending on location; Orange County’s is 1% (or more for Mello Roos fees, for example)
Pikes Peak Colorado Springs

Pikes Peak Colorado Springs

‘My wife and I laugh that the only thing cheaper in California is the citrus,’ White said.

Colorado Springs comes looking for companies to lure away from the beaches and sun and Disneyland, he admitted.

‘We do have a campaign. We think Colorado Springs is a good match for companies seeking to relocate. We can’t compete with southern states that throw millions of dollars in incentives and tax breaks at big projects. Our sweet spot is small to mid-sized companies where the owner moves with the company. They’re driven as much by lifestyle as by incentives.’

Colorado does offer incentives to relocating companies, but they don’t receive them until they create new jobs, White said. For example:

  • The state and city may give as much as $5,000 per job plus tax credits.
  • The city might rebate the property tax up to $800 per job.
  • The legislature just passed an additional $2,500 per job credit against the corporate income tax.

‘We also have asked private entities to provide incentives,’ he added. ‘A country club might waive the membership fee, or the health clubs might give six months free membership. We have a pass to various tourist sites. We don’t have the beaches but we do have Pikes Peak.’

And when business executives come to check out the town, the governor, mayor and civic and business leaders show up to greet them, White added.

Does Arnold do that?”

Well what can we say?  Yes, we’re very proud of our community and Campbell Homes is proud to call Colorado Springs our only home!  When you’re ready to make your move to Colorado Springs, we encourage you to make your move into a new Campbell Home!

 

 

 

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MORE HELP FOR THE MILITARY HOME BUYERS

Wednesday, May 19th, 2010
More help for military families buying a new home

More help for military families buying a new home

Each week New Homes for Sale Colorado Springs discusses useful information on homes, family, and community. Covering a different topic each week, this thought provoking and educational blog is provided by new home builder Campbell Homes in Colorado Springs, Colorado.

Several weeks ago we made a point of reminding active duty military and department of defense contractors that the tax credit for deployed military home buyers is available until April 30, 2011 for contracts and  June 30, 2011 for closings. Now we want to make sure you are aware of yet another phenomenal program that is available to members of the military who meet qualifying circumstances in qualifying communities.

THE HOMEOWNERS ASSISTANCE PROGRAM (HAP)

The Department of Defense (DOD) is proud to offer the Homeowners Assistance Program (HAP). The Homeowners Assistance Program, authorized in Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, provides some monetary relief to eligible service member (including Coast Guard) and federal employee (including non-appropriated fund) homeowners who suffer financial loss on the sale of their primary residences when a base closure or realignment announcement causes a decline in the residential real estate market and they are not able to sell their homes under reasonable terms or conditions.

The American Recovery and Reinvestment Act of 2009 (ARRA) temporarily expands the HAP to assist service members and Department of Defense employees who are wounded, injured or become ill when deployed.  Benefits are also extended to surviving spouses of service members or Department of Defense employees who are killed or died of wounds while deployed.

The US Army Corps of Engineers will analyze your community’s real estate market, conduct market impact studies, and make a recommendation to the Deputy Assistant Secretary of the Army for Installations and Housing for a final determination. If it is found and proven that an announcement caused a significant decline in a residential real estate market, a  HAP may be approved.

The basic application is made on DD Form 1607, Application for Homeowners Assistance Program. Part III, Section IV of the form must be completed by the military or Department of Defense employee’s personnel officer. In addition, applicant must submit a variety of documents to show evidence of property ownership, occupancy dates, assignment orders, efforts to sell the home (whether it was sold), and mortgage details.

Certain conditions do apply to this program with purchase limits depending on individual states. For additional questions on the Home Owners Assistance Program, contact the field office that covers the territory you live in.

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