In recent years, online real estate bidding has been added to the incredible number of tasks you can do online. Like most online activities, it makes sense to examine whether it is better to do it on the Internet or in person. With online bidding, there are several pros and cons to consider.
Pro:
You are more likely to get fuller information and a larger variety of pictures for an online auction than one that is done at a physical location. Organizers of the auction realize that you may be too far away to see the property in person, so they use Internet tools to show the properties virtually. This gives you easier access to certain facts you need.
Con:
Assuming you are bidding from a location other than where the property is located, you may not have had the opportunity to see the property up close. Even though potential bidders often only get to see the outside of the home, that real-life look can be very eye opening in some cases. Pictures do not show everything and a personal view of the property is worth a great deal of cold data at times.
Pro:
You can bid from the comfort of your own home. You do not have to get caught up in the distracting noises and sights as you try to decide what to bid. Without the intense pressure of the crowds, you can easily keep a cool head. You may make much better decisions in the long run.
Con:
You might be more conservative in your bids without the tense mood of the in-person auction. Is this a bad thing? Possibly it is, if you plan on taking enormous risks. If you are a big-time real estate gambler, bidding in person might give you the competitive atmosphere that spurs you on to take greater chances. If you want more safety, online bidding might actually be better.
Pro:
If you do your real estate bidding online, you will have easy access to any notes, pictures and information you have gathered for each property. You can keep it all right there on your desktop as you keep up with the bidding. You can refer to it just before a property auction is starting, and have it there to glance at anytime you need to as the bid goes up.
Con:
When bidding online, it is easy to get hooked up with a disreputable real estate auction company, or a downright scam artist. The Internet is much easier to manipulate in this way than an in-person auction site. However, you can avoid this problem if you do your homework.
Check out the auction company before you enter the online auction. Then, type in the right website yourself to avoid getting sidetracked to a fake website. Read their terms of service and make sure you agree with them. Protect yourself, and the Internet can provide a very advantageous way to buy real estate.
With the real estate market changing at what seems every second of the day it is important that buyers do their research before they make on offer on a house.What many people find out these days is that sellers are putting their home on the markets without a real understanding of the current market.A good realtor can help you do your research before you put an offer in, but the more you know on your own.
The first thing you want to do is to check the other houses that are for sale in your target neighborhood or neighborhoods.When you do this make sure you are comparing apples to apples.If the house you are looking at is 3 bedrooms, 2 baths with a garage than make sure the comps you look at are also 3 bedrooms, 2 baths with a garage.
When comparing properties it is also important to know what type of upgrades your unit has compared to the other houses in the area.If the comparable house has upgraded appliances and the one you are looking at doesn’t than they are not technically the same house.This is potentially a place where you can get a little bit better of a deal.
It is also important to do your research on the area you are looking at as a whole.Even if you don’t have children it is important to know what the schools are like in the area and how far they are from the house.Houses in bad school districts are often hard to sell while ones in good districts are often easier to sell.Parents also need to look at if their child will need to take a bus or if they can get their other ways.
Once you have settled on a house your realtor will send you a report on the area and the house.This report will tell you everything you need to know about the house.It will show any mortgages on the house, when the house was purchased, what it was purchased for, if there was ever any refinancing and if there are any liens on the house.
Dig through this report very carefully to look for clues on what an owner may accept.If the report shows the house fully paid off that may mean the buyer is willing to take a lower price so they can get rid of it and move on.On the other hand the report may show that they are underwater on the house which usually means they won’t budge very much on the asking price.
Just remember that right now this is a buyer’s market so the buyer has the control.There are far more sellers than buyers.With the proper research you will be amazed at how much money you can save.
Just because you have bad credit, it doesn’t automatically mean that you cannot purchase a home.You may be required to pay a higher interest rate than other people, but you are not disqualified from pursuing a home purchase merely because you have bad credit.
If you have recently filed for bankruptcy it is recommended that you wait at least four years before applying for a mortgage.If you have a foreclosure in your past it is recommended that you wait two years before applying for a mortgage, this means that in the case of a foreclosure you may qualify for as little as 3.5% down.
If you find a lender who will approve you sooner than the recommended waiting period, you may be forced to come up with a 20 – 35% down payment.Along with the large down payment, you will also have a much higher interest rate and loan terms that are not favorable.If you cannot meet these strict requirements, it may be better for you to wait the allotted amount of time before trying to purchase a home.
Proving to lenders that you are a good risk requires that you have reliable employment, a low amount of outstanding debt and are working to improve your rating regularly.Lenders like to see that you are steady and can handle the responsibility of a mortgage payment.Proving this to them may take some time, but once they recognize that you are not a high risk loan, they may approve your application.
If you have any outstanding debts, it is important that you pay off as many as possible.This will show lenders that you are serious and you are working towards repairing your credit.If a debt has reached the point of being sent to a collection agency, you will have to contact each agency and request that a payment arrangement be set up or if you able to pay the debt in full.Many collection agencies will offer a discount of your balance just to get the account off of their books.If they offer a discount take advantage of it, this means that you will be paying off the creditor for a lesser amount.
If for any reason you are not satisfied with the rates offered by a lender you may want to consider purchasing a home that offers seller financing.In this case the seller would take the place of a lender and you would pay them directly.Choosing to go this route means that you may not have to meet the strict guidelines set forth by lenders, your interest rate will be lower and you will close fast.This is a very good solution for those who can’t meet the requirements of many lenders.
REO’s are Real Estate Owned properties. REO in the real estate investment business usually refers to those homes that the banks hold for one reason or another. The most common reason a bank would have an REO is if the homeowner defaulted on the home and the bank foreclosed. Then, the bank would take possession and the house would become an REO. It might seem to the untrained observer that banks could hold onto these homes until the market improved or other conditions were right for the sale. However, there are several reasons banks need to get rid of their stock of REO’s as quickly as possible.
Classification
There is a problem with the classification of REO properties for lenders. They are literally bad debt, but lenders are only allowed to claim a certain amount of bad debt on their books. Otherwise, the lender may be termed as insolvent. Selling the REO property will take care of this problem in the sense that there will be no excess bad debt to be added to the lender’s financial reports.
Focus
The bank’s focus is on dealing with money. They are not in the business of maintaining homes, getting them ready for market, or even selling them. This creates a dilution of the bank’s objectives. The more REO property they can sell off, the more they can stay on track to accomplish their financial goals. A bank which keeps its REO’s to a minimum is a healthy bank, and one which is focused on being a bank above all else.
Use of Bank Resources
REO properties do not sit empty and take care of themselves. If a bank allowed that to happen, they would be asking for the home to go down in value rapidly. What is more, REO homes do not ordinarily sell themselves. The bank has to devote manpower and money to maintaining and selling every REO home they hold. This diverts resources away from the main purposes of the bank, such as lending money. If you can offer the bank an acceptable price for an REO home, they will be happy. They will be able to free up more of their human and financial resources to be put to use for the bank’s primary goals.
Auction Problems
One way banks try to get rid of REO’s is through foreclosure auctions. However, there are several problems that plague these auctions. For one, banks may place a minimum bid on the property as the amount the homeowner still owes. Yet, the home may not be worth that much. When no one bids on that home, it reverts to the bank. If you can come in and make an offer that will keep the bank from going through that useless process, the bank may jump at the chance to make it happen. It is rarely if ever a good deal for the bank to hold onto an REO property. That leaves you, as the investor, in a position to acquire properties that you might not have otherwise.
You searched for months for that perfect first home to buy.You and your realtor looked at everything from foreclosures to new construction.Finally you found the one that made you say “I could live here the rest of my life.”You put in your offer and it was accepted.After the initial joy wears off you realize you need to get your ducks in a row so you can close.Below are 5 tips that if followed will help you on the road to a smooth and on-time closing.
Get All Back-up Ready for your Mortgage Company.
While you were searching for your home your mortgage company most likely provided you with a list of items you will need to give them before you can close.Grab that list and start gathering everything you need.That list will include things like recent tax returns, pay check stubs, identification and recent bank statements.As you gather them get them to the mortgage provider so they can look them over and make sure they are what they need.
Get Your Inspection Done
Most offers can be rescinded in the first few days if something is found to be fundamentally wrong with your future home.A good realtor will have someone they recommend you don’t have to use that inspector, but often times it is good to use someone your realtor is familiar with because they know they can trust them.
No big purchases
Most mortgage companies will require you to have enough money in your bank accounts to cover the down payment as well as a month or two of mortgage payments.Even after you have shown them your recent bank statements it is a good idea not to spend much money because they may ask to look again the day of closing.If you need to purchase something for the new home wait until after closing.
Don’t Use Credit Cards
Don’t use your credit cards for anything until after you are completely closed.Using your credit cards can affect your overall credit score which could lead to your mortgage provider raising tour interest rate or worse.Most mortgage companies will run your credit report the day of the closing to make sure you are still within the window of acceptance.Anything you need should wait until after the closing.
Don’t Take Any New Lines of Credit or Open New Loans
It may be tempting to take a new line of credit to purchase the new floors you need for your new home, but wait until after the closing has been completed.Opening a new line of credit or getting a new installment loan can lower your credit score and also increase your liabilities.Both of which can cause your mortgage company to cancel the loan or raise your interest rates.Anything you need for the new home should wait until you have completed closing.
As with any other business strategy, people that are successful at investing in foreclosures have learned how to navigate the system easily. Expert foreclosure investors make sure all paperwork is filled out correctly and turned in on time.I can’t promise that you will turn into a foreclosure expert by the time you finish reading this article. I can however, give you some tips that will help you become a more savvy foreclosure investor.1.Market Research – Know your area. The first thing you need to know when looking at foreclosure investments is what other houses in the market go for. When you know this information you will know how much to bid at the auction. This will help you to estimate the repair costs better. Knowing this information will also help you prepare for tax time by estimating your profits. 2.Know the Law – Some communities have laws which mandate that a buyer must live in the house for a certain period of time before selling the property. It is important to know if this is the case in the area where you are looking to invest because it will make a big difference in the time and money spent on a foreclosed home. Make sure you consult with a realtor or real estate attorney to verify the laws and rules where you are trying to invest. This will save you a lot of heartache later on down the line.3.Line Up a Buyer – Try to line up a potential buyer before you attempt to secure financing. This will help you speed up the process. This will also make you look more favorable to the banks when you try to apply for a loan.3.Plan Ahead – It can be quite a challenge to keeping a step or three ahead of the game. This is because time frames can change when dealing with foreclosed properties. Each county has different rules. Although it is difficult, having a plan in place every step of the way will help you keep it all together and know exactly what is supposed to happen, and when. This will also let the banks know that you are serious, just like a business plan for a new venture.Investing in foreclosed properties can be a very lucrative way to make money in the real estate industry. As with anything in business, you have to plan in order to be successful. Remember when you fail to plan, you plan to fail. Follow the tips given in this article and you will have a good foundation for building a successful foreclosure investing business.
Experienced real estate investors are extremely organized individuals.While transactions seem procedurally repetitive, investors know that each transaction is unique.What might be a stumbling block with one transaction is not the slightest problem with another transaction.
There are many obstacles that can be thorny to resolve in a short sale.Taking the time to identify potential potholes before negotiations begin can reduce some of the stress but even then there always seems to be one more roadblock that needs attention.
If you have engaged in short sales before, you have some idea what to expect.You also know how important it is to hold the delicate fabric between the lender and the homeowner together.While the lender is calling the shots, you need the homeowner’s cooperation to bring about the sale.
Neither the homeowner nor the lender is likely to pay for any inspections your lender requires, so you should be prepared to meet these obligations.However, one sticky wicket that can be a problem is the commission.To the lender, everything is negotiable, including the listing agent’s commission and the commission to the investor’s agent.
If the lender approved the use of a listing broker, they will pay that commission.If the investor has an agent, the listing agent and selling agent will need to work out their shares.Problems can arise when the listing agent says the listing commission does not cover the investor’s agent.
That can result in the investor paying the selling agent, which can be a significant amount.To avoid this problem, the investor should inquire about the amount of the commission and how it will be distributed before moving forward on the property.
Investors who wait until the closing can be surprised.This is just one of many easily resolved stumbling blocks.By addressing the commission up front, the investor eliminates one problem and keeps everyone working together.
When it comes to commissions, never allow a surprise to erupt.Clear up all the details before making any move on a property.Assuming that because the commission was handled one way in one transaction is a dangerous assumption that can be easily clarified on the front end.
Pre-foreclosure residential short sales can be very profitable ventures.The idea of buying low and selling high has immediate potential in just about every county in the United States.With $1 trillion of REO inventory expected to be back on Fannie Mae and Freddie Mac books and with several billion dollars in REO inventory scheduled to land in the laps of private lenders, short sale opportunities have never been more abundant.
For short sales involving properties backed by Fannie, Freddie or the Veteran’s Administration, the new Home Affordable Foreclosure Alternative Program (HAFA) offers viable opportunities for smooth transactions.A subdivision of the Home Affordable Modification Program, (HAMP), much of the heavy lifting has been performed by the government.
In addition to setting the stage for the investor, HAFA carries some attractive financial payouts for both the buyer and seller.Inasmuch as the selling price and the relocation arrangements are clearly established under HAFA, sellers are often easier to work with than sellers of conventional short sales.
However, successful negotiations with private lenders in pre-foreclosure sales provide solid profit potential. The investor should begin the process by meeting with the seller and establishing the seller’s willingness to stay the course.If the seller is not committed, the investor should move on without hesitation.
Assuming the seller is motivated, the investor then must connect with the lending institution’s short sale contact.All future communication should involve this individual.Each private institution will have its own shirt sale package.
Once the investor has the package, the package should be completed thoroughly.Do not create time gaps.Dot every “i” and cross every “t” before returning the package to the contact.If questions arise, call the contact to get explanations.
When the package is complete and the investor is pre-qualified, the process begins in earnest.At this point, the contact will arrange for the procurement of the Broker’s Price Opinion.The BPO is the main figure in negotiations.The lender will want to sell as close to the price opinion as possible.There is some latitude but not a lot.
The investor must be ready to walk away if the BPO is out of line or does not allow room for profit. That lack of emotion is one of the advantages of being an investor.Use it to your full advantage.
Short sales and foreclosure transactions are in the news.The National Association of Realtors (NAR) says that when buyers had the availability of an $8,000 tax credit, short sales were accounting for at least 30 percent of all real estate activity.
Now that the federal tax credit has expired, short sales will play an even larger part in the overall real estate market. Investors are taking residential short sales more seriously than ever before. Unlike typical residential buyers who intend to reside in the home, today’s investors view the short sale opportunity differently.
Residential short sales present outstanding long-term value.As investment guru, the Oracle of Omaha, Warren Buffett, has said the key to the economic recovery is the reduction of existing inventory in the housing market.The abundance of short sales has created a buyer’s market.
For investors, this is not just an opportunity to acquire distressed housing, rent the housing until demand outweighs supply and then make a profit. This market has far greater potential than that.
The opportunity to acquire distressed upscale housing in a down market is rare indeed.Well-situated residences in highly desirable areas with excellent school systems and today’s new structural amenities are still good investments.
These homes may well have cost $300-$400 per square foot to construct.Now, these homes can be on the short sale market for as little as $200-$250 per square foot or less.Investors who believe the market will stage a comeback in the future like those numbers.
What these investors also know is that the rental market is strong.High-end homes in good school districts have strong rental appeal.The formula is simple; buy low, rent high and sell high down the line.
Of course the investor must find a good tenant, be willing to perform necessary maintenance and be sure the area will be in high demand in five to six years.If investors do their research, they know which areas will be winners.
Just as equity investors know Apple, Goldman Sachs and General Electric will win in the long run, real estate investors know that great locations, excellent school districts and value packed per square foot housing will be in demand when the market stabilizes.Be patient but be sure to be in the right place at the right time!
