Archive for the ‘Foreclosure’ Category

Why construction building permits are so important

Wednesday, February 1st, 2012

Just a few years ago no one seemed to care if a home improvement or addition was done without permits.  Appraisers are now required to call out differences between square footage on tax records and actual measurements.  If the home has an addition that was done without permits some banks will not lend on the property, others reduce or eliminate the value of the addition.

When you buy a foreclosure permits are even more important because you don’t get any history of what improvements were done or who did the work.  When improvements are done by a homeowner or unskilled worker the results can be disastrous.  I have seen beautiful bathrooms with the marble falling off the shower walls because it was not installed correctly.  This is something you would not be able to see, and likely a home inspector would not be able to find until the damage was obvious.  I have also run into homes that had windows installed without permits and the windows did not have any headers (the beams that support the wall and roof above the window).  The windows in this same house were installed in such a fashion that the walls had no shear (support that would keep the home from falling down in strong winds or mild earthquake).

Electrical work done by homeowners is almost always done incorrectly and creates unsafe wiring and grounding, overloaded circuits, and unprotected wires.

We don’t like getting permits because it cost money, slows down the job, and of course the building inspector will see everything you are doing. Most people feel they are doing a good job and the permits are not necessary but building codes are designed for safety and are not always easy to follow.

If you buy a home that had work done without permits and you start a project with permits it is possible the building inspector will notice the other work that was done and make you get permits for the old work.  Remember, the responsibility follows the home so once you own the home you also own the improvements that were done by prior owners.

Most homes in Marin County are older and I would guess that many, if not most, of them have had work done without the proper permits.  When buying a home a full investigation of its permit history is in order.   Talk to the county or City, look at the permits and if the permit does not have a “final” stamp that means the work was not done or at least not signed off by the building inspector.  Buy the house if you like it but discount your price for work that may need to be redone.

What it’s like buying a Bank Owned Foreclosure

Wednesday, March 30th, 2011

You’ve been looking and finally found the house you want to buy and it is a foreclosure, also known as an REO (Real Estate Owned –“by a bank”).  Usually these are considered a good deal, at least they typically are priced a little below the going rate.

Here is what you need to know.  There are no disclosures, nothing telling you the next door neighbors might be noisy or maybe water leaks under the house in heavy rains.  There are reasons for this; the bank has never lived in the house so they don’t know anything about it.  The former owners that got foreclosed on are not anxious to help the bank sell the house.  Also, those owners might make the house look better or worse than it is just to “get back at the bank”.  All this means you better do your homework and get inspections so you know what you are getting into.

When you write an offer on a foreclosure it may take several days for the bank to let you know if your offer is accepted, we are talking bankers’ hours.  Most of the larger banks with counter your offer, even if they like your price, with an addendum that turns the whole purchase contract in their favor.  For example, in a typical purchase contract you might have 17 days to do your inspections and if you don’t expressly remove the Inspection Contingency you can get out of the contract without losing your deposit.   The banks addendum changes that so if you don’t remove your Inspection Contingency by the given date it is assumed everything is okay and you are stuck in the contract.  Not only that but they usually give you just 5 to 7 days to complete inspections.

I suppose we could live with the shorter timeline and passive removal of contingencies except it is usually not clear when your timeline starts.  This is because when the bank counters your offer with their addendum they may sign it one day and you don’t receive it for several days after that.  Usually that would not be a problem but the bank form might say the start date is when it is signed by the bank.  At this point I can’t guarantee my clients what the real start day of the contract is so we have to go conservative and assume it starts when the bank signs it.  That can take our 7 day inspection period down to just a few days or worse if it is Friday or a long weekend.  No problem, right?  All we need to do it issue an addendum asking for more time for our inspections.   The listing agent will say okay and send it to the REO bank.  Problem is the bank never signs the extension but you are told it is okay.  We all know everything in real estate has to be in writing but we can’t get the bank to sign anything.  I have to say, so far, the banks have been honorable with their word but who wants to be there when they aren’t.

If a buyer get emotional in a multiple offer situation they may offer more than they wanted once all the dust settles.   No problem for the bank, their addendum takes care of that for them.  If you want the deal they make you sign a form that says if the home appraises for less that your offer you will still go through with the deal and make up the difference with a larger down payment.

Regardless of all these problems with buying a bank owned foreclosure, REO, it likely will still be less frustrating that buying a Short Sale…

Warren Carreiro

More Home Loan Problems

Tuesday, November 16th, 2010

Getting loan approval is only half the battle.  Sure you need to have verifiable income and a down payment but even with that is does not necessarily mean you can get loan approval for the home you want.  Why, because the home you choose has to be approved by the bank as well.

Appraisers are often asked to make note of any of the following issues when appraising a home:

1)      Peeling paint

2)      Missing appliances

3)      Heat or hot water issues.

4)      Additions or improvements done without permits

5)      Major fixers

One of the newer issues is banks asking appraisers to make note of improvements done without permits.  Because most the homes in Marin are older it is not uncommon, over time, for something to be done without the benefits of permits.  Some banks do not want to lend on those homes unless the permit problems are resolved.  Usually something can be worked out with the city, if the seller has the time and money to get retroactive permits.  Historically, unpermitted remodel projects did not cause a problem with loans, maybe with the City but not with your lender.

Often REO (foreclosures) and Short Sale homes have deferred maintenance and in some cases have been trashed.  If it in very bad condition most banks will not lend on the property which often means cash investors are the only buyers.

Home Sales PLUNGE: Not for Marin

Tuesday, August 24th, 2010

It is all over the news this morning; home sales PLUNGE to levels not seen in 15 years.  While this may be true nationwide the saying “real estate is local” definitely applies to Marin.  Sure we have taken our hit on prices and sales and I do feel badly for those homeowners that are underwater or have lost their homes to foreclosure, however, our sales did not plunge in July.

According to the report on Huffington Post sales nationwide are down 27% from last July.  In Marin sales were down 3% from last July.  Year-to-date sales of Marin County Real Estate are up 21% compared to 2009.  The Marin median price is also up 5% so far this year.

Even Belvedere which has a high number of listings (47), with only 2 in contract, and believe me those numbers yell OVERPRICED, is doing better than last year.  So far this year there have been 18 sales compared to 13 for the same period last year.  The median price is down to $808 per square foot from $941 but because it is such a small town with few sales the statistically base is too small to mean much.

Warren Carreiro, Broker

Put Short Sales at the bottom of your list

Friday, November 20th, 2009

When looking for a new home put Short Sales at the bottom of your list. The reason most Short Sales fall out of escrow is the buyers get tired of waiting for the bank to accept their offer. In most cases it takes months for the Short Sale bank to respond to your offer and then you might find out they want to counter with a higher price.  Or perhaps you have waited several months for the bank to respond they at the last minute a new buyer comes in with a higher offer than yours.  At the very least I hope you keep looking for another “perfect” home while waiting for the bank to respond, and no, it is not legal to write offers on several Short Sales and take the first one that is approved (unless you disclose your intent on all offers).

Maybe everything goes along perfect, the bank accepts your offer and then you find out the sellers have changed their mind.  Rather than go through with the Short Sale they will let the bank foreclose and live in the house for several more months without paying their mortgage.

Speaking of waiting, did you realize that you don’t lock your loan rate until the bank accepts your offer?  This means you may write your offer when rates are in the 4% range and by the time the bank accepts your offer rates may have gone up close to 6%.

Don’t think you are getting a better price on a Short Sale either.  Many times the bank will list the home for a lower price as an REO (foreclosed home) than a Short Sale offer they refused.

Short Sale Creates Large Drop in Credit Score

Friday, September 18th, 2009

According to an article published in the Los Angeles Times, a Short Sale can hit your credit rating up to 130 points according to researchers at VantageScore. While this is a big hit there are several advantages to a Short Sale over letting your home foreclose. Typically owners that sell their home short have missed several months of mortgage payments and that is usually what affects your credit. The actual formulas for calculating credit scores are kept secret but typically you can get a new home loan in less than three years after a short sale.

If the bank forecloses on your home your credit rating can take a hit of up to 150 points and the record of foreclosure can stay on your credit report for seven years.

For those that choose Bankruptcy look for a credit drop of well over 300 points and ten years on your credit report.

To read the full story click on this link.

So you want a foreclosure?

Monday, June 29th, 2009

Buying a foreclosure is for the pros with a big checkbook. In Marin a “real” foreclosure is literally sold on the steps of the courthouse on Fifth Avenue in San Rafael. The buyers have several denominations of Cashers Checks that add up to the maximum they will pay. They bid against each other and the bank that holds the loan on the house and is foreclosing on it. The bank has the upper hand because they don’t have to write a check unless the bidding goes over the loan amount.

You will be bidding on a house you likely have not seen on the inside. No bank will lend you money until you buy the home. This is a cash transaction that does not come with title insurance.

When you hear someone say they bought a foreclosure that usually means they purchased a home that has already been foreclosed on by the lender. They are known as REO’s, which stands for Real Estate Owned (by the bank). When buying an REO the paperwork sucks. Banks expect buyers to start their inspection and financing timelines without so much as a signed offer acceptance from the bank. In many cases the acceptance of the offer is conveyed to the buyer verbally. As you know, in real estate verbal does not cut it, the law requires everything in writing. But as long as you are getting a good deal are you really going to fight with the bank that selling the house?

Homes are also sold in pre-foreclosure status which may mean the seller had a notice of default (they are late in mortgage payments) or it is a short sale. In a short sale the seller gets the bank to agree to sell the home for less than the amount owed.

Warren Carreiro