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

Ghost Towns in Marin County

Saturday, August 2nd, 2008

The August 2, 2008 edition of the Wall Street Journal has a front-page article about ghost towns throughout America. The ghost towns are largely a result of unfinished subdivisions. Many of these subdivisions remain a half filled with for sale signs outnumbering occupied properties. Many of the projects have been abandoned by their developers with little hope of being completed in the near future.

The story features a couple who won a rent-free, for five years, with an option to purchase a home at the end of the term for $452,000. I suppose this could turn out to be a great deal for the lucky renters if they don’t mind what can a weed filled yards for the next couple of years. Most of these ghost towns are in areas that had extraordinarily high development of new homes. Conversely, Marin County had very little development in the preceding five years. Most of the development that did occur was in Novato and not surprisingly Novato has experienced the largest reduction in prices in Marin County during the current housing market.

Most of Marin County is designated open-space which prohibits the development of new housing tracts and this remains one reason that Marin County pricing has weathered the current market downturn better than other counties and states. While Marin counties foreclosure rate has increased dramatically it is still significantly below the statewide average. There are very few abandoned properties in Marin County and those that have been abandoned are usually quickly resold by the banks.

If you are looking for one of those funky Western ghost towns I suggest you drive outside of Marin County.

Do not refinance your home!

Tuesday, December 4th, 2007

 If you are up-side-down on your home (owe more than it is worth) and are considering foreclosure or a short sale you need to know the ramification each option has.

If you purchased your California home in the past couple of years with 100% financing and the home is worth less than your purchase price foreclosure may be your best option.  This may also only be true if you have NOT refinanced your home.  You see, in California, in a foreclosure the bank has no recourse on your assets beyond your home (original purchase money only- does not apply to refinanced property).  So if you want to walk from the house -give it back to the bank, the hit you take is on your credit rating for seven years.

Option 2 might be to sell your property and ask the bank to forgive the difference between your loan and sells price.  Even if the bank will not forgive you the difference this is called a short sale.  In a short sale your credit is not hit as bad as a foreclosure.  However, the bank will likely come after your other assets AND (this is a big one) the IRS will tax you on any amount forgiven by your lender.  Don’t forget when the IRS wants your money they get it.

If you want to refinance your property to keep the payments low that will be hard to do at 100% financing and it may take away the best foreclosure on original purchase money has to offer.

Because this subject has such legal and financial ramifications if this article applies to your situation get professional legal (attorney) and financial (CPA) advice.
Warren Carreiro