Archive | May, 2011

High Gas prices are triggering changes in buyer behavior. Is this change also leading to changes in what appeals to home buyers in Metro Detroit?

19 May

High Gas prices are triggering changes in buyer behavior. Will this change also lead to changes in what appeals to home buyers in Metro Detroit? According to a recent survey by Coldwell Banker, the spike in gas prices is driving more buyers to seek out locations that offer a shorter commute to work and to the places they frequent the most.

The gas prices appear to be playing a factor in the renewed interest in urban living. More than fifty percent of the real estate professionals surveyed are seeing a noticeable increase in buyers that are targeting homes in urban areas, as compared to five years ago. The main reason for the growing trend in urban-area migration was cited for the shorter commute times, short walking distances to more places, and the close proximity to public transportation.

The trend in urban-migration is anticipated to grow along with the growing gas prices. Michigan real estate investors may benefit by becoming more in tune with housing properties in down town regions as valid options for home buyers who may have previously only opted for conventional family style homes in suburban settings.

Source: “Coldwell Banker Real Estate Survey Finds Spike in Gas Prices Is Impacting Where Home Buyers Choose to Live,” MarketWire (May 18, 2011)

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Investing in Bank Owned Properties (REO)

10 May

Many real estate investors focus mainly on buying foreclosures as a means to locate properties with a lot of equity at a discounted price, but purchasing a bank owned, or REO (Real Estate Owned) property can be just as profitable, if not more so. An REO is a property that is returned to the bank, or other lender, after being unsuccessful at the foreclosure auction. Many foreclosed properties don’t receive any bids at the auction because the minimum bid starts out including the loan balance, any accrued interest, and any attorney’s fees or any costs association with the foreclosure process. Since what is owed to the bank is almost always more than what the property is actually worth, very few foreclosure auctions end in a successful sale. Then the property is reverted back to the bank and becomes and REO.

How an REO is Sold

Banks, or other lending institutions, always want to sell a property “as is” if possible. They want to sell the property, but they also want to spend the least amount of money on it as they can get away with. Be sure to include in your offer an inspection contingency period that allows you to terminate the sale if an inspection reveals unanticipated damages that the bank will not fix.

Even though you agree to purchase an REO in “as is” condition, always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll be willing to renegotiate the price in order to save the sale, instead of having to put the property back on the market.

Advantages of Buying an REO

  • All liens against the property are removed once it becomes an REO, and taxes are paid.
  • Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents.
  • During slower markets, you can purchase an REO at a discount to the property’s actual value.
  • Lenders and banks do not like holding REOs, and try to get rid of them as quickly as possible.
  • The bank or lender that owns the property will often offer financing with better deals than they would offer on regular properties.
  • While many foreclosures are often in bad condition, REOs are typically restored to at least a somewhat decent condition by the lending bank.
  • The bank or lender that owns the property will often provide an allowance for certain repairs.
  • REOs will often times include appliances
  • REO properties are easy to find; they are usually listed on your local MLS (multiple listing service), or can be found on your local REO bank’s website.

As with any property, make sure to do your homework before making an offer. Make sure that the price you pay is comparable to other homes in the area, and consider the costs of renovations and repairs. It’s a myth that all foreclosures are a bargain.

Take Advantage of Foreclosure Investing

5 May

It seems that more and more foreclosed properties are popping up all over the place; it’s no secret that the foreclosure market is at an all time high. Opportunities for investing in real estate foreclosures are huge due to the increased volume over the last couple of years, and it appears that this trend will go on as homes continue to face foreclosure.

The foreclosure process contains three stages: pre-foreclosure, foreclosure auction, and bank owned properties or REO. Each stage in the foreclosure process can prove to be extremely profitable to the knowledgeable investor when creative real estate investing techniques are applied.

Pre-Foreclosures with Short Sales

Investing in pre-foreclosures with short sales has never been more profitable than it is today. This type of strategy involves just the real estate investor, the homeowner, and in some cases the lender. Because the homeowner has been delinquent on their mortgage payments, they are now in a position to accept offers made by investors. Short sales allow real estate investors to discount the loan from the lender, often purchasing the property for much less than it’s worth to avoid foreclosure. In addition to enjoying discounts, you can also expect very little competition from other investors when buying pre-foreclosed homes. This is a must-know technique if you want to be competitive in today’s foreclosure market.

Foreclosure Auction

The foreclosure auction can also be a very rewarding place for smart real estate investors. There are huge investment opportunities with discounts as high as 50% market value. When buying foreclosed property from the auction, it’s important to know the steps involved to maximize your profits and to have an overall good experience.

The properties are auctioned off to the public and the highest bidder walks away victorious. This can be very rewarding to those who are in a position to buy the property within a short amount of time, but can also be devastating to those who bid without proper prior financing. Most auctions require a small deposit down of the purchase price on the spot, then the remaining balance usually within 1-30 days. It’s crucial to make sure to have your deposit ready and your financing in order before you bid! If for some reason an investor is unable to get financing within the allotted time, they will most likely lose their down payment along with their auctioned property. Buying foreclosures at the auction is by far the riskiest place to pick up a foreclosure because you are buying the property “as is”. To avoid potentially catastrophic problems, it’s very important for investors to do thorough research before bidding on a property at the foreclosure auction.

Bank Owned Properties or Real Estate Owned (REO)

Bank owned properties, commonly referred to as real estate owned or REO, are one of the most common foreclosure investment practices today. These are homes that have passed through the foreclosure auction without any bids and have now become a bank owned property, or bank foreclosure. Buying foreclosures that are REO primarily involves only the lender. Since lenders don’t want to have excess inventory, they are constantly listing properties that have come back from the foreclosure auction in hopes of selling. Lenders in this situation are very motivated to sell their properties, especially if they have a large number of them to move. These properties are considered to be huge expenses that need to be eliminated, which gives real estate investors several ways to negotiate on a relatively low purchase price.

Be sure to search foreclosure listings for bank owned properties in your area!