Remember When REO Used to be a Rock Band?

In the early 1980’s, when someone was talking about REO they probably meant REO Speedwagon not a home owned by a bank. Yep, back in the day when many of my friends and relatives were buying their first house, few thought a foreclosure home was a good deal. There was a section in the paper at the time for HUD homes. They were all dumps in the minds of buyers. It was deemed “too risky” to buy a bank owned home. Better to leave those houses for an investor.

In 1981 when REO (the band) was tearing up the charts with the now oldie but goodie rock tune, “Keep on Lovin’ You”, interest rates were 17%. That’s not a typo…Seven-TEEN percent! Geez…it’s a wonder anyone bought a house in the 1980’s!

Back in the days of big hair and parachute pants, first time buyers had to scrimp on hairspray to save for a down payment AND closing costs. Sellers might pay a point or two to help bring down the interest rate but they rarely wanted to pay closing costs AND points. So a first time buyer needed to have thousands to put down on their first home.

There was no internet back then either so with REO belting out “Take it on the Run” on the cassette player, buyers would traipse around town with the Sunday open house ads looking to find a home. When they stopped in to talk to a friendly REALTOR®, there was no required agency disclosure. The buyers were supposed to instinctively know that the agent worked for the seller. Almost all agents were under contract to work in the best interest of the seller in those days no matter how nice the agent seemed to treat the buyer.

And believe it or not, despite all the cards stacked against them, many, many people bought their first homes in the early 80’s—It was the American Dream after all!

FLASH FORWARD to TODAY
When someone is talking REO now, they are more than likely talking about Real Estate Owned by a bank. These foreclosed homes are no longer thought of as dumps for investors to deal with; they are opportunities. These homes are sold as-is but many are in amazing condition and at tens of thousands less than the homes sold for just a year or two ago. Some homes are even new construction.

Can you say affordability? It is off the charts when you consider a foreclosed home! Check out this video which explains the 239% Affordability Index currently in the Twin Cities. (The music isn’t rock, but the information rocks!)

Today, interest rates continue to hover around 5%. FIVE percent guys…Your parents, aunts and uncles signed documents agreeing to over 300% more than the rate available in this market. What an opportunity for a buyer today!

In this internet age, first time buyers can prescreen houses online with photos, virtual tours and more. Less driving and more time viewing the homes you really want to see!

Now first time buyers are in the driver’s seat when it comes to representation too. You can hire a REALTOR® to represent your interests—Usually at no cost too! Since the early 1990’s, buyer’s representation has become a wonderful opportunity for home buyers to hire an agent to represent their interests. The seller still pays a commission which is split by both agents so there is no additional cost to have your own agent working for YOU!

And in 2009, first time buyers get an unprecedented $8000 tax credit to boot! This program isn’t going to last forever but if a first time home buyer (or someone who hasn’t owned a home in the last three years) buys a home between January 1, 2009 and November 30, 2009, they will get an $8000 credit on their taxes. There are a few details and restrictions (read more here) but most first time buyers will get to take advantage of this program.

First Time Buyers! What are you waiting for?

If you are the fence about buying your first home, thinking their might be a better opportunity coming, think again! This is a great time to be a first time home buyer. People who bought homes in the early 1980’s did okay even with all the disadvantages they faced. First time home buyers today have opportunities only dreamed of when REO was on the Top 40 charts. Don’t miss out…It won’t be long before your best chance at the American Dream is just a retro memory!

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Copyright 2009 Teri Eckholm http://www.terieckholm.com/

Anoka County Tax Forfeited Properties Available Online

Did you know that you can see the properties that have been forfeited to Anoka County and available for sale right on the Anoka County website?

Currently there are three properties available in communities spanning the county. One is to the north in Linwood, while another is located in the south community of Fridley and then to the west in Coon Rapids. The site features links to both plat maps and aerial views.

Homes are sold with a sealed bid system. Complete instructions on how to properly submit a bid are posted. 

Copyright 2009 terieckholm.com

Foreclosure Disclosure in Minnesota—Despite Regulations, It is Still Buyer Beware!

Wise men say; only fools rush in…Wait a sec. I know that classic song is about falling in love. But since many home buyers do “fall in love” with a home and become a bit foolish, it applies.

A few weeks ago, I was with a couple who went a bit gaga over a bank-owned foreclosure listed by one of those agents specializing in REO homes. I’ll admit, this was an amazing home: Nice floor plan….Picture perfect condition…Terrific View…And a “just reduced” price tag that put the home in the category of phenomenal deal!

These buyers were not first time buyers, having bought and sold several times before, my clients were a bit savvy and wanted to write an offer on the spot. As their buyer’s representative, I advised them that the instructions from the listing agent required any interested parties email for instructions on how to write the offer. Offers not following the specific instructions would not be presented or accepted.

I sent off the email to the listing agent and momentarily received a return email with a 15 pages attachment with step-by-step instructions as to how the buyer’s agent was to fill out the purchase agreement so buyers could, among other things, sign away all of their rights to disclosures.

Some of the instructions were just plain crazy! For instance, the buyer could inspect the home but not turn on the water if the home has been winterized. How can a home be properly inspected without water? This home was on city water and sewer, but had the home had been on a private sewer system with a well, we are talking about some big ticket, critical components of a property, without a disclosure or ability to inspect.

As it turned out, I didn’t have to write an offer for this particular REO home. I did not have to explain to my clients how all the restrictions for an acceptable offer on this home would be slanted totally in the banks favor while put them as buyers at serious risk . Paraphrasing another musical classic, “you can’t always get what you want but sometimes you get what you need”; we received an email that another offer had been accepted. It was a solid, cash offer and no backups were being accepted.

Long story short…First priority was finding my disappointed buyers another home. My philosophy: There is ALWAYS another home. And sometimes the second home is much better. Within days, another better home was found.

But for me, the memory of the 15 pages of instruction manual remained. In fact, this was so alarming to me I kept the printout. I have sold other foreclosed homes where the agent did not spoon-feed the directions on how to write the purchase agreement. In other cases, the buyers requested the water be turned on prior to the inspection contingency timeframe counting. As my buyer’s representative, I discussed the specific terms as we wrote up the agreement and though a few standard instructions were indicated, like a special warranty deed is required and personal property cannot be part of the agreement, it is not always required with a litany of instructions to completely slant the sale to where the buyer must take an incredible risk.

Since 2002 there has been a mandatory seller’s disclosure statement in Minnesota requiring sellers to share all pertinent information to buyers of a home. The disclosure must be made in good faith and include all material facts pertaining to the adverse physical condition of which the sellers are aware that could adversely and significantly affect an ordinary purchaser’s use and enjoyment of the property and any intended use of the property which the seller is aware. The law does provide alternatives to the disclosure for those sellers who have not lived at the property like when the home is bank owned or is part of an estate. Sellers can have an inspector view the home and provide a written report of the condition. Or they can ask a buyer to sign a waiver that says the seller is unaware of the condition of the property and that they buyers waive their rights to the disclosure.

When buying an REO or bank owned home a buyer must be prepared to waive their rights to disclosures.

There are additional federal, state and municipal laws that require sellers to disclose the condition of the property prior to the purchase agreement. Homes built prior to 1978 require a lead based paint disclosure. The existence and condition of wells and private sewer or septic systems must be disclosed in Minnesota. Some septic systems will require additional inspections at a county or local level. Also it must be disclosed if the home has ever been used in the production of methamphetamine. It is important for a buyer to understand they have rights and to be very careful when waiving them away. It may not be the best decision to buy a foreclosed home without the assistance of an experienced professional REALTOR representing your interests. As tempting as it may be to buy that “picture perfect” home at the amazing price, it could end up costing thousands more without proper disclosures and inspections.

Copyright 2009 terieckholm.com

Foreclosures! Not Just for Investors Anymore…First Time Buyers also get DEALS!

This past spring I asked readers if they were ready to take on the challenge of buying a foreclosure or short sale home. Test Yourself--See If YOU are Ready to buy a Foreclosed Home! was a tongue-in-cheek look at the average homebuyer purchasing a pre-foreclosure or bank owned property. I have thought of that post often in the past few months …At the time, I was seeing overpriced pre-foreclosures and trashed REO houses, in many cases buyers were better negotiating with traditional sellers for their dream homes. But, as they say, that was then and this is now. NOW, I think it is time to take a serious look at foreclosure properties.

In the past few weeks, I had the opportunity to visit several dozen bank owned properties in the $100,000 to $150,000 price range throughout Anoka County. Though several were trashed, my buyers and I were pleasantly surprised to find many REO homes in move-in condition. The fear of AS-IS purchasing was still a concern, but not so dramatic as when the homes literally had holes where the appliances should have been.

Now, I am finding tremendous deals on bank-owned homes throughout the north and east metro on a daily basis. Many properties are going back to the bank in extremely good condition and being put back on the market quickly and at unbelievably affordable pricing.

So what do you need to know if considering purchasing a foreclosed home? Here are a few key points to consider….

Understand the difference between short sale and REO. A short sale or pre-foreclosure is a home where the seller is selling but owes more to the bank than the home is worth. A REO property has been returned to the bank and is now bank-owned.

In a short sale, the seller lists the home on the multiple listing service, MLS, for what they believe the home to be worth even if the list price is less than they owe. When an offer is received on the property, the bank is sent the offer for approval as they will have to write off thousands of dollars to attract a buyer. It can take months to receive an answer from a bank (or banks if there is a second or third mortgage on the home) and the answer is not always positive.

I recommend to most buyers that it is better to keep looking at other properties and wait and see if a particular short sale home goes back to the bank. If it becomes an REO property, it is usually relisted at a much lower price. Because the bank now knows exactly what it wants for the home and only one bank or division of a bank is involved, answers come much more quickly; usually within days, if not hours. This is a much smoother process.

Get Representation. Dealing directly with the bank is extremely risky. If you are going to be looking at foreclosures, find an agent you trust and sign a buyer’s representation contract. Then that REALTOR is working for you! When I represent a buyer, it costs nothing to that buyer because my commission is paid for by the seller. I can help a buyer understand if the list price by the bank is a fair price for the property and in its current condition.

When you find that perfect foreclosure, I, as your agent, assist you in putting together the best offer for the situation and negotiate on your behalf. Good homes are seeing multiple offers. If you find an almost perfect foreclosure, chances are several other buyers will like the home too. In November, I wrote offers on three move-in condition foreclosed homes. All three had multiple offers just days after the home listed. A listing agent is working for the bank. Don’t you think you deserve to have a professional REALTOR working directly for you?

Get Ready to Waive Goodbye to your Right to a Disclosure. Minnesota requires that the seller of a home disclose all known defects to the property. Most banks will require you to sign a seller’s alternative to the disclosure where you will waive your rights to receiving a homeowner’s disclosure. This is not negotiable as the bank representative did not live at the home and does not have any way of knowing the condition of the property.

Inspections are Critical. Buying a foreclosed home means buying a home in AS-IS condition. That means the bank will not warranty that anything in the home is working and will not make repairs to any part of the home. A complete home inspection is designed to give you a picture of the current condition of the property and if any major repairs will be required to make the home habitable.

Rethink a Home Warranty. Many buyers do not want to spend the additional dollars on a home warranty. However in the case of an as-is purchase from a bank or other corporate-owned property it could be a smart investment for that first year. If something is missed at the inspection or is not visible, a home warranty might be able to cover the defect. For example, central air conditioning cannot be tested during a Minnesota winter so come spring, you might find your home full of hot air and no blower to help you cool down. Most home warranties will cover central air conditioning.

Don’t Overlook Traditional Sellers. Homes being sold by a traditional home seller in this market are in most cases priced to sell! This is good news for FHA and VA buyers as many foreclosed homes will not qualify for these programs due to the poor condition of most properties. Sellers understand they are competing with banks that have only a financial not emotional interest in the property. So homeowners needing to sell have to check their emotions at the door and price their home accordingly. A lovingly maintained property with a full disclosure at a rock bottom price could still be the best deal for a buyer.

If you are buying, selling or relocating to Minnesota and need help from a professional REALTOR®, give me a call or visit my website for a FREE Relocation Packet or Homebuyers Success Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

Buying a Home? Check out my new HOME BUYER'S BLOG!

Copyright 2008 terieckholm.com

FREE List of Twin Cities Foreclosed Homes in North and East Metro!

In the past few weeks I have noticed many people doing internet searches for a resource for lists of bank owned homes. With the volume of new foreclosures coming onto the market, there will be more buyers specifically interested in these types of properties. Whether you are an investor or first time homebuyer, obtaining a listing of current foreclosures to meet your needs can be time consuming when searching through listings on many of the current internet sites.


Let me help you cut through the redtape. Get a specific list of all the foreclosed and REO properties currently listed on the MLS from me with no obligation. Complete the form below and add your detailed criteria and I will set up a quick MLS search and email the list to with your specific properties for FREE.


In the open area specify what you are looking for in a home including:

• BEDROOMS


• BATHROOMS


• SCHOOL DISTRICT


• TOWNS/CITIES


• ACRES


• LAKESHORE


• PRICE RANGE

There is no obligation for this service. I email the list one time and will only contact you further if you request an additional list or more information.




If you are buying, selling or relocating to Minnesota and need help from a professional REALTOR®, give me a call or visit my website for a FREE Relocation Packet. I specialize in acreage and lakeshore properties in the north and east Twin Cities metro area including Ham Lake, Lino Lakes and all communities in the Forest Lake School District! Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.

Copyright 2008 terieckholm.com