Revamped Foreclosure Alternatives—Can the Buyer Pay Back the Money?

Simple question. Granted, had it been asked when many initial loans were taken out and the answer acted responsibly on, we might not be in the mortgage mess that our economy finds itself today. It seems the question is being finally being asked again. Not only to new borrowers, but a modified question, “HOW can the buyer pay back the money?”, is being asked to assist homeowners at risk of foreclosure.

Earlier this week, I read a Newsweek article posted by Daniel McGinn, Focusing on Foreclosures. In the article, McGinn discusses how after the summer takeover of IndyMac, the FDIC introduced a loan modification program that looks at a homeowner’s current situation and what they are able to pay first, then tweaks the loan to keep the homeowner in their house. Note they first look at what the homeowner can pay. Then using a standard formula, they try to set up a payment that will not exceed that amount. This starts by lowering the interest rate or extending the length of the loan. If that doesn’t work, the principle of the loan could be decreased.

While this does cause a loss to the bank on the books, it is in many cases a much lower lost than the cost of foreclosing on the home. And as most people now realize, the total impact of the loss is not just for the bank, many others are affected starting with the homeowner and extending throughout the community.

Finally, things are starting to snowball in a good way. Early yesterday, Citibank announced an expanded moratorium on foreclosures. By the afternoon, the FHFA was announcing an expanded Fannie Mae/Freddie Mac program to keep more people in their homes by reducing there payments to not more than 38% of their gross monthly income. 

While questions the logic of the bailout continue to swirl, I do think banks working to keep homeowners in their houses on affordable payment schedules does make sense. Too bad this simple question wasn’t asked sooner and consistently.
CLICK HERE for additional information on HUD Foreclosure Assistance.

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.

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

Copyright 2008 terieckholm.com

Think You are Ready to Buy a Foreclosed Home?—Take the Quiz!

As a Realtor working in this changed Twin Cities real estate market, I get lots of questions:

• “Is it REALLY a good time to buy a home?”


• “With all the foreclosures, there must be some awesome deals?”


• “What does mean when an offer requires bank approval’?”

The media has lead many first time buyers and investors into believing buying a foreclosure or pre-foreclosure home is a great deal. So I get the questions. Potential buyers and those on the fence often want my expert opinion if buying a foreclosed home is a good idea. Well, my answer is it all depends on the buyer.

There are awesome deals on homes throughout Anoka County. Some of these properties are foreclosures or bank-owned. Others are short sale or upside-down, where the homeowner owes more for the home than the average buyer in the market place will now pay for the property. And then there is the traditional seller or builder who has the controlling ownership of the home, is ready to negotiate and move on to their next home.

Before you jump into buying a home in the changed Twin Cities real estate market, how do you know what type of property makes the most sense for you to buy? Face it—It is hard to pass up the very attractive, low prices on foreclosed and short sale listings. But not everyone has the stomach to handle the roller-coaster ride that accompanies the purchase of these homes. So, I created a 10 question true/false quiz to help you decide what might be your best option.

Is A Foreclosure or Short Sale Home for Me?

1. My ability to deal with household emergencies and repairs is limited to picking up the Yellow Pages and having a consult with Dex.


2. I have a huge rainy day fund and don’t know what it means to live on the edge from paycheck to paycheck.


3. I cheer for the banker in Deal or No Deal.


4. I expect empathy from the seller not apathy.


5. I have the patience of a saint.


6. I love my in-laws and vice versa that my entire family including the dog and two cats are welcome to live in their home for months on end while the deal goes through and the home is made habitable.


7. I will be purchasing my dream home.


8. I have expert knowledge in all areas of home construction and/or can afford to hire experts for inspecting the property prior to closing.


9. I need to be assured that my family won’t be exposed to lead paint, toxic mold, radon, failed septic systems, contaminated well water, rodents, insects and dirt.


10. This is the biggest personal investment of my life.

So how did you do? Are YOU ready to buy a bank-owned or upside-down property?
Question 1--False. If you answered true here, you might prefer to stick to the traditional seller. Foreclosed and short sale homes are not always in the best repair as the previous owners did not have the funds or desire to keep them in good condition. Paying out of pocket to hire contractors for every little repair can be cost prohibitive.
Question 2--True. If you truly have a considerable nest egg that can be invested in the known and unknown repairs of a foreclosed or short sale home, then it could be worth the risk. However if your budget can not withstand unexpected repairs, you might want to have a better understanding of the home you are buying with a complete seller disclosure and try to negotiate a home warranty with a traditional seller.
Question 3--True. Obviously a true on this one is an indication of a foreclosure and/or short sale buyer. You understand your purchase is just business to the banker. You are in it for the investment and feelings do not enter into the equation.
Question 4--False. Anyone who expects empathy from the seller needs to avoid short sales and foreclosure homes. The banks do not care about your family, your needs or your life. It is strictly a business transaction.
Question 5--True. If you don't believe patience is a virtue and answered false here, don’t even consider a short sale. Most transactions will take a minimum of 8 weeks for the purchase agreement that has been accepted by the seller to be reviewed by the bank. And when the bank finally reviews the agreement, then the negotiation begins. This process can take literally months!
Question 6--True. If your answer is false and your in-laws become out-laws after a day of togetherness, avoid the short sale or foreclosure scenario or find alternative housing prior to submitting your offer. Banks don’t accept contingent offers so if your current home sells and you put in that offer to the bank, your current property can close long before even getting an answer from the bank. Traditional sellers are much more flexible with timing as they are usually in a similar situation an can empathize with the buyers.
Question 7--False. In the best case scenario, the foreclosure/short sale buyer is purchasing a property not a dream. Dreams can become nightmares when buying an AS-IS foreclosure or short sale home. If you are not looking at the property as an investment devoid of emotions, stick with the traditional seller situation.
Question 8--True. If you cannot answer true to this question, be prepared to fork over hundreds of dollars for inspections on the home prior to purchasing it. Inspections and testing can cost into the thousands if the home is on a private well and/or sewer system, if there has been water intrusion/mold or if the home’s age indicates the possibility of lead or asbestos.
Question 9--False. If you need assurances about the condition of the home, stick with the traditional seller. In Minnesota homeowners are required to provide disclosures. Some inspection costs can be negotiated into a purchase agreement with a traditional seller like the well and/or septic system. Banks rarely pay for any type of inspection and buyers are often asked to agree to purchase the home AS-IS and waive their rights to a disclosure.
Question 10--False. If you answered true and this is the biggest investment of your life, as it is for many first time buyers or owner occupied residences, maybe a traditional purchase would make more sense in the long run. First time investors need to heed this warning and give careful consideration to foreclosures and short sales too. Until you can say, it is just another property and you don’t have your heart and sole tied to the investment, it might be more prudent to choose the investment with the least risk.

All kidding aside, these are serious questions to contemplate. Buying a bank owned property is not the right choice for the average buyer. Dealing with a corporation where a home is just numbers on a balance sheet can be frustrating. Buying a dream shouldn’t be a nightmare. The buyer alone is the only one who can decide whether buying a home that requires a bank approval is worth the risk, frustration and effort.

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Featured Ham Lake Listing--An awesome deal that is NOT a short sale or in foreclosure!

15139 E Vermillion Circle NE, Ham Lake, MN 55304

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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

Fearing Foreclosure in Anoka County? Help and Hope is Just a Phone Call or Click Away!

Homeowners fearing foreclosure who live in Anoka County have several options for assistance. Help can be a call, click or workshop away!

The Foreclosure Prevention Hotline directs calls to a certified mortgage prevention foreclosure specialist. Calls are returned on business days usually within 24 hours. This financial counseling has been made available through the Anoka County Community Action Program and is designed to help homeowners stay in their homes.
Foreclosure Prevention Hotline 763-783-4880
The Homeownership Preservation Foundation is another organization designed to help homeowners needing financial counseling information. This free program is available on a 24/7 basis.
Homeownership Preservation Hotline: 1-888-995-HOPE
Homeownership Preservation Website: www.995hope.org

Attend a FREE Foreclosure Prevention Workshop. Anoka Technical College will be hosting an open house workshop on May 13 to provide information and assistance to Anoka County residents fearing losing their homes. The workshop will provide information on the process of foreclosure, owner’s rights and possible solutions. The information and assistance will be free and confidential. The open house presentation is a drop-in format allowing participants to come in anytime from 4:30pm to 7:30pm.

Visit the Home Ownership Center Website at www.hocmn.org for additional information.

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

Anoka County Foreclosures Rate Highest in Metro—How Does this Affect Homeowners?

Another housing report and more bad news; foreclosures are up in Anoka County. In fact, Anoka County ranks in first place in the 13 county metro area for foreclosures at 1.57% according to article by Paul Levy on StarTribune.com, Housing Crisis Hits Hardest in Anoka County. Does this come as a surprise?

Maybe for some, but there are some factors that could help explain. Anoka County is one of the largest counties in the metro with a southern border to Hennepin County where the foreclosure rate has been on the rise for many months. Add this to the housing development explosion all over Anoka County in the past 5 years in communities like Andover, Lino Lakes and Blaine. During this time period, many first time homebuyers took advantage of the zero down programs and adjustable rate financing to maximize purchasing power and possibly purchasing more than they could afford. With balloon payments coming due on these programs, rates rising and property values stagnant or in some cases falling, there is no refinancing safety net. Foreclosure is the ONLY option for those who are over extended.

So how will high foreclosure rate affect the property values of other homeowners in Anoka County?

Two factors give this situation a little more perspective:

1. Real estate is local and Anoka County is a BIG county.


2. The foreclosure rate less than 2% means that 98% of homes are NOT in foreclosure.

Sounds a little better right? Before we get too excited, we have to remember that some specific communities may be hit hard. If you live in a neighborhood where several of the homes are in the foreclosure process, if will probably have a negative affect on the value of your home. Families facing foreclosure often do not have the funds to keep up their homes so when the foreclosure process is complete, the bank has to sell at a discount to find a buyer. Banks don’t give away these homes so property values won’t plummet but they are not getting top dollar either.

If you don’t have to move over the next three to five years, you should be okay as this downturn should balance out in time. However if you need to sell your home this year, it is more important than ever to have good expert advise from someone who knows the community where you live.

Understanding and assessing the neighboring property values and positioning your home to compete with foreclosed homes for sale will take knowledge and expertise of a Realtor who works to sell homes in your specific community every day.

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

Foreclosure Disclosure—Do I Really Need An Inspection?

The local news investigators recently did a story on foreclosed homes that banks are putting on the market in the Twin Cities area. The story had an ominous tone. The reporter visited a home with a hidden camera in tow posing as a potential buyer. Questions were asked about the condition of the home and regarding disclosures available. This particular home did have evidence of a mold problem, dark spots on a sheet rocked wall. A few days later, the reporter returned to the home and the area with the mold had been repainted.

The angle of the story in the voice over was that in Minnesota there is a “loophole” where banks and other financial entities would not have to fill out a disclosure form that is required to be completed by all other home owners in the state. The reporter indicated that a new buyer would not be aware of the painted-over mold. She had a home inspector with her as an expert who said that it was his opinion that the law is flawed; financial institutions should be required to provide potential buyers with a report from an independent licensed inspector.

Though interesting to watch, there were many inaccuracies in this investigation. True, the state of Minnesota does not require financial institutions to provide a disclosure. But I don’t think this is a “loophole”. When the reporter first visited the home posing as a potential buyer, she was shown the home by the listing agent. The listing agent is working for the seller. Since the news reporter was trying to make a point about disclosure, it may have been cut out where the agent recommends that the buyer get an independent inspection. When under contract as a listing agent, the agent is working for the seller not a buyer but still must disclose any known information about the property. Although on the return trip, the wall was bleached and repainted, that does not mean that the agent wasn’t informing potential buyers of the situation.

Buyers considering foreclosed properties must go into these homes with their eyes wide open! The best advice is for buyers to sign a buyer’s representation agreement with an agent prior to visiting any listings. Your agent will advise an independent inspector on all properties, not just foreclosed homes, because the average homeowner may not be aware of all defects in their own property. Most listing agents on foreclosed homes will recommend an independent inspector as well. The reporter did say that the agent had done nothing wrong so they did not show his face. This makes me wonder if the agent had been explaining why inspections are necessary.

Most foreclosed homes have notices posted in the MLS and at the home to “Get an Inspection”. This inspector when hired by the buyer walks through the entire home with the buyer in a systematic two-three hour process explaining the defects and potential problems and repairs of the home. The buyer has an in-depth understanding of the property they are buying. If the state had required that financial institutions provide inspections, many buyers might forego having an independent inspection.

The current real estate market includes many foreclosed, bank owned homes. These properties can be a great investment resource or “fixer-upper” first home. But buyers must be smart. Smart buyers with have their own representation and hire their own independent inspectors. On a purchase this big, you owe it to yourself not to take someone’s word for the property’s condition.

If you are relocating to Minnesota, are looking for Homes for Sale in the north and east Twin Cities metro area and need help from a professional Realtor, give me a call. Serving Anoka, Chisago, Ramsey and Washington Counties in Minnesota.


Copyright 2007

terieckholm.com

Fearing Foreclosure? There may be help available.

Foreclosure is sadly, not as uncommon as it was in years past. The influx of ARM's and zero down financing and refinancing has put many a homeowner into this financial situation.

There is help out there for families facing foreclosure. The Foreclosure Prevention Hotline is an initiative to help those experiencing issues with their mortgages.
This is a service being managed by the Homeownership Preservation Foundation and employs 4 different credit counseling agencies to provide free counseling for consumers--all are HUD certified and have been trained in housing and credit counseling. The counselors can also act as a facilitator between the
consumer and the lender.

For additional information call 1-888-995-HOPE or check out their informative website at http://www.hpfonline.org