Saturday, September 1, 2007

F is for Foreclosure

This entry will have two distinct parts.

Part I

If you are a seller, or thinking about selling because you are in financial trouble, STOP. Examine what you are doing and why. Examine all of your options. Talk to a credit counselor, like CCCS in Atlanta (no experience with them personally, but Clark howard said...). Really examine all of your options. Talk to your lender. Contrary to popular belief, they don't want to own your home, even if the way they act seems to suggest otherwise. Some of the questions you might need to answer are:

Is this a temporary problem, or is there an underlying financial issue that isn't going to go away in a few months?

Can I change my lifestyle and be able to afford my home?

If I do get rid of this house, will I be able to find another place to live?

What other financial issues am I facing?

Now, if after looking at your situation you and your credit counselor feel that selling your house is what needs to be done, do it. And, if you are going to do it, do it right. Make your house presentable. Karma can be a real PITA, so I would recommend not tempting it by being a difficult seller. Keep your home presentable, and make it available. Whether you think all of this is someone else's fault, or feel it is your own, it is the new reality, and you have plenty of company, and plenty of competition.

Part II

If you are a buyer, stop thinking that foreclosure = deal. Especially in the realm of REO (Real Estate Owned, lingo for bank or mortgagor owned properties), there are some real deals, and a lot of terrible ones. And, for either there will likely be a lot of work involved. I have been in a LOT of foreclosure and pre-foreclosure properties here in the Atlanta metro area. There have only been a few that were actual deals. I hope that the situation changes, as it would get investors into the market and get the market warming back up again. But, the reality is still mostly that these properties are often priced near their competition after factoring in deferred maintenance and other needed repairs. In many cases, after factoring additional needs for the properties, they are priced well above the comps.

Get ready to jump through some hoops. Even when they are a deal, some of the REO practices are downright crazy. When "the bank" needs 30 days to respond to an offer, they deserve to not sell the property (side note: There is no excuse for not being able to turn the answer around in 72 hours). In addition, there might be Proof of Funds requirements or special addenda that need to be included with offers. Be ready to follow the instructions to the letter. If they are too crazy, move on.

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