After selling hundreds of REO properties through the years, I constantly hear buyers voice concern over closing costs on REO properties. In most cases when buying an REO property, the closing costs will be no more than any typical real esate closing. In fact, if you are an owner occupant, many REO sellers (Freddie Mac and Fannie Mae in paticular) will pay up 3% of the purchase price towards closing costs on financed deals. All you need to do is ask at the initial offer.
There are a few outrageous REO sellers out there, Ocwen (Altisource Homes) is one that comes to mind imediately that charges higher than normal closing costs. But they are more the exception than the standard.
What you really want to look out for are the hidden costs AFTER closing. The issue with REO properties is, rarely does the lisitng agent have an opportunity to speak to the previous owner about details of the property. Here are some of the surprise costs I have run across in the past.
1. Mail box keys or common area keys- This is most typical in Condos and Townhomes. Many have a general mailbox area which requires a key to the box. Most times when buying a REO home, this key will not be found and you will need to have it replaced. I have seen some keys go up to $200 in the past.
2. Water softners- If you are looking at a home with a water softner, see if there is a name on the unit. Many are rented from companies by the previous owner and left behind without canceling the contract. While you will not be responsible for any past due amounts, the company will remove their equipement if you do not agree to sign a new agreement.
3. Propane Tanks- In rural ares, many times you will have a propane tank for your furnace rather than natural gas. The good thing about propane tanks and REO homes, any gas left behind in the tank is included with the home. The bad, sometimes these tanks are rentals and you will need to sign up with the gas company if you wish to keep the tank.
4. HOA dues- 98% of the time, these are caught prior to closing. The issue usually arises in newer subdivisions that are currently not charging a HOA but plan to in the future. This could be an added cost to your monthly budget in the future.
5. Sewer bills- These are the most common and most expensive overlooked items. Most title companies and agents are very good about checking on past due amount prior to closing. But if the property is in an obscure area or shares a sewer system with another town, it could get over looked. Always request a zero balance statement from the title company or lisitng agent that proves the REO seller has paid all outstanding sewer balances to date.
6. Garage door openers- This is a minor cost as you can pick up a programable opener at most hardware stores, but can be an inconvenience if you do not realize it up front. If you are looking to buy an REO home and see a garage door opener in the home, consider yourself lucky!
Happy Buyng!
Monday, January 23, 2012
Wednesday, September 7, 2011
Northwest Indiana August Housing Stats
Well, we saw a little decline in local values in August. Saint John and Hobart were strong performers with median homes sales up both year to date and versus same month last year. Merrillville had a huge jump in median sales price over August of last year.
The average days on market dropped in many markets and I am sure this coincides with the drop in median values.
Overall, Real Estate is still local and I have spoke with many buyers and sellers over the last month and both have one major factor in common. The majority of buyers and sellers I have spoken with are not in a hurry. Below are up to date market stats for some Northwest Indiana Markets. If you do not see your city or town, give me a call, I"ll be happy to provide them!
Crown Point-
August 2011- 28 Units Sold
Median Sales Price- $172,998
Avg. DOM- 132 Days
August 2010- 19 Units Sold
Median Sales Price- $210,000
Avg. DOM- 88 Days
Year to date 2011- 201 Units Sold
Median Sales Price- $183,000
Avg. DOM- 134 Days
Year to Date 2010- 193 Units Sold
Median sale Price- $179,900
Average DOM- 114 days
Schererville-
August 2011- 18 Units Sold
Median Sales Price- $232,000
Avg. DOM- 86
August 2010-21 Units Sold
Median Sales Price- $235,000
Avg DOM- 107
Year to Date- 2011- 131 Units Sold
Median Sales Price- $223,900
Avg. DOM- 123 Days
Year to Date 2010- 131 Units sold
Median sales Price- $229,900
Avg. DOM- 101 Days
Saint John
August 2011- 11 Units Sold
Median Sales Price- $270,000
Avg DOM- 145
August 2010- 14 Units Sold
Median Sales Price- $242,552
Avg. DOM- 141 Days
Year to Date 2011- 85 Units Sold
Median Sales Price- $254,921
Avg DOM- 121 Days
Year to Date 2010-67 Units Sold
Median Sales Price- $250,000
Avg DOM- 123 Days
Cedar Lake
August 2011- 12 Units Sold
Median Sales Price- $133,000
Avg. DOM- 172
August 2010- 14 Units Sold
Median Sales Price- $146,000
Avg DOM- 114 days
Year to Date 2011- 98 Units Sold
Median Sales Price- $142,600
Avg Dom- 128 Days
Year to Date 2010- 108 Units Sold
Median Sales Price- $146,825
Avg DOM- 132
Winfield
August 2011-4 Units Sold
Median Sales Price-$193,000
Avg DOM- 62
August 2010- 6 units sold
Median Sales Price- $207,718
Avg DOM- 131
Year to Date 2011- 53 Units Sold
Median Sales Price- $211,000
Avg. DOM- 112
Year to Date 2010- 68 Units Sold
Median Sales Price- $218,950
Avg DOM- 113 Days
Merrillville
August 2011- 35 units Sold
Median Sales Price-$112,600
Avg DOM- 165 days
August 2010- 34 Units Sold
Median Sales Price- $80,500
Avg DOM- 79 days
Year to Date 2011- 245 Units Sold
Median Sales Price-$96,500
Avg DOM- 114 days
Year to Date 2010- 266 Units Sold
Median Sales Price- $107,750
Avg DOM- 96 Days
Hobart
August 2011- 27 Units sold
Median Sales Price- $126,200
Avg DOM- 140 Days
August 2010- 23 units sold
Median Sales Price- $117,000
Avg DOM- 81 Days
Year to Date 2011- 190 Units Sold
Median Sales Price- $115,000
Avg DOM- 121
Year to Date 2010- 249
Median sales Price- $111,000
Avg DOM- 101 days.
The average days on market dropped in many markets and I am sure this coincides with the drop in median values.
Overall, Real Estate is still local and I have spoke with many buyers and sellers over the last month and both have one major factor in common. The majority of buyers and sellers I have spoken with are not in a hurry. Below are up to date market stats for some Northwest Indiana Markets. If you do not see your city or town, give me a call, I"ll be happy to provide them!
Crown Point-
August 2011- 28 Units Sold
Median Sales Price- $172,998
Avg. DOM- 132 Days
August 2010- 19 Units Sold
Median Sales Price- $210,000
Avg. DOM- 88 Days
Year to date 2011- 201 Units Sold
Median Sales Price- $183,000
Avg. DOM- 134 Days
Year to Date 2010- 193 Units Sold
Median sale Price- $179,900
Average DOM- 114 days
Schererville-
August 2011- 18 Units Sold
Median Sales Price- $232,000
Avg. DOM- 86
August 2010-21 Units Sold
Median Sales Price- $235,000
Avg DOM- 107
Year to Date- 2011- 131 Units Sold
Median Sales Price- $223,900
Avg. DOM- 123 Days
Year to Date 2010- 131 Units sold
Median sales Price- $229,900
Avg. DOM- 101 Days
Saint John
August 2011- 11 Units Sold
Median Sales Price- $270,000
Avg DOM- 145
August 2010- 14 Units Sold
Median Sales Price- $242,552
Avg. DOM- 141 Days
Year to Date 2011- 85 Units Sold
Median Sales Price- $254,921
Avg DOM- 121 Days
Year to Date 2010-67 Units Sold
Median Sales Price- $250,000
Avg DOM- 123 Days
Cedar Lake
August 2011- 12 Units Sold
Median Sales Price- $133,000
Avg. DOM- 172
August 2010- 14 Units Sold
Median Sales Price- $146,000
Avg DOM- 114 days
Year to Date 2011- 98 Units Sold
Median Sales Price- $142,600
Avg Dom- 128 Days
Year to Date 2010- 108 Units Sold
Median Sales Price- $146,825
Avg DOM- 132
Winfield
August 2011-4 Units Sold
Median Sales Price-$193,000
Avg DOM- 62
August 2010- 6 units sold
Median Sales Price- $207,718
Avg DOM- 131
Year to Date 2011- 53 Units Sold
Median Sales Price- $211,000
Avg. DOM- 112
Year to Date 2010- 68 Units Sold
Median Sales Price- $218,950
Avg DOM- 113 Days
Merrillville
August 2011- 35 units Sold
Median Sales Price-$112,600
Avg DOM- 165 days
August 2010- 34 Units Sold
Median Sales Price- $80,500
Avg DOM- 79 days
Year to Date 2011- 245 Units Sold
Median Sales Price-$96,500
Avg DOM- 114 days
Year to Date 2010- 266 Units Sold
Median Sales Price- $107,750
Avg DOM- 96 Days
Hobart
August 2011- 27 Units sold
Median Sales Price- $126,200
Avg DOM- 140 Days
August 2010- 23 units sold
Median Sales Price- $117,000
Avg DOM- 81 Days
Year to Date 2011- 190 Units Sold
Median Sales Price- $115,000
Avg DOM- 121
Year to Date 2010- 249
Median sales Price- $111,000
Avg DOM- 101 days.
Thursday, August 25, 2011
The Dreaded Pre-Approval
I'm really not sure how long this has been going on. Maybe, I have just become more cognizant of it lately. Maybe I'm the only one who notices. Maybe I'm overreacting. Maybe...
In the last few weeks, I have been appalled by potential buyers' unwillingness to get pre-approved before they look at homes. Most of the buyers I have spoken with are first time buyers and I expect a little resistance since they are new to the process. I have also spoken to home owners looking to possibly move up and they too look at me like I am asking them to donate a kidney!
If you are interested in buying a home, if you are thinking of buying a home, if you may eventually buy a home...GET PRE-APPROVED!
Yes, you will need to speak to a bank or mortgage broker. Yes, you will have to disclose some personal financial information. Yes, you will have to have your credit checked and yes, sometimes, you will have to face some harsh realities. At least you will still have your kidney.
BETTER NOW THAT LATER!
Let's face it, no one said buying a home is easy. There is work involved, even for you. It is better for everyone involved to find out where you stand upfront.
Do you want to spend your free time and weekends looking at homes for months only to fall in love with a home and not be able to get a loan?
Do you want to have your realtor spend hours looking through and previewing listings for you only to find out you can not get a loan?
Before my epiphany, I have had clients in the past look at 20 homes only to find out they could get a loan but for much less than the homes we spent hours touring.
Put yourself in the seller's shoes. You have your home listed, you're moving out of the area for a new job, a buyer comes through, puts in an offer and you accept. You're overwhelmed with joy and you start planning your move only to find out 2 days later they can't get a loan.
Sounds crazy but it happens!
I know it's work, it takes time getting things together but why would you knot want to put yourself in the best negotiating position! Pre-approved buyers are taken much more seriously and have a better chance of getting the home they love!
If you are looking for a home and have not been pre-approved, I would love to hear why. What are your concerns? Fears? Thoughts?
In the last few weeks, I have been appalled by potential buyers' unwillingness to get pre-approved before they look at homes. Most of the buyers I have spoken with are first time buyers and I expect a little resistance since they are new to the process. I have also spoken to home owners looking to possibly move up and they too look at me like I am asking them to donate a kidney!
If you are interested in buying a home, if you are thinking of buying a home, if you may eventually buy a home...GET PRE-APPROVED!
Yes, you will need to speak to a bank or mortgage broker. Yes, you will have to disclose some personal financial information. Yes, you will have to have your credit checked and yes, sometimes, you will have to face some harsh realities. At least you will still have your kidney.
BETTER NOW THAT LATER!
Let's face it, no one said buying a home is easy. There is work involved, even for you. It is better for everyone involved to find out where you stand upfront.
Do you want to spend your free time and weekends looking at homes for months only to fall in love with a home and not be able to get a loan?
Do you want to have your realtor spend hours looking through and previewing listings for you only to find out you can not get a loan?
Before my epiphany, I have had clients in the past look at 20 homes only to find out they could get a loan but for much less than the homes we spent hours touring.
Put yourself in the seller's shoes. You have your home listed, you're moving out of the area for a new job, a buyer comes through, puts in an offer and you accept. You're overwhelmed with joy and you start planning your move only to find out 2 days later they can't get a loan.
Sounds crazy but it happens!
I know it's work, it takes time getting things together but why would you knot want to put yourself in the best negotiating position! Pre-approved buyers are taken much more seriously and have a better chance of getting the home they love!
If you are looking for a home and have not been pre-approved, I would love to hear why. What are your concerns? Fears? Thoughts?
Thursday, August 4, 2011
Northwest Indiana July Housing Stats
Real Estate is local. Values are determined by local market trends and demands. Too often I speak with buyers and sellers who focus on the national picture instead of what is happening in their own back yard. After doing some research, I can see why buyers and sellers focus on the national picture. That is all they see. At best they may get housing stats from their state and even these are not a good gauge for your local market.
Here are some housing stats from some Northwest Indiana markets. While the housing picture is not all rosy, there are some encouraging signs. Crown Point, Schererville and Valparasio all have year to date median sale prices that are above last year! That's good news!
Don't see your city or town. Call, 219-306-0333, or email me, steve@stevejamrok.com, and I will be happy to discuss your local market!
Crown Point-(DOM=Days on Market)
01/01/10-07/31/10= 236 Homes sold/ Median Sale Price- $161,500/ Avg. DOM- 119
01/01/11-07/31/11=207 Homes Sold/ Median sales Price-$170,000/ Avg. DOM- 130
07/01/11-07/31/11= 30 Homes Sold/ Median Sales Price-$159,950/ Avg. DOM- 146
Saint John-
01/01/10-07/31/10= 77 Homes Sold/ MSP-$240,000/ Avg DOM- 124
01/01/11-07/31/11= 94 Homes Sold/ MSP- $235,971/ Avg DOM- 120
07/01/11-07-31-11 = 16 Homes Sold/ MSP-$228,000/ Avg DOM- 116
Dyer-
01/01/10-07/31/10= 100 Homes Sold/ MSP- $186,500/ Avg. DOM- 108
01/01/11-07/31/11= 107 Homes Sold/MSP- $178,084/ Avg DOM- 124
07/01/11-07/31/11= 14 Homes Sold/ MSP-$180,042/ Avg DOM- 106
Schererville-
01/01/10- 07/31/10- 176 Homes Sold/ MSP- $180,500/ Avg DOM- 108
01/01/11-07-31/11- 155 Homes Sold/ MSP- $200,000/ Avg DOM- 137
07/01/11-07/31/11- 23 Homes Sold/ MSP- $205,000/ Avg DOM- 118
Valparaiso-
01/01/10-07/31/10= 314 Homes Sold/ MSP- $166,250/ Avg DOM- 119
01/01/11-7/31/11= 301 Homes Sold/ MSP-$167,000/ Avg DOM- 113
07/01/11-07/31/11= 68 Homes Sold/ MSP- $189,950/ Avg DOM- 109
Cedar Lake-
01/01/10-07/31/10=93 Homes Sold/ MSP- $145,750/ Avg DOM- 134
01/01/11-07/31/1= 85 Homes Sold/ MSP-$143,000/ Avg DOM- 122
07/01/11-07/31/11=5 Homes Sold/ MSP- $140,000/ Avg DOM- 169
Demotte-
01/01/10-07/31/10=59 Homes Sold/ MSP- $144,500/ Avg DOM-149
01/01/11-07/31/11=53 Homes Sold/ MSP-$139,900/ Avg DOM- 113
07/01/11-07/31/11=8 Homes Sold/ MSP- $162,500/ Avg DOM- 156
Merrillville-
01/01/10-07/31/10= 232 Homes Sold/ MSP- $109,500/ Avg DOM- 99
01/01/11-07/31/11= 210 Homes Sold/ MSP- $94,700/ Avg DOM- 105
07/01/11-07/31/11= 38 Homes Sold/ MSP- $109,000/ Avg DOM- 89
Here are some housing stats from some Northwest Indiana markets. While the housing picture is not all rosy, there are some encouraging signs. Crown Point, Schererville and Valparasio all have year to date median sale prices that are above last year! That's good news!
Don't see your city or town. Call, 219-306-0333, or email me, steve@stevejamrok.com, and I will be happy to discuss your local market!
Crown Point-(DOM=Days on Market)
01/01/10-07/31/10= 236 Homes sold/ Median Sale Price- $161,500/ Avg. DOM- 119
01/01/11-07/31/11=207 Homes Sold/ Median sales Price-$170,000/ Avg. DOM- 130
07/01/11-07/31/11= 30 Homes Sold/ Median Sales Price-$159,950/ Avg. DOM- 146
Saint John-
01/01/10-07/31/10= 77 Homes Sold/ MSP-$240,000/ Avg DOM- 124
01/01/11-07/31/11= 94 Homes Sold/ MSP- $235,971/ Avg DOM- 120
07/01/11-07-31-11 = 16 Homes Sold/ MSP-$228,000/ Avg DOM- 116
Dyer-
01/01/10-07/31/10= 100 Homes Sold/ MSP- $186,500/ Avg. DOM- 108
01/01/11-07/31/11= 107 Homes Sold/MSP- $178,084/ Avg DOM- 124
07/01/11-07/31/11= 14 Homes Sold/ MSP-$180,042/ Avg DOM- 106
Schererville-
01/01/10- 07/31/10- 176 Homes Sold/ MSP- $180,500/ Avg DOM- 108
01/01/11-07-31/11- 155 Homes Sold/ MSP- $200,000/ Avg DOM- 137
07/01/11-07/31/11- 23 Homes Sold/ MSP- $205,000/ Avg DOM- 118
Valparaiso-
01/01/10-07/31/10= 314 Homes Sold/ MSP- $166,250/ Avg DOM- 119
01/01/11-7/31/11= 301 Homes Sold/ MSP-$167,000/ Avg DOM- 113
07/01/11-07/31/11= 68 Homes Sold/ MSP- $189,950/ Avg DOM- 109
Cedar Lake-
01/01/10-07/31/10=93 Homes Sold/ MSP- $145,750/ Avg DOM- 134
01/01/11-07/31/1= 85 Homes Sold/ MSP-$143,000/ Avg DOM- 122
07/01/11-07/31/11=5 Homes Sold/ MSP- $140,000/ Avg DOM- 169
Demotte-
01/01/10-07/31/10=59 Homes Sold/ MSP- $144,500/ Avg DOM-149
01/01/11-07/31/11=53 Homes Sold/ MSP-$139,900/ Avg DOM- 113
07/01/11-07/31/11=8 Homes Sold/ MSP- $162,500/ Avg DOM- 156
Merrillville-
01/01/10-07/31/10= 232 Homes Sold/ MSP- $109,500/ Avg DOM- 99
01/01/11-07/31/11= 210 Homes Sold/ MSP- $94,700/ Avg DOM- 105
07/01/11-07/31/11= 38 Homes Sold/ MSP- $109,000/ Avg DOM- 89
Tuesday, March 15, 2011
Buyers, Leave your family home
I always get weired looks and catch some flak from my buyers when I ask them to leave their family at home for the first showing of a property. Buyers, especially first timers, always want to feel protected and have every one's opinion. They even want to show off a bit for family, "Hey, look at us, we're looking to buy a house, aren't you proud."
Now there is nothing wrong with getting your families' opinion but the first time viewing a property is NOT the right time. The first time you set a showing for a home it should be just the people who are going to be making the purchase. If you are single, just you and your Realtor. If you are married, your spouse and the Realtor, etc... You can always invite, Mom , Dad, Uncle Joe, Aunt Sue and all your cousins for a second showing. But the first showing should be all about you and the house.
If you have kids, try and arrange for a baby sitter. Again, your first showing should be about you and the house. You want to pay attention to the details of the home, not chase little Billy around the house or worry about what he might get into. Even if the kids are older, bring them on the second showing once you identified the home as a possible keeper.
No offense Mom and Dad, but you are the worst to have at a first showing. Parents are always looking out for their children. NO home will ever be good enough for their child. Parents have a way of scrutinizing every little detail of the property and the price is always at least $100,000 too high. View the property with your Realtor first and make an informed decision. If you like it, bring Mom and Dad back for the second showing, after you formed your opinion.
I never like having Uncles, Aunts, cousins, nephews, etc... I'm trying to pay attention to you, not Uncle Bob. I want to answer your questions about the home, not his. Many times, relatives have a little jealousy when you're buying a home and believe it or not will try and steer you away from a good deal because they either can buy it or missed out on it.
I'm sure people are again thinking, I don't know anything about buying a house and need all the help I can get. Well, this is WHY you hired a Realtor. You should be working with a Realtor you trust and have a good rapport with. If you feel you need someone with you on all showings, you need a new Realtor.
Now there is nothing wrong with getting your families' opinion but the first time viewing a property is NOT the right time. The first time you set a showing for a home it should be just the people who are going to be making the purchase. If you are single, just you and your Realtor. If you are married, your spouse and the Realtor, etc... You can always invite, Mom , Dad, Uncle Joe, Aunt Sue and all your cousins for a second showing. But the first showing should be all about you and the house.
If you have kids, try and arrange for a baby sitter. Again, your first showing should be about you and the house. You want to pay attention to the details of the home, not chase little Billy around the house or worry about what he might get into. Even if the kids are older, bring them on the second showing once you identified the home as a possible keeper.
No offense Mom and Dad, but you are the worst to have at a first showing. Parents are always looking out for their children. NO home will ever be good enough for their child. Parents have a way of scrutinizing every little detail of the property and the price is always at least $100,000 too high. View the property with your Realtor first and make an informed decision. If you like it, bring Mom and Dad back for the second showing, after you formed your opinion.
I never like having Uncles, Aunts, cousins, nephews, etc... I'm trying to pay attention to you, not Uncle Bob. I want to answer your questions about the home, not his. Many times, relatives have a little jealousy when you're buying a home and believe it or not will try and steer you away from a good deal because they either can buy it or missed out on it.
I'm sure people are again thinking, I don't know anything about buying a house and need all the help I can get. Well, this is WHY you hired a Realtor. You should be working with a Realtor you trust and have a good rapport with. If you feel you need someone with you on all showings, you need a new Realtor.
Monday, February 28, 2011
Winterized Properties
Even though warm weather is almost upon us, REO companies will keep their properties winterized into April. Some companies will keep them winterized year round. A property is winterized to help prevent freeze damage to the plumbing system during the winter months.
Since it can cost approximately $250 to dewinterize and rewinterize the property it is important to know up front who is responsible for the dewinterization/ rewinterization. Some companies will dewinterize the home for the home inspection and the appraisal, then rewinterize the property through closing. It then will be the buyer's responsibility to dewinterize the home after closing.
Other companies put this expense on the buyer for the home inspection and then expect them to rewinterize the property after the inspection. They will even hold the buyer responsible for any damages that occur prior to closing if they do not rewinterize the property.
Before placing an offer on a REO proper try, make sure you or your agent asks who will be responsible for the dewinterizing/ rewinterizing. This could be an added cost you were not prepared for.
Since it can cost approximately $250 to dewinterize and rewinterize the property it is important to know up front who is responsible for the dewinterization/ rewinterization. Some companies will dewinterize the home for the home inspection and the appraisal, then rewinterize the property through closing. It then will be the buyer's responsibility to dewinterize the home after closing.
Other companies put this expense on the buyer for the home inspection and then expect them to rewinterize the property after the inspection. They will even hold the buyer responsible for any damages that occur prior to closing if they do not rewinterize the property.
Before placing an offer on a REO proper try, make sure you or your agent asks who will be responsible for the dewinterizing/ rewinterizing. This could be an added cost you were not prepared for.
Tuesday, February 22, 2011
Buying REO Properties Part III
I want to share a conversation I have with potential buyers almost daily.
Buyer- Hi, I'm interested in looking at 123 Main St.
Me- Wonderful. Let me tell you a little about the home. It is a REO property that needs quite a bit of work, the utilites are off and the furnace is missing. Are you looking for a fixer upper?
Buyer- Yes, my family has fixed up homes for years, we can handle anything.
Me- That's great. Do you have a proof of funds letter ready to go stating you have the cash to buy this property.
Buyer- No. I'm getting a loan.
Me- Oh...have you informed your lender that you are looking at REO properties? Are they aware that the utilities are off?
Buyer- No, but that won't matter.
Me- It won't matter?
Buyer- Yeah... I told you my family has been fixing up properties for years, I can handle the work. I want to buy this house!
Okay, the conversations are usually a little more in depth, but this sums it up pretty well. Most buyers looking at REO properties just look at price and not how they plan on paying for the home. If you are paying cash, you are in great position and you can go after any home you'd like.
If you are getting a loan, your choices are slimmer. Lenders have tightened their belts and are only loaning on properties that are habitable, and in order to be considered habitable the utilities have to be on and working.
To save yourself a lot of time and heartache, determine if the utilities are on before you run out to look at a REO property.
Buyer- Hi, I'm interested in looking at 123 Main St.
Me- Wonderful. Let me tell you a little about the home. It is a REO property that needs quite a bit of work, the utilites are off and the furnace is missing. Are you looking for a fixer upper?
Buyer- Yes, my family has fixed up homes for years, we can handle anything.
Me- That's great. Do you have a proof of funds letter ready to go stating you have the cash to buy this property.
Buyer- No. I'm getting a loan.
Me- Oh...have you informed your lender that you are looking at REO properties? Are they aware that the utilities are off?
Buyer- No, but that won't matter.
Me- It won't matter?
Buyer- Yeah... I told you my family has been fixing up properties for years, I can handle the work. I want to buy this house!
Okay, the conversations are usually a little more in depth, but this sums it up pretty well. Most buyers looking at REO properties just look at price and not how they plan on paying for the home. If you are paying cash, you are in great position and you can go after any home you'd like.
If you are getting a loan, your choices are slimmer. Lenders have tightened their belts and are only loaning on properties that are habitable, and in order to be considered habitable the utilities have to be on and working.
To save yourself a lot of time and heartache, determine if the utilities are on before you run out to look at a REO property.
- You or your agent can contact the listing agent to verify if utilities are on
- Call the utility provider-they can tell you if they are on or off
- Look at the meter at the house, if there is movement, it's on
Most REO Asset Companies require that their listing agents turn on the utilities to their properties. Here are a few reasons the utilities would not be on-
- Property condition- missing furnace, exposed wires, missing plumbing, missing light fixtures, etc...
- Safety concerns- It could pose a hazard to keep utilities on
- High potential for squatters
- The utilties have been off for an extended period of time and the city or county will require the building inspector to inspect the property prior to turn on.
- My favorite- The LAZY lisitng agent.
Be careful of number four when you are looking at REO properties. If the utilties are off, have your agent call the utility provider to see if the home will require an inspection prior to turn on. If no ispection is needed and the property looks in pretty good condition, call the lisitng agent to find out why they are not on. It is their job after all to have them on. If yes, an inspection is needed, check with the local building department on their codes. Another good idea when an inspection is needed is to call an electrician who is licensed in that city to walk through the property with you. They should be able to give you an idea as to what will need to be done to bring the property up to code.
Bottem line, lending standards are strict, if you are getting a loan to buy a REO property, make sure the home is habitable before you invest too much of your time and energy.
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