Real Estate Investing

So you want to get a great deal on a home? Stick to the foreclosure listings. Sure, these can be found in abundance on the Internet, but many people are hiring realtors nowadays to help locate and negotiate great deals on already underpriced foreclosure properties.

Mercury News recently ran a feature on the success some are having in the Silicon Valley area. One homeowner, Zena Hall, bought a townhouse for $380,000, 29 percent lower than its value in 2005 and 5 percent lower than the amount of an appraisal that took place immediately prior to closing. The key for homeowners like Hall is focus, determination and vision.

“When I started my search for a house, foreclosed homes were the ones I wanted to see,” Hall told Mercury News. “I figured they would definitely be pretty affordable.”

Sometimes the art of closing on a foreclosure property is simply a waiting game. The lenders are literally covered up with these properties and very eager to unload them. The longer a property sits vacant, the greater the chance it will be vandalized, decrease in value or even bring down the neighborhood value. Mercury News cites one homeowner who waited to commit to a real estate-owned property until the lenders dropped the price a second time. The second price decrease was $30,000 and brought the home under $500,000 into the buyer’s range of affordability. It took two weeks, but proved to be worth the wait.

So enlist a realtor, stay focused, be patient, and fourthly, examine the property carefully and factor into your offer the costs of any home improvements you will need to make. Things like a new roof, cracked ceilings, or new carpet can be costly, but necessary living expenses. Many foreclosed properties belonged to homeowners without the financial means to maintain their homes properly. Sometimes, homeowners are even so distraught over losing their home that they will purposely damage the property before vacating. This is another instance where a realtor’s experienced, critical eye can come in handy.

Looking for a new home? Gone are the days of driving around neighborhoods, scouting out For Sale signs. Newspapers are even irrelevant to the home search nowadays. And you can forget trucking it over to your local open house. Online MLS listings, online classified ads, online high-powered search maps and even online virtual tours have made it so that the first human contact may not come until the closing.

It’s shocking, but true - it’s a digital age. Some say it’s convenient, but others say it’s sad. At any rate, most people (particularly under age 35) could name at least three great web sites to aid the real estate search. However, in a recent column for USA Today, tech wiz and radio show host Kim Komando compiled a pretty comprehensive list:

-Realtor.com is the official site of the National Association of Realtors.

-RealtyTrac.com categorizes listings according to pre-foreclosure, bank-owned, government-owned, FSBO, auction, resale and new. It’s very comprehensive and user-friendly, but costs about $50 monthly after the seven-day free trial.

-Foreclosures.com has foreclosure listings with market value and the percentage of equity in the home. Again, a seven-day free trial followed by a $50 monthly fee.

-BargainNetwork.com advertises thousands of foreclosures and FSBOs nationwide, but will not allow you to browse the site without signing up for a free trial membership, to be followed by a $40 monthly fee. The catch on these seven-day trials is that you must enter your credit card information, which will be charged if you do not call the company and cancel. In some situations, there may even be a $40 or $50 hold placed on your card during the trial period, so be forewarned.

-HomeSales.gov lists federal government-owned properties to be sold at auction, many of which are HUD homes.

-Trulia.com allows searches to be saved and referenced later, and e-mail notices can be sent out whenever there are new listings matching your search criteria.

Kim Komando lists other resources, like the home value calculator and neighborhood property value “heat maps” on Zillow.com. Of course, we wouldn’t want to forget about sites like FSBO.com and ByOwner.com, and Komando also recommends searching official government web sites for foreclosure listings. And of course, there’s always our good friend Craig. Warning: searching for real estate online, regardless of whether you are serious about buying, is a very time-consuming and addicting process. Proceed carefully!

This is a real shame. It seems the affordable housing program in Napa Valley, California is falling victim to the mortgage crisis. Two of the homes were recently foreclosed upon, one of which will bring the city of Napa’s Housing Authority a financial loss to the tune of about $56,000. In one of the foreclosure cases, the homeowners had previously used about $100,000 in home equity to pay off consumer debt and fix up the home.

Altogether, the city’s Housing Authority owns 230 properties for low-income, first-time homebuyers. Most of the mortgages are fixed rate, but the two foreclosures were on properties with adjustable rate mortgages. The mortgages reset to a higher rate, while the values of the homes simultaneously declined by as much as $100,000. Those two combined factors proved to be a crippling blow that the homeowners could not overcome.

The Housing Authority has learned from this little setback. All future low-income first-time homebuyers in the program will be required to take a 30-year, fixed-rate mortgage. No more ARMs. Furthermore, city council members are asking the organization to place restrictions on when and for what reasons participating homeowners can refinance their homes.

Here’s the really interesting part: The Housing Authority’s purchase limits for qualifying “low income, first-time homebuyers” is $532,000. At least one of the foreclosures involved a house worth about $430,000 after the value had dropped significantly. Wait, are we talking half-million dollar homes here? I’m low-income, sign me up!