Why Do Homes Go Into Foreclosure?

July 17, 2012 By Leave a Comment

Many home buyers and real estate investors often look for foreclosed homes for sale to get a great deal in buying a home. These foreclosed properties are usually owned by mortgage companies or lending institutions and not by the homeowner themselves. These mortgage companies are very eager to get rid of the homes because their organization’s primary aim is to make money from home loans and not to sequester and own the properties. However, you have to keep in mind that buying a foreclosed home will not always give you a good deal. A lender usually does not exert effort in upgrading the property to sell it on a higher price. They normally sell it ‘as is’.

First, we need to understand what foreclosure is. A foreclosure is a legal process where a mortgage company acquires the ownership of an estate (repossess the property). This occurs when the homeowner has failed to make payments, has defaulted, or violated the terms of their mortgage loan.

With the rising number of foreclosures in the market today, many of you would wonder how homes go into foreclosure. Below are the common reasons why homeowners fall into foreclosure:

Negative Equity

One of the common reasons why some home fall into foreclosure is negative equity. Negative equity usually happens when a homeowner buys a house using a mortgage and then the home prices start to drop. After the house purchase, the value of the home decreases below the value of the amount owed on the mortgage, causing negative equity. When this happens, the homeowner does simply give up paying their monthly mortgage. He decides to cut his losses and stop making payments.

Sub-Prime Mortgages

HUD allows giving loans to high-risk borrowers with little capability of keeping up the payments is another contributor to the increasing incidence of foreclosure. Creating risky loans generated significant profits through origination fees and selling the mortgages to investors, even if the homes had to be foreclosed on later.

Unemployment

Employment or job gives every person the financial capability to buy the food they want to consume, buy the clothes they want and pay for the mortgage and other utility bills.  Thus, losing a job can make someone financially vulnerable and makes it impossible for the homeowner to keep paying the mortgage.

Other Personal Reasons

Aside from the aforesaid reasons why homes go into foreclosure, some home owners lose their home due to unwanted circumstances in their lives. One of which is serious medical condition. Serious Illnesses can stop a person from continuing their job, paying for the hospital bills and medications can also drain their financial resources, as a result the home owner fails to pay for the monthly mortgage. Divorce is another reason why people lose their home through foreclosure. When a couple separate or have a divorce, one of the spouses who keep the house may not be able to afford paying the mortgage alone. Lastly, there are also people who fail to pay mortgage and lose their house because of their gambling or substance addictions who usually prefer spending their money to satisfy their habits instead of fulfilling their monthly obligation on paying their mortgage.

Make use of our MLS MN database to search homes for sale in Minnesota.

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Contingencies in Real Estate Contract Basics

June 30, 2012 By Leave a Comment

 Much has been said about how important each step of the home buying processes is. When it comes to spending a large amount buying something that should always be the case right? To give you a real sense of just how important each step in the home-buying process is, let’s look at one step which is fulfilling contingencies in real estate contracts.

Simply put, a contingency is a condition set by the buyer or the seller that should be met before the sale is made final. There are several contingencies that come to mind that every first-time home buyers should know and I’ll list them below to give you a better look at this step in home-buying.

1. Inspection of the property. The buyer should have this as a conditional. Before you buy a home, you need to know that it is in good condition and for that, an inspection of the property is needed. Once the inspection is completed and the buyer deems that there is a problem with the property, he or she can renegotiate its final price.

2. Financing for the buyer. This is the sort of contingency that is very normal and obvious is that the buyer should secure financing before both parties agree to a deal.

3. Disclosures from the seller. As the buyer, you should know all known issues about the property that you are going to buy. The seller should provide you with a disclosure of the issues without which, the sale would not go through. It is a contingency that would protect your investment.

4. Timeframe for specific occurrences. Time is money and both seller and buyer need to be able to complete the deal with as little snag as possible. Having a condition that the deal will only go through if both parties complete certain things by a certain date would make things easier and faster for both sides.

Going through the list of contingencies can be a hassle especially if there are a lot of things involved. We are here to help you with the whole buying process so don’t hesitate to contact us.

 

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Supply And Demand Factors Affecting The Real Estate Industry

June 30, 2012 By 1 Comment

Buying a home is a big investment on your part. It is not a simple thing that you can buy and if everything does not work out, you can expect to just leave it or flip it to get your money back. It is therefore your duty to learn as much as possible about the real estate industry so that you can make the right decision when to buy a new property.

Supply and demand are huge factors in the pricing of properties in the market which means if you want to make the best decision when it comes to buying a home, you need to learn about it.

Let us look first at the supply factors affecting the industry.

If there is a limited supply of real estate in the market, it will usually push the prices higher. Conversely, if there are a lot of properties in the market, the tendency is for the price to go down. A balanced market will work well for both sellers and buyers. Even if the supply is imbalanced, there are other factors that can make the real estate market performing well.

Builders for example are going to adjust their plans to avoid oversupply of new homes in their area. The more they build, the lower the prices would be so they are not going to build and build without regard for the supply factor. Another thing that can balance the oversupply of housing is the availability of land. Some regions do not have plenty of space for new housing so the risk of oversupply of properties in the market is not that high.

About the demand factor, there are a lot of things to take into consideration. The higher the demand for real estate, the higher the prices would be. Some of the factors affecting the demand are the following:

1. No job losses in the area.

2. Baby boomers kids looking to buy entry-level homes.

3. Immigrants looking for homes in the area.

4. Stability in the interest rates.

5. Rising wealth status.

By reading how the market is performing, you would have a better idea when would be the right time to buy a new home.

 

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Still Undecided? Here Are Reasons To Buy A House

June 30, 2012 By Leave a Comment

 First-time buyers usually receive a lot of advices from friends, family, and even co-workers that the right time to buy a house is today. Well, not exactly today but it should be done as soon as possible. When pressed for reasons though, they may have different answers and for someone who is already confused, that would not help at all in enforcing your decision to buy a house.

To help you out, let’s look at the most important reasons why you should be saving now to buy your dream house in the near future.

1. Appreciation. You may have noticed that the value of real estate properties fluctuate every now and then. Over a long period of time though, the value of real estate is always increasing. The sooner you buy a property, the better return you will get from your investment in the future if you decide to sell the property.

2. Tax deductions. IRS Publication 530 cites tax information for buyers who bought their first property. The real estate property taxes paid for it are fully deductible from income tax. It would definitely be a big benefit for first-time home buyers.

3. Peace of mind. Once you have moved into your newly bought home, you can drill to your heart’s desire, you can crank up the volume on your speaker, you can paint and repaint the walls, and you can do pretty much anything you want without the fear that you will lose your security deposit.

4. It is cheaper in the long run. While renting may mean paying less monthly, buying makes more sense in the long run. After you have paid the full price of your house, you can do with it as you please. You can sell it if you want or but in renting you will have to move out once the lease is up and if you do not want to extend the contract.

These are reasons enough why you should buy a house. If you are still not convinced, let us look at your current resources financial and otherwise and gauge if you are ready to make one of the biggest investments you will make. We can also see what you can do to make you ready for buying your own house.

 

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Why Short Sales Fail

June 30, 2012 By Leave a Comment

If you do not have plenty of money to invest in buying a home, one advice you might get often from friends and family is to look for short sales. Of course, the price listed for these properties are not exactly what you would be paying for as it is just an estimate on how much it might take to close the deal. Also, you have to keep in mind that many short sale offers fail more than they succeed. So if you think that short sales are your only options, you should know why these transactions fail so that you can plan better.

1. Unreasonable Second Lenders. Usually, the agent you will be working with can be likened to a table tennis ball in the sense that they would often bounce between first and second lender to get a deal done. For example, the first lender decided that it does not want to meet the second lender’s demand.

2. The House Is Unoccupied. Most servicing guidelines require that the property is occupied. Sometimes, the seller would be asked to move back in just to complete the deal. It is obvious though that not all sellers would agree to do this so if a property is occupied, you would have a better chance at closing that deal.

3. Vandalized Property. Same with the above point, if the property is vandalized or damaged because of wear and tear, the bank would not pay for the repair making the deal harder to repair.

4. The Seller Gets A Job. Because short sales can be a long process, the seller could end up getting a new job with good salary. Once that happens, the property may no longer be qualified for a short sale.

The road to buying a short sale property is fraught of challenges. Having a good real estate agent working with you would make it easier to complete a deal.

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Understanding What Mortgage Is

June 30, 2012 By Leave a Comment

One of the biggest problems that first time home buyers run into in the process of home buying is the language barrier. Yes, the documents you would have to read and sign would be in English but the terms used are not necessarily easy to understand. One of the most common terms thrown around is mortgage and it is surprising to see that many interested home buyers do not have a concrete idea what it really is.

Let us first start with the definition. Mortgage is a written document containing two parties, the mortgagor and the mortgagee. The mortgagor is you, the home buyer or the borrower. The mortgagee is the lender. It could be a bank or any financial institution that would lend the money that would go toward the purchase of the property. The real estate will be used as the collateral for the loan.

In case the borrower failed to pay the loan, the lender would then have the right to gain possession of the property. This phase is foreclosure. Different states have different laws regarding the period for the property to go into foreclosure.

Now that we have a clear understanding of what a mortgage is, let us look at how you can use it to your advantage as a buyer. Let’s say that you are starting out with a family and you may think that you are too young to pay for the property in cash. You may have some sizeable amount of money in a bank but you are also planning to use it on other important things.

With a mortgage, you can afford to free up those finances. This means you would have more freedom as far as spending your savings on. You do not have to empty your savings account to buy your first house and end up with too little to spend on other important things.

If you are therefore looking to make your first home in MN, before you use an MLS MN database make sure that you understand the options open to you as a first time home buyer.

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Tips When Looking For Short Sale Listings On MLS

June 30, 2012 By Leave a Comment

While resorting to buying a short sale property is not the best move to make each and every time, there are times when conditions are right to get big savings with short sales. If you therefore understand more than the basics of short sale and you think that it is the best choice you have when looking for that new property in Minnesota, you can take advantage of MLS MN to aid you in your quest to find such properties.

To help make the hunt easier for you, please take note of the tips below because listings would not necessarily be tagged as a short sale. Lenders have complained heavily about that practice. As a result you need to be on the lookout for terms that real estate agents use to indicate that a property might be a short sale. Below are some of these terms:

1. Subject to bank approval.
2. Pre-foreclosure.
3. Notice of default.
4. Give the bank time to respond.
5. Pre-approved by bank.
6. Headed for auction.

By being on the lookout for such terms, you could have an easier time combing through the choices that an MLS might give you.
Even with these things though, it is still best to work with a real estate agent, especially one who is well-versed with the process involving short sale properties. These individuals would be more than qualified to provide you with the tips you would need to pull off a deal that would leave you with plenty of savings.

Aside from a real estate agent you can trust, it is also strongly recommended that you approach a lawyer if you have any questions regarding the laws surrounding short sales. Since buying a home is a life-changing thing to do, it make sense that you cover all your bases even if that means paying for the services of a competent lawyer.

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