Buying a Distressed Home - Alpharetta - July 20, 2011


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  • What is a Distressed Home - Definition - Types of Distressed Homes
  • Good DealREO - Stress & Hassle dealing with Bank, Property condition & implications(little things add up, mortgage, inspection)SS - Stress & Hassle dealing with Bank, Need flexible close date, Potential for wasted time, no repairs, emotional roller coaster
  • BATNA – back up plan, have one to avoid feeling like you have no option except to take the offer
  • Research needed to understand the Auction process better
  • Buying a Distressed Home - Alpharetta - July 20, 2011

    1. 1. Buying a Distressed Home In Today’s Market Presented By: James Marks Danielle Coats Tara Ryan James Barrow
    2. 2. Overview Agenda• What is a distressed home?• Finding distressed homes• Market and pricing statistics• Bank owned homes• Short sales• Auctions• Financing• Negotiation strategies• Home inspections• Home warranties• Attorneys, title and closing
    3. 3. Quick Intros• James Marks – Redfin Broker• Laurie Nixon – Redfin Agent• Danielle Coats – Redfin Agent• Shannon Lentz – Redfin Coordinator• Carol Smith – Redfin Field Agent• Caitlin Zygmont – Redfin Field Agent• Tara Ryan – Envoy Mortgage• James Barrow – Inside Out Home Inspections
    4. 4. Your Turn• What’s your name?• How long have you been looking?• Where are you looking?• Are you under contract now?• Are you working with a Realtor? • Are you a Realtor?• What is one thing you’d like to learn?
    5. 5. Types of Distressed Homes• Short Sales • AKA: Pre-foreclosure, approved short sale• Foreclosures (Post-County Foreclosure) • AKA: Bank-owned, REO, lender owned • Fannie,Freddie,Ginnie & HUD• Auctions• Estate Sales
    6. 6. Reasons to buy or not buy?• Why would you buy a • Foreclosure? • Short sale?• Why wouldn’t you buy a • Foreclosure? • Short sale?
    7. 7. Finding Distressed Homes Danielle Coats
    8. 8. Finding Distressed Homes• Redfin • Shadow Inventory • Foreclosures (bank owned) • Short Sales• Government Sites • and • • IRS• Look down the street
    9. 9. Searching on Redfin Only Show Bank Find Owned open houses Exclude Search short foreclos sales ures Download to ExcelConsidering… Looking… Buying…
    10. 10. Alpharetta Foreclosures
    12. 12. Case-Shiller: Atlanta v. 20-City250.00 Case-Shiller: Atlanta Area Down 5.2% year-over-year Peak was July 2007200.00 Down 27.9% from peak Currently at October 1999 prices150.00100.00 Atlanta Area Case-Shiller: 20-City Composite 20-City Composite 50.00 Down 3.6% year-over-year Peak was July 2006 Down 33.1% from peak Currently at April 2003 prices 0.00Considering… Looking… Buying…
    13. 13. Atlanta Active Inventory Foreclosure 18% Short Traditional Sale 53% 15% Other 14%Source FMLS as of 7/20/2011 for SFR inFulton, Dekalb, Cherokee, Cobb, Forsyth, &Gwinnett
    14. 14. Atlanta Sales 1st Half of 2011 Short Sale Other 6% 5% Foreclosure 51% Traditional 38%Source FMLS as of 7/20/2011 for SFR inFulton, Dekalb, Cherokee, Cobb, Forsyth, &Gwinnett
    15. 15. Atlanta Supply by Sale Type140001200010000 8000 6000 4000 2000 0 Active Sold 1H
    16. 16. Bank Owned Homes• Contracts• Addendums• Timelines• Home condition• Listing agents• Tenants
    17. 17. Why Buy a Bank Owned?• Best price• Not afraid of a remodel• Comfortable with contracts• Financially strong with liquid capital• Don’t need a lot of repairs to be made
    18. 18. Short Sales• How does a short sale work?• Parties involved (chart)• Qualifying the short sale• Short sale approval process (chart)• Timelines• False contracts• Approval notice• Does cash make a difference?
    19. 19. Short Sale Parties Short Sale Bank #1 Attorney Customer Short Sale Care Departmen Litigation Center t Closer BPO Mortgage Appraiser Insurer Escrow Assistant Mortgage Negotiator Investor #1Sellers Bank #2 Mortgage Investor #2 Short Sale Listing Customer Departmen Litigation Closing Agent Care Center Buyers t Departmen t BPO Mortgage Redfin Home Buyer’s Appraiser Insurer Agent Appraiser Inspectors Lender Mortgage Negotiator Underwrite Investor #1 r Mortgage Investor Investor #2 Guidelines Closing Departmen t
    20. 20. Short Sale Approval Process
    21. 21. Short Sale Tid Bits• The rumor mill (old market)• Types of loans and liens • Get the Prelim! (and read the fine print)• 90 day non-refundable earnest• Latest short sale trends• Questions to ask before writing an offer• Why we don’t do multiple offers on short sales
    22. 22. 15 Questions to Ask the Listing Agent1.Is the property owned by and owner or investor?2.Has there been a trustee’s sale notice issued?3.How many short sales have you closed?4.Do you have the seller’s completed short sale package in your possession?5.Have you ordered the preliminary title report?6.Are there any non-mortgage liens attached to the property?7.How many loans are on the home?8.Who are the lenders/banks?9.Are any of the loans a line of credit?10.Do you have any offers?11.Have you had any previous offers?12.Have you received an acceptance letter?13.Has the broker’s price opinion (BPO) been conducted? (if yes, when)14.Have you been assigned a negotiator?15.What has motivated the sellers to do a short sale?
    23. 23. Seller’s Short Sale Shoes• Why do a short sale?• Mortgage payments• Credit hits• 90 day contract restart• Emotions• House maintenance• Inspections
    24. 24. Why Buy a Short Sale• It’s the perfect home• You can wait 90-120 days minimum• If you don’t get it, you’ll be alrightOr…• You like emotional roller-coasters
    25. 25. Buying at Auction• County Auctions (steps)• Organized Auctions• Who buys homes at auction?• What types of homes are at auction?• What are the prices like?• What is involved with buying at auction?• What is an absolute auction?• Due Diligence prior to auction• Write down your Max-bid
    26. 26. Financing Tara Ryan, Envoy Mortgage
    27. 27. Financing• Pre-qualification vs pre-approval• Credit inquiries and FICO• Lender you trust • Redfin Partner Lenders
    28. 28. Financing Options• Conventional loans • 30 year, 15 year, 5/1 ARM, etc• FHA • FHA health and safety requirements • Flipping guidelines• Rehab loans (203k)• Homepath loans
    29. 29. Financing Steps• Preapproval• Select property • What is condition of property? • Flipping guidelines• When to lock in the rate • Short sale • Bank owned• Mortgage process
    30. 30. 0% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2%Apr-71Apr-72Apr-73Apr-74Apr-75Apr-76Apr-77Apr-78Apr-79Apr-80Apr-81Apr-82Apr-83 18.45%Apr-84Apr-85Apr-86Apr-87Apr-88Apr-89Apr-90Apr-91Apr-92Apr-93Apr-94Apr-95Apr-96Apr-97Apr-98 30 Yr Fixed Source: Freddie Mac Interest Rates 1971 - TodayApr-99Apr-00Apr-01Apr-02Apr-03Apr-04Apr-05Apr-06 30 Yr FixedApr-07Apr-08 Source: Freddie MacApr-09Apr-10 Interest Rate
    31. 31. Negotiation Strategies - REO• Round 1 • New listing • 30 days old • 90 days old • Closing costs • Keep it clean• Round 2 • Repairs • Health and safety • Stolen goods• Get a backup
    32. 32. Negotiation Strategies - SS• Pull the comps• Ask lots of questions• New listing• Old listing• Pre-approved short sale• Approved once upon a time• Team up with listing agent• Meet the sellers• Be realistic
    33. 33. Home Inspections James Barrow Inside Out Home Inspections
    34. 34. Home Inspections• What to look for yourself• Missing components • Big ticket items (AC, cabinets, appliances) • Deliberate damage & safety (electrical)• Severe neglect• What an inspector won’t find and won’t test • Hidden defects • Untested system defects
    35. 35. Home Inspections• Most common concerns • Roof • Structural • Plumbing • Electrical • HVAC • Deferred Maintenance • Termites • Mold • Cosmetic
    36. 36. Home Warranties• What is a home warranty?• What is covered?• What is excluded from coverage?• Benefits of a home warranty• As-is, what can be covered?• Pre-existing conditions • Known • Unknown• Managing the risk of unexpected repairs• Home inspections and warranty coverage
    37. 37. Attorneys, Title and Closing• Attorney represents buyer’s lender*• Deeds – Warranty Deed vs. Special Warranty Deed• Title Search • Chain of title • Last minute liens • Title insurance • Lender’s Policy • Owner’s Policy• Closing Paperwork• Possession and keys
    38. 38. Thanks for Coming!
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