Residential Foreclosure Temptation
Making money by purchasing foreclosed homes sounds like an easy way to turn a profit, but buyer beware: The unwary purchaser may be buying a financial disaster.
Residential real estate foreclosures have been on the rise nationwide for the past several years with little sign of slowing down in the near future. The adjustable rate mortgage phenomenon coupled with general economic factors of our time have created a perfect storm of disaster for many homeowners, and the result is that many homeowners are finding their homes in foreclosure. With these foreclosures comes an excellent opportunity for a knowledgeable investor.
For the ill-informed, however, buying a foreclosed property at a sheriff’s sale can be confusing at best, and at worst it can be financially disastrous.
Become Familiar With The Foreclosure Process In Your State
The foreclosure process in each state is dictated by statute and case law, and the procedure differs greatly from state to state. In some states, such as Texas, the entire process can take less than three months. In other states, such as Wisconsin, the process can easily take nine months to a full year, or even longer if the homeowners file for bankruptcy protection or otherwise work to delay the process.
Each state has its own methods and procedures, and the first step to success is understanding the foreclosure process for your state in its entirety. If you plan on making foreclosure investment a serious venture, you may even wish to enlist the assistance of an attorney who can advise you on the foreclosure process and help you better understand the full procedure for your state.
Do A Thorough Title Search
In many states, properties are sold at foreclosure sales subject to any liens and encumbrances already on the property. This can include judgment liens, tax liens, prior mortgages, real estate taxes or any number of other financial or title issues which the purchaser at the foreclosure sale can inherit. An unwary purchaser may buy a property that seems like a great bargain only to find out that it was sold subject to tens of thousands of dollars worth of other liens, or worse.
Do not rely on the statements of other potential purchasers, the attorneys for the foreclosing bank, or even those of the homeowner when it comes to the status of the title to the property. Either enlist the assistance of a title company or become familiar with searching the judgment rolls, tax records and real estate records. It is absolutely essential to exercise due diligence and research the status of title for each property before even considering placing a bid at a foreclosure sale.
Be Skeptical About The Property’s Condition
Unlike a traditional real property transaction, there is rarely an opportunity to view the interior of the foreclosure property prior to purchase. Further, the properties are purchased as-is with absolutely no warranties as to their condition. Some interested buyers do contact the homeowners and ask to view the interior of the property, but not all owners are willing to show their houses and in many cases the property has been abandoned or the owners are difficult to locate. As your only evaluation of the property’s condition is likely to be from the exterior, it is essential to think critically about the interior’s condition.
When residential properties go into foreclosure it almost always related to the owner’s financial difficulties. This means that there may be maintenance issues with the property that were ignored due to their expense, or serious repairs that should have been done but were neglected due to the cost. As a purchaser of a foreclosure property, you must be willing to take on whatever problems the interior or structure of the property may have.
There Will Always Be More Properties
Foreclosures are showing no sign of slowing down. If you have serious reservations or unanswered about a property it may simply be best to hold off and wait for the next one. If you cannot go into a foreclosure sale armed with complete knowledge of the property you want to bid on – knowledge of the status of title, the interior and exterior condition, and any other issues that might be of concern to you – you may be better off waiting for the another property.
Residential real estate foreclosures have been on the rise nationwide for the past several years with little sign of slowing down in the near future. The adjustable rate mortgage phenomenon coupled with general economic factors of our time have created a perfect storm of disaster for many homeowners, and the result is that many homeowners are finding their homes in foreclosure. With these foreclosures comes an excellent opportunity for a knowledgeable investor.
For the ill-informed, however, buying a foreclosed property at a sheriff’s sale can be confusing at best, and at worst it can be financially disastrous.
Become Familiar With The Foreclosure Process In Your State
The foreclosure process in each state is dictated by statute and case law, and the procedure differs greatly from state to state. In some states, such as Texas, the entire process can take less than three months. In other states, such as Wisconsin, the process can easily take nine months to a full year, or even longer if the homeowners file for bankruptcy protection or otherwise work to delay the process.
Each state has its own methods and procedures, and the first step to success is understanding the foreclosure process for your state in its entirety. If you plan on making foreclosure investment a serious venture, you may even wish to enlist the assistance of an attorney who can advise you on the foreclosure process and help you better understand the full procedure for your state.
Do A Thorough Title Search
In many states, properties are sold at foreclosure sales subject to any liens and encumbrances already on the property. This can include judgment liens, tax liens, prior mortgages, real estate taxes or any number of other financial or title issues which the purchaser at the foreclosure sale can inherit. An unwary purchaser may buy a property that seems like a great bargain only to find out that it was sold subject to tens of thousands of dollars worth of other liens, or worse.
Do not rely on the statements of other potential purchasers, the attorneys for the foreclosing bank, or even those of the homeowner when it comes to the status of the title to the property. Either enlist the assistance of a title company or become familiar with searching the judgment rolls, tax records and real estate records. It is absolutely essential to exercise due diligence and research the status of title for each property before even considering placing a bid at a foreclosure sale.
Be Skeptical About The Property’s Condition
Unlike a traditional real property transaction, there is rarely an opportunity to view the interior of the foreclosure property prior to purchase. Further, the properties are purchased as-is with absolutely no warranties as to their condition. Some interested buyers do contact the homeowners and ask to view the interior of the property, but not all owners are willing to show their houses and in many cases the property has been abandoned or the owners are difficult to locate. As your only evaluation of the property’s condition is likely to be from the exterior, it is essential to think critically about the interior’s condition.
When residential properties go into foreclosure it almost always related to the owner’s financial difficulties. This means that there may be maintenance issues with the property that were ignored due to their expense, or serious repairs that should have been done but were neglected due to the cost. As a purchaser of a foreclosure property, you must be willing to take on whatever problems the interior or structure of the property may have.
There Will Always Be More Properties
Foreclosures are showing no sign of slowing down. If you have serious reservations or unanswered about a property it may simply be best to hold off and wait for the next one. If you cannot go into a foreclosure sale armed with complete knowledge of the property you want to bid on – knowledge of the status of title, the interior and exterior condition, and any other issues that might be of concern to you – you may be better off waiting for the another property.
Does Location Really Matter?
In yesterday’s Wall Street Journal there was an article that talked about an investment fund called CORE investments, a fund that is buying very high quality properties, fully leased, in stable markets, at relatively low yields. I thought this was interesting because it shows that some pretty high IQ people have decided that it is better to be safe than sorry. For the past 20 years it seemed to me that every real estate fund out there was seeking extraordinary undervalued deals that they would add their expertise to and increase value significantly. Now the smart guys are seeking investments that they will do nothing to but hold as the preferred way to invest in real estate.
I recently witnessed what I want to call the Tale of Two Cities. The two cities are not that far apart, Burien and Fremont (I know Fremont is part of the City of Seattle but people who live in Fremont may disagree so I don’t want to offend anyone) but may as well be in different hemispheres as far as pricing today is concerned.
Within the past three weeks two separate sales of apartment buildings have closed at about the same price, one for $2,275,000 and the other for $2,250,000. The first is in Fremont: a 15 unit built about 20 years ago that sold for an 11.3 gross rent multiplier and a 5.09 CAP, $151,667 per unit. The other sale is in Burien for a building built about 40 years ago that sold for a 5.5 gross rent multiplier and a 7.57 CAP, $52,325 per unit.
Quite a stark difference that shows the premium price well located properties continue to obtain. This has been the case as long as I have been in the business of selling apartment buildings (over 24 years now).
McQuaid Commercial Closes Third Fremont Deal in 30 Days
November 4, 2010: McQuaid Commercial Real Estate has closed the sale of the Fremont Arms Apartments, a 6-unit building located at 800 N 36th street.
“Despite the complexities involved in this particular sale we are extremely pleased with the price we achieved for our client (the sellers).” Noah Klika, seller representative said Thursday. “Getting $160,000/unit for this property illustrates the premium the market is willing to pay for well located apartment buildings in a so called ‘down’ market.”
The buyer for the property is of the typical Seattle fashion: a well-to-do couple working for a local technology company and University looking to expand their personal portfolio of income producing properties (investments which provide attractive yields and safety compared to other investment alternatives).
The seller is a long-term family partnership exiting the rental business after owning and operating a portfolio of multi-family and mixed-use buildings throughout the Seattle area
Fremont Arms sold for $960,000, with a 5.7% cap rate and 11.35 GRM. This calculates $171.43/sq ft and $160,000 per unit.
MCQUAID Commercial Real Estate is located at 400 Roy street in lower Queen Anne. It is an open concept, boutique-style firm offering advising services and focuses on superior client representation.
###
“Despite the complexities involved in this particular sale we are extremely pleased with the price we achieved for our client (the sellers).” Noah Klika, seller representative said Thursday. “Getting $160,000/unit for this property illustrates the premium the market is willing to pay for well located apartment buildings in a so called ‘down’ market.”
The buyer for the property is of the typical Seattle fashion: a well-to-do couple working for a local technology company and University looking to expand their personal portfolio of income producing properties (investments which provide attractive yields and safety compared to other investment alternatives).
The seller is a long-term family partnership exiting the rental business after owning and operating a portfolio of multi-family and mixed-use buildings throughout the Seattle area
Fremont Arms sold for $960,000, with a 5.7% cap rate and 11.35 GRM. This calculates $171.43/sq ft and $160,000 per unit.
MCQUAID Commercial Real Estate is located at 400 Roy street in lower Queen Anne. It is an open concept, boutique-style firm offering advising services and focuses on superior client representation.
###
Mortgages on property
The basic mortgages available and what they are.
You’ve gone out and bought a new home, but can’t afford to fork over the $300,000 in full right away, so you’ve applied for a mortgage with your financial institution. You’ve been approved? That’s great! Was it the right mortgage?
Essentially, a mortgage is a loan. Mortgages can be taken out on any property owned by someone – a boat or a car for example – but typically are used for real estate. Like everything in life, there are ups and downs to taking out a mortgage on real estate, regardless of whether it is for personal or commercial use. The positive is that whoever is purchasing the property doesn’t have to fork over the full amount right away and can make monthly payments until it is paid off. The downside is that interest is going to build up on the balance and the amortization period chosen determines just how much.
The amortization period of a mortgage is how long the term is. This time period is usually chosen by the person taking out the loan. Each individual financial institution determines the minimum loan period and the maximum loan period – for example, in Canada, the minimum is usually 15 years and the maximum recently was moved up to 35 years. The United States has a fairly similar demographic as Canada, and while most mortgages have amortization periods of 40 years, some banks have started toying with loan period of 50 years.
You can’t have a mortgage without the rates involved. No bank would willingly approve a mortgage loan without getting anything in return. That $300,000 you just paid for a new home? If you have a fixed interest rate of 4.5%, assuming you make all your payments on time and pay off extra when you can, the bank is going to make $135,000 in interest. That’s almost half the cost of your new home!
There are many types of mortgages, including but not limited to:
Fixed Rate Mortgages have set interest rates. If your mortgage starts with 4.5% interest, it is going to stay at 4.5% interest even if the interest rates increase or decrease over time.
Variable Rate Mortgages are just what they sound like. When interest rates increase or decrease over the loan term, your interest rate will increase or decrease with it. So your payments and interest will vary from month to month.
Pre-Approved Mortgages allow you to shop around for your new home or property and know just how much you can afford!
Remember that when you take out a mortgage on a property, it belongs to the bank you took the loan from. This bank can repossess the property at any time you fall into arrears – have missed several payments. Be sure to do your research before applying for a mortgage and know what you can afford. With the many types of mortgages that are available and the right guidance from your financial adviser, it is easier to choose the mortgage that fits your financial position.
You’ve gone out and bought a new home, but can’t afford to fork over the $300,000 in full right away, so you’ve applied for a mortgage with your financial institution. You’ve been approved? That’s great! Was it the right mortgage?
Essentially, a mortgage is a loan. Mortgages can be taken out on any property owned by someone – a boat or a car for example – but typically are used for real estate. Like everything in life, there are ups and downs to taking out a mortgage on real estate, regardless of whether it is for personal or commercial use. The positive is that whoever is purchasing the property doesn’t have to fork over the full amount right away and can make monthly payments until it is paid off. The downside is that interest is going to build up on the balance and the amortization period chosen determines just how much.
The amortization period of a mortgage is how long the term is. This time period is usually chosen by the person taking out the loan. Each individual financial institution determines the minimum loan period and the maximum loan period – for example, in Canada, the minimum is usually 15 years and the maximum recently was moved up to 35 years. The United States has a fairly similar demographic as Canada, and while most mortgages have amortization periods of 40 years, some banks have started toying with loan period of 50 years.
You can’t have a mortgage without the rates involved. No bank would willingly approve a mortgage loan without getting anything in return. That $300,000 you just paid for a new home? If you have a fixed interest rate of 4.5%, assuming you make all your payments on time and pay off extra when you can, the bank is going to make $135,000 in interest. That’s almost half the cost of your new home!
There are many types of mortgages, including but not limited to:
Fixed Rate Mortgages have set interest rates. If your mortgage starts with 4.5% interest, it is going to stay at 4.5% interest even if the interest rates increase or decrease over time.
Variable Rate Mortgages are just what they sound like. When interest rates increase or decrease over the loan term, your interest rate will increase or decrease with it. So your payments and interest will vary from month to month.
Pre-Approved Mortgages allow you to shop around for your new home or property and know just how much you can afford!
Remember that when you take out a mortgage on a property, it belongs to the bank you took the loan from. This bank can repossess the property at any time you fall into arrears – have missed several payments. Be sure to do your research before applying for a mortgage and know what you can afford. With the many types of mortgages that are available and the right guidance from your financial adviser, it is easier to choose the mortgage that fits your financial position.
Subscribe to:
Posts (Atom)