Financing Foreclosed Homes

A "not so beautiful day in the neighborhood" for some homeowners today. Living next door to a boarded up home after foreclosure is not anyone's choice.  Even with the price being way below market value (also not a blessing for the neighbors) the problem generally lies in being able to finance a severely distressed property.  There is an answer that a lot of folks are over-looking in today's market. That is the old 203K loan.  Still viable, available and a real good way to purchase that fixer property and have enough money to make it habitable. 

Foreclosure properties, especially those with the water and power turned off, may not qualify for standard financing, but may qualify for a federally insured 203(k)loan. Buyers who are going to "owner occupy" the property and do not have enough money to purchase a foreclosure home using cash, may qualify for the federally insured 203(k) loan, which allows borrowers to roll projected rehab costs into the loan.

Since most foreclosure properties are sold "as is" and, oftentimes, heating, plumbing, and/or electric are problematic or inoperable, it's unlikely a conventional lender will lend money on the home.  With a  203(k) loan, buyers generally employ an independent consultant hired by the Federal Housing Administration to review contractor cost estimates and architectural plans for things like whether the work will bring the property up to minimum standards, while not going overboard on improvements.

Buyers should be aware that not all foreclosure properties will be eligible. For instance, a partially built house that has never had a certificate of occupancy will require a construction loan of the kind that a commercial developer would use. We're also seeing more and more "unfinished remodeling job" homes today where the seller ran out of money and the building systems and/or  structural definitions are lacking or insufficient.  Those would require construction loans as well.   

The interest rate on a 203(k) loan is approximately a quarter of a percentage point higher than on a standard FHA-insured loan, and a buyer also can expect to pay 1 or 2 points. Also, as with other FHA-backed loans, down payments may be as low as 3.5 percent, and loan limits apply. Currently, most FHA loans are capped at $729,750.

My friends at PACIFIC FIRST FINANCIAL will give you all the information necessary to investigate the 203K loan for your purchase.  They also work with the CHF Platinum Program which is a Homebuyers Assistance  Program featuring low interest rates and down payment along with closing cost assistance with Grants that do not have to be repaid.   Call Sheila for the latest info at 310-214-9299.

Tote your toolbelt over to my office and I'll give you list of great opportunities in your neighborhood!  We're always ready to work for you here at Team South Bay Realty, Your Realtors For Life!

Call Charlie @ 310-534-3940 or email: Charlie@TeamSouthBayRealty.com

When will housing come back in California?

Happy New Year!

Foreclosures in the state are still high. Sales of new homes are at historic lows. And millions of homeowners are underwater on their mortgages. So what's the outlook for 2011 and beyond?

Although the steep decline of home prices in California ended in spring 2009, the weakness in the housing market after the expiration of federal tax credits for home buyers last year has led to some speculation as to whether the recovery is sustainable. Five experts, including Leslie Appleton-Young, the chief economist for the CALIFORNIA ASSOCIATION OF REALTORS®, were asked to provide their view on the state of real estate and what they think is needed to get the housing market moving again.

• In terms of home prices, the experts differed slightly with the majority predicting that home prices will remain flat throughout 2011. Ms. Appleton-Young predicts home prices will rise 2 percent this year, while a foreclosure expert predicts housing prices to decline 5 percent in 2011. According to Ms. Appleton-Young, there is little chance of home prices returning to their previous peak levels anytime soon. “We are in a slow-moving recovery with prices stabilized at the moderate and low end,” she said. “We are still seeing price attrition and price softening at the upper ends of the market.” 2011 will be lackluster, she said, but that does not mean California is not improving. "We are almost two years into a price recovery. The problem is not to look at 2007 as the normal market that you are moving back up to, because it wasn't a normal market. We are back in an underwriting environment that actually makes sense." "You are seeing prices recovering throughout the state," she added. "It is just going to take time."

• California’s recovery will hinge on location, according to Richard Green, director of the USC Lusk Center for Real Estate. Areas between El Centro and Sacramento likely will not see a return to peak prices for a long time. However, places like La Jolla, Laguna, Huntington Beach, Atherton, Palo Alto, the city of San Francisco, and Marin County could experience a return to their peak prices within the next five years, according to Mr. Green.

• Foreclosure expert Bruce Norris of the Norris Group believes the market is being artificially boosted by government programs and is set to fall further this year. Mr. Norris believes the demand for housing is most-needed for a sustainable recovery.

• California’s coastal markets will make a return once the job market improves, according to Emile Haddad, chief executive at FivePoint Communities Inc. In turn, that will lift consumer confidence. However, California’s inland areas are more likely to lag behind, and builders will have to reconsider the kind of product they offer in certain places.

• Former UCLA senior economist Christopher Thornberg, predicts home prices will remain flat in 2011. Thornberg was one of the first to predict the housing crash, pointing to prices that were way out of line with what people earned. In that vein, he views the plunge in home values as its own recovery of sorts "because that is when prices went from stupid-high levels to levels that made sense again," Thornberg said. "Now we are in a post-recovery recovery, if you will."

Here in the South Bay we are still treading water! Looking forward to a stabilizing market in 2011 through 2012 and price increases equal to inflation only. Those downsizing or moving up this year will find plenty of good quality housing at great prices. Don't forget we still have the lowest interest rates in over 30 years available today at fixed rates!