Buying a Bank Owned Home

What a perfect time to get an affordable home in Southern California, especially Temecula and Murrieta. Now there are hundreds of bank owned homes on the market and ready to go.

In the beginning, when you saw a bank owned home, the yard was yellow and the homes were trashed. Now when an agent list the homes for the banks, they require the agents to turn on the water and electricity and clean up the yard.  They have a cleaning service come in and clean. All of that said, they can’t make the carpet new or even beige without spots and they won’t and can’t make linoleum turn to tile or wood. You often find great granite and beautiful stainless steel appliances with terrible flooring!

Now when you do find something you like and want to put an offer on there are two things to remember. One: Get a home inspection if it makes you feel more confident but banks will do no repairs and will not discount the price of the home to make up for the changes you want to make. Two: You will have to make an offer very close to the price the home is listed for or the bank won’t consider it and will just wait for the next offer!

Before the home is listed with an agent, the bank gets an appraisal and sets the price that they will list and sell the house. They consider the price they list to be the price they will sell! Even for the listing agent to drop the price of the home, they have to wait a certain number of days without an offer and then be able support the price they want to lower the price with a number of comps of homes that have sold for less.  Even then, the banks gets a couple of price opinions from two other realtors not involved or from the same area. In in todays market the prices from the banks are pretty much right on.

There aren’t many perfect homes but if you find one, there will be multiple offers “over asking”. The agent will tell you to give you “highest and best” offer.

They know the value and they don’t negoiate. They don’t have to move for a job, they aren’t “losing” the home, they don’t want to move before winter, they aren’t trying to sell to be able to move into their dream home. In other words, it is strictly a BUSINESS decision.

Something I hear ofter is – “I don’t want to pay that price (which is half of what they would have willingly paid in worst shape last year) BECAUSE I have to put in $10,000 to $20,000 to make it the way I want it. The banks could care less! Buy a cheaper home but don’t expect your problem to be their problem. They will just sell to someone else.

Home are so affordable and interest is low – take advantage of this time who knows when it will come again.

Talking about FHA mortgages

I find that most common folks like you and I don’t really understand exactly what an FHA mortgage is and what kind of people the should be looking at FHA loans. I found a great article by Brad Cornett that I thought I would share with to to help decode “FHA”

FHA Home Loans to the Rescue – Help for Homeowners

by Brandon Cornett

You can’t turn on the TV these days without seeing a news story about the U.S. economy in general and the housing market in particular. Starting in 2007, we began to see record numbers of home foreclosures, a trend that continued into 2008 (and one that shows no sign of slowing).

But for many homeowners, help is on the horizon. And it comes in the form of FHA refinance loans. Let’s take a closer look at this new program and what it promises to do.

Housing and Economic Recovery Act

The recently passed Housing and Economic Recovery Act of 2008 will help “at least 400,000 families” who are struggling with their mortgage payments and facing foreclosure. It will do this by providing FHA-insured refinance loans to switch the homeowners from high-rate ARM loans to lower fixed-rate mortgages. For those accepted into the program, the end result will be a lower monthly payment and more desirable fixed rate that will no longer adjust / increase.

History of the FHA

The Federal Housing Administration was created in 1934, during the Great Depression, to make home financing available to a greater number of Americans. The FHA does not actually make home loans to consumers. Instead, they insure certain loans made by private lending institutions.

You’ve probably heard the term “government-backed financing” before. The FHA program is an example of this. By having government insurance in their favor, private lenders are more willing to offer mortgages to borrowers they normally wouldn’t qualify (due to credit problems or other qualification issues). The lender is assured of getting their money back on the loan, even if the homeowner defaults and stops making payments. That’s what the FHA insurance does.

The Refinancing Angle

Traditionally, the FHA program was focused on helping buyers in the purchase of a home. But as a result of the aforementioned Housing and Economic Recovery Act, the program is being opened up to homeowners who want to refinance. According to the HUD website, “an estimated 400,000 borrowers in danger of losing their homes will be able to refinance into more affordable government-insured mortgages.” The program is slated to begin in October of 2008. To find out if you are eligible, visit the HUD website or refer to the Home Buying Institute resources mentioned at the end of this article.

Getting Away from ARM Loans

The goal of this new program is two-fold. It is designed to help struggling homeowners who have adjustable-rate mortgages (ARMs) convert to fixed rates. It’s also designed to lower their mortgage rates in the process. Lower rates and less uncertainty — a double win.

About the Author: Brandon Cornett is the publisher of many consumer-education websites, such as the Home Buying Institute and the Software Learning Center. To reach the author, please visit his software website at www.LearnAboutSoftware.com