Archive for February, 2010

It Sold! No it didn’t!

As I was walking through the neighborhood, I saw a client who had written a contract a few days ago.  He had hoped to purchase a particular REO property, as he wanted to help some friends by renting the house to them.  This was a multiple offer situation, and he wrote his cash offer above the listed price. 

Photo courtesy of Stockvault.net

I called to him and said, “I haven’t heard anything yet.”  He called back to me, “It sold!”  When I caught up to him, I asked what he meant, as it didn’t seem possible that it could have sold already.  “Oh yes,” he said, “I read it in the newspaper.”  I must have looked incredulous, as he asked me if I wanted to see the paper.  “Yes,” I said, “please show it to me.”  When he showed me the clipping, I saw that some recent sales were listed, and among them was the address of the home on which he had written the offer.  “It sold for more than I bid,” he said, looking at me with disappointment. 

Upon closer examination of the details in the newspaper I noticed that the sale date was January 10, 2010.  We had dated his offer February 9th, and so far had not heard back from the listing agent.  The list of sold homes was prefaced with the explanation that these sales were purchased through foreclosure by lenders.  When I pointed out to him that the sale reported in the paper took place in January, he looked puzzled.  You may be too.  This is what happened:

The prior owners lost their home to foreclosure.  The home was purchased in January by the loss mitigation department of the lender holding the note.  The lender paid $237,000 which was reported in the newspaper.  The lender then engaged a Realtor to sell the home, and as this home needs work, it was listed at $180,000, less than the lender paid for it.  Because this San Jose home was listed so low, multiple bids came in on the property, many of them above the listed price. 

We must wait to see what the sale price will be on this house.  That is not disclosed until escrow closes and the property has been recorded in the new owner’s name.  Will it be what the lender paid?  Or less?  Or more?  It could be any of these, but in this case, in this area, it’s likely to sell for a higher price.  In this troubled time in our nation, lenders would be happy to recoup what they paid, but they may not.  Lending institutions are in the business of lending money, not owning real estate, and their interest is in getting the REO property off their books.

Preparing to Buy: Getting Finances in Order

You’ve been pre-approved, and you’ve been shopping with your Realtor. She’s encouraging you to write an offer on that cute little house you saw today. “When do I need to have my funds available?” you wonder. Some funds need to be available right away. An earnest money deposit, or “consideration,” is part of writing a real estate purchase contract, and you are expected to put a check with the offer you write. Your agent will collect a check from you, usually up to 3% of the purchase price. If your offer is not accepted, she will return your check to you. Once your offer is accepted, she generally has three days to deposit that check into an escrow account for you. This money becomes part of your down payment.

In addition to the remainder of your down payment, you will need cash for closing costs. These costs may include escrow charges, title insurance, lenders’ fees, the transfer taxes that are collected when a property changes owners, prorated property taxes and various small fees. Both buyers and sellers have closing costs. Who pays for what depends upon the terms of the contract and the county in which the property is located. The money for closing costs is brought in with your down payment, shortly before your escrow closes and you become the new owner of the home.    

“Okay, so I need money when I write my contract, and I need my down payment and closing costs just before my escrow closes. Do I need to have any other money available during the escrow process?” I’m glad you asked! Yes, probably so. While the deposit, down payment, and closing costs are most of the money you will need to bring in to purchase your new home, you may have to pay “up front” for the appraisal the lender requires. Of course if you’re paying cash for your home, an appraisal would be optional. Also, you may wish to have inspections made on the property you are buying. Most inspectors give us the choice of paying for an inspection at the time of inspection or having the cost of the inspection billed to escrow. In the latter case, the fee is higher. Questions? I’m here to help you.