Avoid These Top 5 Short Sale Buying Mistakes

With so many great foreclosure and short sale deals on the market, you may find it hard to resist jumping in and taking advantage. But few are aware of the expensive problems that can accompany short sales. Short sale properties often have hidden issues like structural damage, mold, and plumbing issues. Don’t let this completely discourage you; there are some hidden gems out there. Just keep the following tips in mind and don’t fall for these five mistakes short sale buyers commonly make.

5 Tips for Buying a Short Sale

Don’t Ignore The Problems

Many previous short sale owners faced financial difficulties and therefore were not able to care for the property properly. Many of these homes suffer from more than just neglect. They are leaky, moldy, have termites, have been stripped by thieves, and are dirty. Beware though, that in some areas banks are not required to disclose any of these issues to potential buyers. There have been cases when the house was constructed of defective and recalled materials and the bank did not alert the potential buyers. Many older short sale homes are in worse shape. It is likely that the previous owners had experienced financial hardship for some time and were unable to make cosmetic repairs.

Don’t Skip the Property Inspection

Make sure you are present for the inspection. The inspector will help educate you on the property. Be aggressive in asking questions because the inspector is on your side. Get estimates on expected repairs and when a problem is noted, do your research on it. Renovation costs are always underestimated. In some areas, buyers are going as far as doing property inspections before making an offer, known as a preoffer property inspection. Also, call in special inspectors for more costly issues such as damage to the house’s structural construction, mold, and termites. If the house is particularly old or damaged, consult a structural engineer.

Don’t Ignore Important Insurance and Legal Information

Because most short sales won’t come with a disclosure statement, you should do additional research independently. Try to find out whether any renovations and housing additions have been made legally, have permits and are approved. You don’t want to get fined and cited for construction you didn’t do. Checking in with the neighborhood planning department can help you ensure that there aren’t any neighbor plans to build a large structure next to your house or tear one down. This information won’t be included during a short sale.

Don’t Leave Yourself In a Time Crunch

Short sales closings take longer than traditional home sales. The seller’s lending bank will have to approve the terms and price at which the property is sold. In this economic environment, banks have a lot of short sales to review; so things will take some time.

Don’t Get Emotionally Attached to a Bad Investment

Not every short sale is a great deal. Think as an investor would and don’t get emotionally attached. Think about how much someone would pay to rent the property. Would that cover the mortgage? Also consider how much money you’ll have to put into the house to live in it. Bring along a friend or relative and ask what they think about the property. If it’s not a good investment, walk away.

This is a really great time to get a deal on a short sale property. Keep in mind the above when you are shopping. This way you’ll know for sure you’re getting a great deal and making a good investment.

Chicago Neighborhood are Working to Survive

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Although this video is from 2009, the problems are still the same in neighborhoods across the country.  This is a neighborhood in Chicago, IL, but you can see the same problems and struggles in similar neighborhoods in the Midwest.  Some areas of the country are slowly recovering, but many were so devastated by the foreclosures and the fact that houses are left empty, that it will be a long time before they are close to healthy again.

A Spanish protest

A Spanish protest.

As we come out of the socialist party offices, past the gleaming bust of Karl Marx which stands inside the doorway, suddenly I heard it, witnessed it, the Spanish reaction to property foreclosures sweeping the country, the sound of my very first cacerolada, the tactic is copied from Argentina when it also went bust in 2002, the idea lacks subtlety yet  appears to be affective, protesters block the streets banging pots and pans, these particular protesters are women, office workers mostly aged over 40 and well dressed,  they have spread themselves in a line across the road, blocking the traffic  at one of Madrid’s busiest intersections, they bang their pots and pans and chant, “the bailouts are rewarding the Banks” they say, but insist they  are doing nothing to ease the suffering of families laid low by the economic crisis. People are losing their jobs a woman tells me, decent families with children, living on the street, surviving on handouts and charity. This was one of many caceroladas I have witnessed in the last two weeks.

When Bankia Spain´s fourth largest banking group had to ask for a 4 billion euro bailout, followed by another  19 billion when the initial 4 was not enough I saw the same type of protest involving pots and pans again, deployed primarily outside many of its branches.  But Spain’s problem is not just its banking  system  the country’s economy  was buoyed up for a decade by the very property boom that the banking system fed, so now they are left with bankrupt banks and a shrinking economy,  with protests  happening up and down the country and no decisions as of yet by the government, the situation is set to worsen with one in four unemployed,  people from all sectors seeing their wages and pensions cut, all kinds of ordinary people have taken to the streets using methods copied from and sometimes aided by the M15 movement the hard core anti capitalist youth movement who occupied Spain’s Plazas over a year ago, but the new breed of  protesters are well aware that the constant  banging of utensils on Teflon is at the moment merely  acting as a kind of release valve on the feeling of social discontent.

Later I met a group of squatters who had occupied a block of flats in Seville after losing their own homes to repossession; they were planning a protest of this kind themselves outside the electricity company headquarters that had just recently disconnected the electricity to the building. The squatters mainly families, calling themselves Barrios en Lucha which translates as ‘neighbourhoods in struggle’ were evicted from their own homes when they were repossessed by the banks, released a statement

‘Twenty families in urgent need of housing, organised through the 15M movement, have squatted an empty building in Avenida de Juventudes Musicales, (the Avenue of Musical Youth!) to make homes for themselves there under the name of Patio of Neighbours “La Utopia” and to “make visible the terrible housing problem that so many people suffer. The building has been empty since it was completed in 2010. Instead of it sitting empty, twenty families have made it their home’.

The building in question  is an empty apartment block, never been lived in since it building work was completed in the year 2010,  it was previously owned by a large property company, since declared bankrupt, it is presently owned by the bank Ibercaja, the number of families now squatting has recently  risen to 36, some had simply fallen into rent arrears and been evicted, but the majority were still the victims of bank repossession, the people inside are a mixture of ages from the very young to the very old, some in a state of serious ill health, but even this has not stopped them being constantly harassed  by the local government, water and electricity have been disconnected, One woman I spoke to was previously living in a block of flats from which thirty families have been evicted, in an area called La Macarena which has the highest rate of mortgage foreclosures in Seville. If this continues I fear a lot more cacerolada´s will be heard ringing through the streets Spain.

Property Repossessions – How Are We doing?

There are many things in life that are stressful, and property repossessions has got to be one of the worst. During the last 3 or 4 years, foreclosure procedures on both sides of the Atlantic has caused countless families to lose their homes.

Whilst recent reports in the US state that repossessed homes are on the downturn, a closer look at figures would suggest otherwise. The recent figures are de facto but the speed with which properties are being processed is more the deciding factor re the numbers than an actual slow down in repossessions.

It’s no different in Europe, with vast numbers of Spanish home owners losing their homes on a daily basis. In the heart of the financial mess is Mercia, an area widely advertised a few years back as being some kind of Mecca for overseas property developers. Ordinary home owners were also targeted, with many a UK resident jumping ship and buying what they thought would be their Spanish Shangri-la.

Fast forward to the Spring of 2012 and disaster abounds. Properties are unfinished, complexes deserted. Beautifully constructed blacktop stretches for miles, then simply terminates. Manicured and lovingly tended golf courses are little more than expensive, ornamental landscaping and hotels, stores and bars remain unused.

The Spanish banks are groaning with the effort of trying to sustain a weakening economy and the rest of Europe has averted its eyes whilst praying for a financial miracle. Elsewhere, in the UK reports were published (at the end of May) that stated that house prices had fallen below those enjoyed during 2005.

In seven years, the UK householder has seen a significant drop in the value of property, and just like their American counterparts, it doesn’t look as though things are going to change anytime soon. Property repossessions continue to increase, despite the fact that UK banks have tried to create a better relationship between themselves and their borrowers.

Ireland fares no better, with house prices continuing to fall, and looking elsewhere in Europe it looks as though the entire continent is barely managing to keep a roof over its head. What does all this mean for the average home owner? Simply that you’re not alone, and that the world continues to struggle to regain the financial foothold it enjoyed prior to the 2008 crash.

What can you do to avoid going through a property repossession?

  • approach your bank/lender and discuss your future options. Banks aren’t gaining anything from foreclosures, so see what they can offer by way of support and negotiation. Ask for an extension, see if you can alter the terms of your mortgage; in short explore your options with your lender
  • if it’s possible to do so, try and sell your home. Better to off-load debt that you can’t manage, than to hang on for grim death
  • consider renting. There remains a high demand for rental property, and it may well be worth you moving out and renting your home out, whilst you (in turn) rent somewhere for yourself
  • seek financial advice elsewhere. There are a variety of charitable organizations around the country, make an appointment

Whatever you do, don’t hand your keys over and walk away, Turning your back won’t solve anything in the long term, and you may well find yourself before the court for more than just the mortgage debt itself.

Link: need realistic mortgage advice? Click here.

Cleveland Levels Foreclosed Homes to Revive Neighborhoods

All around Cleveland, foreclosed properties are being torn down, rebuilt, or used for other purposes.  This is an excellent video to see what Cleveland neighborhoods are doing to fight the aftermath of foreclosure.

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JPMorgan Chase Has to Pay Ohio and Other States Over Bid Rigging

Ohio has been caught up in another case involving JPMorgan Chase which affects our economy and the ability for the state and local municipalities to create jobs and income for Ohio residents.   JPMorgan Chase is going to pay out in total $211 million, a number that is so high I can’t even imagine what that amount is, after admitting that one of its divisions rigged dozens of bidding competitions to win business from state and local governments.  Unbelievable!

Bid rigging means that the bidder has a chance to see competitors bids before the final bid is cast, giving the bidder an unfair advantage on the bid.  Why is this bad for states?

Banks help municipalities invest the money they raise from bond offerings to earn interest before they use the money for various projects.  Competition allows the municipality to earn the best yield possible.  By bid rigging, the competition is not real, and it denies the municipality the best yield resulting in less income earned.

Complaints were filed by the SEC, the IRS, bank regulators and state attorneys general.  Part of the money is paying off a civil fraud charges.  From this amount of money, Ohio will receive $1.2 million, and the City of Cleveland, the Columbus Regional Airport Authority, and the Ohio Public Facilities Commission will also receive money.  Just one more case of the big banks taking money out of taxpayers pockets that has contributed to the economic recession.

Ohio Home Sales Delayed by Stricter Policies at Fannie Mae and Freddie Mac

One of the largest impacts on the economic recovery of states including Ohio are the new stricter rules governing government mortgage agencies like Fannie Mae and Freddie Mac.  Many people who would have fit the borrowing criteria 5 years ago to buy a home in Ohio are no longer considered qualified by the much stricter new rules.

This affects both the buyer and the seller in both ends of a deal in selling homes, whether they are Ohio foreclosure homes, or just regular homes for sale.  Sellers who are selling homes at a fraction of what they paid for them, are not even able to get a buyer approved to pay for that amount.  Buyers who normally would have qualified for a loan through a mortgage lender, are not being approved even if they have good credit.  Their circumstances are just not good enough.

This causes a huge delay in the Ohio economic recovery that we all need to get back to better paying jobs and also to get back on the road to a more prosperous future.  Many of the government policies, meant to help, are just acting in conflict with each other.

Believe it or not, there are a record number of people who want to buy homes in Ohio.  However, more than usual are being turned down for mortgage loans.  This is on top of another delay caused by federal, state, and local investigations into “fraudclosure” or mismanaged or criminal neglect and oversight of foreclosure practices in several banks and banking contractors.  And no matter who is to blame, the Obama sponsored loan modification program has fallen short of goals.

“Giving out unsupportable mortgages was a disaster, and now the danger is overreacting and making the standards excessively high,” according to Joseph Stiglitz, a Nobel prize winninng economist and professor at Columbia University in New York.

Banks usually follow the standards that are set by Fannie Mae and Freddie Mac because these are loans that the agencies will then purchase and package into bonds.  These companies, along with the Federal Housing Authority back about 90% of loan originations.

Government programs like the Home Affordable Modification Program (HAMP) have mostly helped keep existing home owners out of foreclosure, here in Ohio and elsewhere in the U.S., but they have not had the success rate hoped for by the Obama Administration when the program was begun.

Right now the entire fleet of 50 state attorneys are investigating the banking industry foreclosure practices which is holding up the current batch of foreclosures in the works which may work in some homeowners’ favor, allowing them more time to catch up with their bills.

Recently, indictments were brought in Cuyahoga County against 9 employees of Argent Mortgage, Inc.

Sesame Street Elmo Helps Explain Job Loss and Foreclosure to Children

Due to the large amount of families facing financial crisis due to foreclosure and bankruptcy, Sesame Street has come out with a series of 5 videos to help explain your family’s financial difficulties to your children in a way that won’t frighten them, leading to more issues.  Sesame Street calls the series Families Stand Together: Feeling Secure in Tough Times and they also have a website that has other activities and links for families facing job loss, foreclosure, and bankruptcy, or just having to move because of financial issues.

Children are well aware when parents are not happy, are arguing, or are under stress which losing a job or a home definitely qualifies for.  As usual, Sesame Street does an excellent job of providing help through characters that your children already trust through their television shows, videos, and books.

Sesame Street – Families Stand Together: Tough Times

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Argent Employees Should Be Indicted

I have been closely following the news about the Cuyahoga County Grand Jury Indictment of the Argent Mortgage employees, and frankly, as far as I am concerned, they are just a drop in the bucket of all the fraudulent mortgage activity that had been allowed over the last few years.  If this financial crisis had not happened, who knows how much more mortgage fraud would be going on right now.

I find it insulting, to say the least to know that American banks are taking advantage of prospective buyers just so that their employees can earn a few extra bucks, when by their actions they can destroy the lives of numerous desperate families that are already on the edge.  Did the banking crisis cause the recession, or did the recession cause the banking crisis?  We will most likely never know, however, it is sure that the banking crisis is a factor, if not the cause of the long continuation of the problems facing the American financial system, and several specific states, Ohio being one of the most affected by the current mortgage, foreclosure, and bankruptcy issues.

So many companies in Ohio have had to close, or consolidate, close some of their operations, let people go, or lay people off.  These people in turn, then cannot pay their mortgage, and go into foreclosure.  It is a never ending cycle, that needs to be fixed for our Ohio economy to get better, and the rest of the country too.

Most families in Ohio are sitting on pins and needles, waiting for the next shoe to drop, hoping and praying that their jobs will stay intact for another few months.  I personally would like to see a lot more indictments to companies like Argent, whose employees thought it would be good fun to torment hardworking American families.

Bank of America Will Pay $8.5 Billion to Repurchase Mortgage Securities

A large fix for the banking industry was settled today.

Bank of America announced today that it will pay $8.5 billion to settle claims related to sales of poor quality mortgage securities through its Countrywide division.  Bank of America CEO Brian Moynihan said that the settlement would minimize “future economic uncertainty” in the banking business and “clean up the mortgage issues largely stemming from our purchase of Countrywide.”

“We have said consistently if people are reasonable and can get to a reasonable assessment of their claims and it’s in the best interest of shareholders, we will settle,” Moynihan told Wall Street analysts in a conference call.

The settlement is subject to court approval and covers 530 trusts with original principal balance of $424 billion.

Citi analyst Keith Horowitz said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.

Shares of Bank of America Corp. jumped more than 4 percent, or 48 cents to $11.30 before the market opened, with investors happy that the bank can put very big uncertainty behind it.

Investors may now be more confident that they can get similar concessions from other major U.S. banks that created markets for mortgage-backed securities with questionable pedigrees.

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While I am glad to see the financial world begin to stabilize itself, the settlement still begs the question about how much the banks are doing to help people during the foreclosure crisis.  While Bank of America is willing to settle with large banking clients, what about all the mortgage customers who have lost their livelihood while the banks were foreclosing on their homes.  Consumer confidence will continue to be shaky until the foreclosure rate goes down, and people start buying new homes, and building new homes.  Until then, Ohio and the rest of the U.S. will be buying and selling foreclosed homes, foreclosed properties, and foreclosed condos.

Until then, you can get a real bargain on a short sale in Ohio, or a foreclosed home or office building.  Hopefully, with the banks improving their financial status, the rest of us can do the same.