Purchase and Remodel a home with only 3.5% cash out of your pocket

Today I attended a class on the FHA 203 K loan.  It has always been one of those things that sounds really good but is practically impossible to get done.   But I met a team of peeps all working together and getting the FHA 203k loans closed and people into their beautiful homes.

One of the challenges in todays market is that so many of the homes (foreclosures and short sales) are in poor condition.  Having items and issues that need repair in order to get a loan on the property; and with both short sale and foreclosure properties being “As Is” transactions, and no repairs being completed by the seller, getting a loan approved, funded and closed can be like pulling teeth without any Novocain.

In comes the FHA 203K team!

Together, a lender who will complete this type of loan; the home inspector, termite inspector, general contractor, HUD inspector, and a handful of other people that together know what is required, are working in unison to help people purchase these distressed properties, make the needed repairs and do some remodeling and updating at the same time.

How does it work?

The home buyer finds out what they will qualify to purchase.  Working backwards from there, if you qualify for 200,000 and you are going to put 20-35,000 into repairs and remodeling; look for homes priced around 160,000.  At the same time you have the home inspection, also bring in the general contractor and maybe the HUD inspector too.  Find out the cost for what is needed to be repaired and what you would like to have remodeled.  The cost of repairs and remodeling are rolled into the final loan amount. At closing the general contractor gets in the house and makes the repairs and remodeling, a few weeks later the home owner gets to move into their beautiful newly re-done home.

This takes an experienced team, a well oiled machine and fantastic communication.  I am glad to know the players! and to have been invited to join the team and help a few more buyers get into their dream home.

Why isn’t the bank doing a short sale?

I had a great question asked this week. The person asked me about a house in their neighborhood. It had been vacant for a while and they were interested in the stats and possibly purchasing it. I looked up the house and found out the property was scheduled for foreclosure in less than a month.

The question: “Why isn’t the bank doing a short sale?”

The consideration for a short sale is requested by the owner of the home. It may be in the owner’s best interest to do a Bankruptcy, and let the property foreclose. If the owners had consulted with a tax attorney, they may have been advised to move forward in the manner they were.

Doing a short sale is not the choice of the bank. They (the bank) cannot opt to sell the property, as they do not own it. The current owner could at the last minute pay the bank the fees owed, renegotiate their loan and get out of default. The foreclosure process allows the owner to get out of trouble if they can.

The bank is not at liberty to do anything until they have ownership of the property.

Foreclosures in the Active Adult Communities

With today days real estate market I get asked about foreclosures all the time. Specifically about foreclosures in the adult communities. As people are looking thru the listings from our website (Active Adult Communities in Arizona) they don’t see many foreclosures. I am not hiding them, or keeping them from the selection available, I promise.

It is the nature of the buyer in Adult Communities. They are much more conservative. Many if not most, purchase with cash. If they require a loan, the amount down is usually greater than 10 or even 20% and the loans are all fixed rate loans. Only investors in those communities purchased with interest only, adjustable loans. And most new build communities did not sell to investors.

So we don’t see many home foreclosures in the adult communities. When they do come on the market, many times was an investor that got in over their heads, or some major personal issue, or the property passed on to the family and they couldn’t handle paying the additional mortgage.

The result, the housing prices in the adult communities have not been affected by foreclosures like the all aged communities. Instead, the conservativeness of the buyers, and the balance of retirement accounts has kept the buyers away, bringing the prices down in those communities.

In conclusion, the adult communities see far fewer foreclosures, and though the prices have come down with the real estate crisis, they prices have not come down as much as the all aged communities.

Castles in the Sand

This is a cautionary tale of buying foreclosed homes. The documentation you don’t get when you purchase a home is just as important as the documentation you do. One of the things missing in a foreclosure purchase is disclosure on the history of the property.

… A young buyer found the home of his dreams. He won the bid and eagerly awaited his closing date. In his excitement he would come by the neighborhood, walking his dog, meeting some of the neighbors, and peeking in the windows of his soon to be new home.

His enthusiasm was growing each day, until he peeked in the window of his soon to be castle and discovered the ceiling of the kitchen had fallen and was strewn across the counters and floor. Water was pouring down into the kitchen and upon further inspection into the living room as well.

The beautiful new carpet, the fresh paint, new kitchen and bath cabinets. All ruined…

With this type of news, the neighborhood gathered to commiserate with the saddened buyer. From this gathering it was revealed that this house had had similar issues in the past. In fact when the bank foreclosed, they had to do the same repair, and apparently the source of the water leak had not been corrected by the banks cleanup crew.

Now, the future of this young and disappointed buyer is still not known, but the banks cleanup crew is back again, doing the same job, with less mold to remediate, due to the speed the water damage was reported and addressed….

And the Bank, did they disclose the repairs they had to do prior to selling the property – No

Will the bank disclose the damage and repairs that are being done today… No

Because when you purchase a bank owned property you are purchasing “As Is”, “Where Is” and you not only do not receive disclosures, but sign documentation that says you can’t sue the bank for any items you discover in the future either.

New Real Estate Scam to be aware of

Brooklin Bridge

Originally uploaded by [desta]

I don’t mean someone selling the Brooklyn Bridge: When you are working with money, there is always a scam around. Some are easy to detect, others a bit harder.

This past week I was at a training class sponsored by Lawyer Title. They identified and shared with us the newest scam to be aware of. Sellers having a “dirty” Release of Lien. The release has been filed with the recorder’s office, so when the title company goes to provide clear title, there are no mortgage notes attached to the property. (Those have been released)

The scam is: the release if fraudulent. The seller still owes. The seller continues to make their payments, so no one is aware and once the home closes they walk away with all the proceeds from the sale of the home. Then they stop making payments and the house starts to foreclose.

When a call is made to the previous mortgage lender, the fraudulent actions are exposed. If this is detected by the title company prior to closing, the buyer is out of luck. They will get their earnest deposit back, but they won’t be getting the house. If it is not detected and the house closes, the title company is in for a big payment to the sellers bank as they guarantee clear title to the buyer.

So if a seller recently paid off their mortgage, and has the ‘paperwork’ to prove it. Be aware. Things may not be as they seem.

Home Owners Associations – some not doing so great

Recently, at a continuing education class, the instructor shared some facts about HOA’s. There are currently around 11,500 Home Owners Associations (I am not sure if that is in the state, or in the county I didn’t write that tidbit down) and of those HOA’s 3000 of them are upside down financially.

I was surprised to learn that as little as 15% of properties going into foreclosure in an HOA can cause financial stress to the balance sheet.

With our residential purchase contract, you the buyer, do get to check out and approve during the inspection period, the CCR’s (rules and regulations of the HOA). We are now suggesting adding in that the buyer to also receive the current financial records for the HOA. Knowing what the financial status is of an HOA, you will have a better idea if there are going to be large assessments in the future, does the HOA have reserves, and are they adding to the reserves each month.

Foreclosures and the Adult Communites

Although there are no adult communities within McCormick Ranch, our initial website is focused on Active Adult Communities and we work with many 55+ buyers.   

We are seeing lots of numbers being published for the ratios of Bank Owned and Short Sale properties in the valley.   We are not seeing those same numbers in the Adult Communities.   Since it is a cold rainy day, I have been playing with numbers and really surprised myself with what I found!

Taking only single family detached homes in the entire MLS for the valley, a total of 41,832 this morning, 10,796 of them were Bank Owned and an additional 9,003 were Short Sales.  Those numbers round off to 25% of the single family homes on the general market are bank owned and another 21% are short sales.  

Current MLS Single Family Homes on the market, with Bank Owned and Short Sale

Current MLS Single Family Homes on the market, with Bank Owned and Short Sale



BUT when you look at the Active Adult Community 55+ single family homes, there are a total of 2819 on the market.  Of that 2819 only 52 are bank owned and 63 are short sales which works out to 2% of the homes are bank owned and another 2% are short sales.

Current active single family home listings in adult communities comparing bank owned/ foreclosure and short sale

Current active single family home listings in adult communities comparing bank owned/ foreclosure and short sale



HMMMM  kinda makes you wonder.    Our 55+ citizens have indeed saved for their retirement homes, their financing is minimal and their risk taking days are in the past.

There were very few zero down,  or investor homes sold in these communities in the 2005 and 2006 sales surge.    I believe it is the investors who did get in to these adult communities, that are making up the Bank Owned and Short Sale properties.

Foreclosures and Cash for Clean Up

One of the challenges with purchasing a foreclosure property, is the cost of clean up.  Many of the properties, are a great value, they are priced right, and are selling.  The challenge is once you have the property, where are you getting the cash to do the repairs and clean up required.

Cat pee on carpet in foreclosure home

Cat pee on carpet in foreclosure home

Most of the banks are keeping the power on, with the breakers off to the main part of the house, that way they don’t get hit with a high electric bill.  Then with power to the pool, and landscaping, green pools are not as common an occurrence and tons of dead plants are not in need of replacement in most cases.

But what about the damages and condition of the interior of the home.  Broken floor tile (that can’t be matched any more), grimy carpet that has to be replaced, holes in the walls in need of repair, missing door knobs, do it yourself repairs that are possibly not up to code and safety standards and who knows what else.

Sure elbow grease and a bucket of paint are cheap and go along way.  What about the other issues?

During your inspection period, consider brining in tradesmen who can give you estimates of repair.  Know what the costs are going to be before you get into a home and situation that is over your head.  The bottom line may be greater than you want to handle.

a Sun Canyon foreclosure in Scottsdale’s McCormick Ranch

100_1476 This bank owned 2 bedroom 2 bath 1342 sq ft single level second floor apartment style town home with a one car garage is priced at $218,500. Located in the attractive community of Sun Canyon in McCormick Ranch , it has vaulted ceilings, a fireplace, lots of windows giving an abundance of light. The master suite has a large bathroom just calling out to be redesigned. . The kitchen has original cabinets painted white, tile countertops and all the appliances. The patio is a good size. The carpet 100_1478 might not clean up and have to be replaced, otherwise this is one foreclosure to be grabbed and run away with.

The closest comparable property, identical floor plan, also upstairs was priced at $275k. Others in the complex go up to $299k for the same floor plan

The one at $275k has oak cabinets & the same tile countertops as the foreclosure. It has very nice looking wood flooring in the kitchen. The carpet is aqua and

Map image

would probably have to go, so to me there is no way a wood floor and wood cabinets are worth $57k when the foreclosure is available. It would however look good without the foreclosure.

To find out more about this property or others give me a call on my toll free 1-877-579-7129

"The Cat House"… or when a good home goes bad

Posted by Claudina:

cat house I purchased a home a few years ago that had a lot of cats living in it. I felt like I stole it the price was so low and I bought it “as is” with intention of doing a total remodel..    I have never owned a cat so I figured, no problem, tear out the carpets and use a little Clorox on the cement under it and we will be ready to go.   Not so.  The cats had sprayed, not just piddled.  I didn’t know about cats spraying.  They can spray up to 3 ft high.   We tried scrubbing it down with Clorox…pool strength, we tried a magic ozone light, we tried every remedy suggested to us by our many helpful friends.  They called it “The Cat House”

What did we do?  Finally we tore out every single piece of wood trim, the door frames & baseboards, the cabinets , windowsills and even the doors.  We then cut the wallboard off at the 4 ft mark, everywhere!!.  We removed the insulation from the outside walls, washed the 2x4s  with all sorts of deodorizing stuff.  Mostly more Clorox, my cure all for smells.  Eventually  we ended up spraying many gallons of Kilz, my second step cure, on the 2 x 4s and in the spaces, put in new insulation and  new wallboard. I got pretty good with tape, and  a trowel that year.   Even the electric outlets had to be changed they were all so corroded.  We then tiled every square inch of the floors.  Oh, we had to pull all the insulation out of the attic crawl space and replace all the ducting for the a/c!  The little rascals had played up there too and ripped the ducts to shreds.  For as long as I lived in that house when the humidity got high I swore I smelled cat urine.  I did get even with the other agent, I got him to appear and pick up the cat urine soaked seller in his new Mercedes to go to the closing.  He had refused to even step into the house after the listing was signed. I did my walk thru and he waited outside.  He had to get it detailed after taking the seller for that ride  and  he reminded me of it every time we crossed paths.