San Ramon CA real estate listings and homes for sale, home buying, home selling information – Platinum Club Realty Team - CRG

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REO vs. Foreclosure

April 8th, 2008 2:23 PM

Many of our clients ask us about REO and Foreclosure properties. Therefore, we think that it would be beneficial to explain:

What are REO's and Foreclosures?
How are REO's and Foreclosures different?
Which one is better to purchase?

REO - Real Estate Owned: Is a property that a mortgage lender takes back into its ‘care’ as a result of a foreclosure on a home that has not yielded a buyer during a foreclosure sale. There maybe many reasons why a foreclosure sale by the mortgage lender fails, leading to a REO sale. The fact that the house is being sold as a REO property should not detract the buyer from the property. In most cases there is nothing suspect, or wrong, with the property that is for sale by the lender, other than the fact that the previous owner could not afford the repayments.

All homebuyers have the right to have a house inspected by a qualified assessor or appraiser. Sometimes the sellers may only allow the inspection at certain times, due to commitments and other factors. These problems, and various others, are not of concern with a REO purchase and therefore make having an appraisal carried out easier and faster, than would normally be the case.

Foreclosure: We don't want to spend a lot of time talking about the foreclosure process itself and that would take up quite a bit of this blog. What we want to focus on is what happens during the foreclosure sale. Foreclosure sales begin with a minimum bid by the buyer. This minimum bid has to include the following items:

The loan balance on the property. This is to cover the missing amount that the previous owner could not afford
All accrued interest Attorneys fees
All costs associated with the foreclosure process

To bid at a foreclosure auction, you (the buyer) must have a cashiers check in hand for the full amount of your bid. If you are the successful bidder, you receive the property in its "as is" condition. This means that the sale could include someone still living in the property and there might also be liens (a restriction on a certain parcel of property that usually reflects an amount of money due to a third party from the owner of the property) against the property which you will be liable for.

REO vs. Foreclosure: As noted, the major difference between an REO and a Foreclosure is that an REO happens as a result of a foreclosure on a home that has not yielded a buyer during a foreclosure sale. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank negative equity.

Which one is better? Generally speaking, Foreclosures are more favorable to investors rather than homebuyers because as a buyer you have to have all of the money upfront, purchasing the home as-is, and there is a very good chance that the home may have tenants that you would have to evict at your own cost. Every try to evict someone? No...see "Pacific Heights" (1990) to get a little taste. :-)

Even though REO's are less risky, don't expect to get a great deal! There is a very good reason why the REO prices are so appealing! An REO manager prices the home way below the market value and then waits for the "public auction", which drives up the prices. Many buyers that make offers on REO's get very frustrated when after 30 days they still hear nothing. Some continue to drive up the bid when they don't hear anything from the lender. Finally, after 30-60 days period, the REO manager picks the best bid. So if you are considering on making an offer on an REO, consider this:

The 60 days you have to wait to hear from the lender, you could have found 2 or 3 better deals with resale or brand new properties that have been on the market for a long period of time and have a good Realtor (that would be us) negotiate on your behalf
You are attempting to make an offer on a property covered in a cloud of bad energy not to mention one that may be in poor condition. Imagine what happens to homes that have all utilities turned off for a number of months.
Don't pay too much attention to all of the hype. Especially commercials that claim that you can purchase foreclosed homes pennies on the dollar. If that were true, EVERYBODY would be doing it...including US!

Posted by Zia Chernyak on April 8th, 2008 2:23 PMPost a Comment (0)

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4/14/08 - Weekly Mortage Update

April 13th, 2008 11:54 PM

This week brings us the release of seven relevant economic reports for the bond market to digest. We are also heading into corporate earnings season which could lead to fluctuations in the stock markets. If earnings come in lighter than estimates, the stock markets may fall, leading to an influx of funds into bonds. But, if earnings and forecasts are strong, the major stock indexes may rally, pulling funds from bonds and leading to higher mortgage rates. Some of the most influential companies don't report quarterly earnings for a few more weeks, but the early releases could affect optimism about what those big named companies' earnings will show.

1.) The first important report comes early tomorrow morning when the Commerce Department will release March's Retail Sales data. This piece of data gives us a measurement of consumer spending, which is very important because consumer spending makes up two-thirds of the U.S. economy. Current forecasts call for a 0.1% increase in sales last month. If we see a larger increase in spending, the bond market will probably fall and mortgage rates will rise. However, a weaker than expected reading could push bond prices higher and mortgage rates lower tomorrow.

2.) The Labor Department will post March's Producer Price Index (PPI) early Tuesday morning, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch; the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices, leading to higher mortgage rates Tuesday morning. However, a small increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for a 0.4% increase in the overall reading and a 0.2% rise in the core data.

3.) There are four pieces of news scheduled for release Wednesday. The first is the sister report of the PPI. March's Consumer Price Index (CPI) will be released early Wednesday morning. This index is very similar to Tuesday's PPI, but tracks prices at the more important consumer level of the economy. This is one of the most important pieces of data we see each month, so stronger than expected readings will undoubtedly lead to higher mortgage rates. Current forecasts are calling for an increase of 0.3% in the overall index and 0.2% in the core data.

4.) March's Housing Starts report is the second report to be posted Wednesday morning, but it will most likely be a non-factor in the market. It gives us a measurement of housing sector strength and mortgage credit demand, however, usually doesn't cause much movement in mortgage pricing unless it varies greatly from forecasts. It is this week's least important report.

5.) The third is March's Industrial Production report at 9:15 AM ET. It gives us a measurement of output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for a decline in production of 0.1%. Since signs of a weakening economy are considered favorable to bonds and therefore mortgage rates, a larger decline would be good news for mortgage pricing. However, the CPI is by far the most important data of the day.

6.) The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET Wednesday. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises.

7.) Thursday's sole monthly report is the Conference Board's Leading Economic Indicators (LEI). This data attempts to measure economic activity over the next three to six months. If it estimates an increase in activity, the bond market may fall and mortgage rates could rise. If it shows weaker than expected readings, the bond market may rally and mortgage rates should move lower. This is considered to be a moderately important report, so we may see some movement in rates as a result of this report. It is expected to show an increase of 0.1%.

Overall, look for the most movement in rates early in the week. The Retail Sales, PPI and CPI reports are the biggest names on the agenda. Any of the three can cause significant movement in the markets and mortgage rates, so please proceed cautiously if still floating an interest rate.

Posted by Zia Chernyak on April 13th, 2008 11:54 PMPost a Comment (0)

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Platinum Club Realty Team: April 2008 Newsletter

April 11th, 2008 4:20 PM

Hello,

Hope you had a great week!

Kick off the weekend with a review of our Newsletter to keep you up to date on Real Estate & Financing News.

Get insight about buying a home in Windemere or Gale Ranch. Read what a Foreclosure vs REO vs Short Sale is. Check out the New Homes Now Selling in Gale Ranch and Windemere. Review the Mortgage Rates!

April 2008 Newsletter

Have a Real Estate or Financing Question?

Give Zia a call at (925) 984-7671 or Oleg at (925) 984-7734 today!

We look forward to hearing from you.

Have a Great Weekend!

Best Regards,

Oleg & Zia Chernyak

Posted by Zia Chernyak on April 11th, 2008 4:20 PMPost a Comment (0)

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