Want to go to the Capital Home Show this week? Is money tight? Don’t worry…I gotcha covered! I have tickets to the Capital Home Show which I am giving away for free to clients and LoudounScene.com and LoudounForeclosures.com readers.
“Nothing in life is free!”, you say? You’re right. Here’s what I ask in return…
1) I have a limited supply of tickets and they’re first-come, first-serve so if I don’t have any more left when you contact me, please don’t be angry with me
2) When contacting me, you have to give me your real name, home address, working phone number and actual email and have to be OK with hearing from me once in a while regarding what’s going on with the local real estate market
If you’re still interested, click here to contact me for your free Capital Home Show tickets. And don’t forget to put in your home address so I can either mail them to you or drop them off at your front door (I will drop them off to you as long as you live in Northern VA and not somewhere like Richmond).
Lots of people ask me, “How do I buy a foreclosure in Loudoun County/Northern Virginia?” There are two ways - one is definitely more popular than the other these days.
Here are the two ways a consumer can buy a foreclosure in Loudoun County/Northern Virginia…
- At the local court house steps during the foreclosure auction. (Yes, there is an actual auctioneer speaking a million miles a minute in that typical auctioneer slang)
- On the open market (including local MLS) once the property is marketed by a listing broker of the bank’s choice.
Let’s look at the first method of buying a foreclosure in Loudoun County/Northern Virginia…
The auction method is tricky and can by filled with pitfalls. Once of the pitfalls is that you have limited access to the property before the auction so you may not get a good idea of what the house looks like or the full scope of work needed to fix it up. There are also many special requirements and nuances to an auction which are different than buying a traditional resale listed through a listing agent/broker on the MLS. Another issue is that there is a “Buyer’s Premium” of 10 - 15 percent of the sales price which you must pay on top of the winning bid price. So your $300K purchase just turned into a $345K purchase.
Even if you get past these issues, there’s one more… The “reserve” price is usually the amount due on the mortgage which is typically higher than the market value of the property. This makes the reserve amount (plus the Buyer’s Premium) an absurd amount of money for the property. The price issue is one of the main reasons why this method is used so rarely these days.
Now let’s look at the second method of buying a foreclosure in Loudoun County/Northern Virginia…
In the current market, this method is used 99% of the time because banks end up taking the property back at auction and then using a listing broker to sell the property on the open market and MLS. This method is also less tricky - as long as you have your own Buyer’s Agent who has a lot of experience working with foreclosures/bank-owned properties and who is looking out for your interests (unlike the listing agent who is looking out for the bank). The transaction is similar to buying a traditional resale in many ways which makes for a smoother transaction than buying at auction. But it’s different in other ways such as “as is” conditions/clauses, bank addenda, etc. This is why you need a Buyer’s Agent who knows what they’re doing with foreclosures/bank-owned properties.
In addition, there is no “Buyer’s Premium”, you get to see the house before submitting an offer, you get to do a home inspection, etc.
Are you intimidated with the prospect of buying a foreclosure in Loudoun County/Northern Virginia?
Don’t be. If you go in educated and with someone in your corner, you’ll find it’s not as crazy of a process as you think. And there’s more good news…Though buying a foreclosure involves much more than buying a traditional resale, it’s a lot less hassle than buying a short-sale.
This post is the quick answer to the question. If you would like to know more or would like to find a foreclosure in Loudoun County or elsewhere in Northern Virginia, click here to contact me.
The other day, I talked about how few foreclosure/bank-owned properties there are on the market in Loudoun County and Northern Virginia (click here if you missed the post). But what does having only a very few foreclosure/bank-owned properties on the market really mean for Loudoun/Northern Virginia home buyers and sellers?
- If you would like to settle quickly, your only options are traditional resales and foreclosure/bank-owned properties. Either can typically settle within 3 to 6 weeks (less if cash offer) of when the contract is accepted and ratified
- Since there are so few foreclosure/bank-owned properties, the overwhelming majority of properties you’ll see will be traditional resales
- Traditional resales are typically in better condition and require less work than foreclosure/bank-owned properties, but you’ll pay more for them up-front in the purchase price
- If you have the time (3 to 6+ months) and patience and want to spend less money up front, but don’t mind doing some work to the property, then you may want to consider a short-sale
- If you’re trying to take advantage of the first-time home buyer tax credit, you’re looking at only foreclosure/bank-owned properties and traditional resale (click here for more information on what I mean by that)
- If you are a home owner selling your home as a traditional resale (not a short-sale), you’re in a great position
- When there were a lot of foreclosure/bank-owned properties on the market, buyers who needed to settle quickly could choose from a foreclosure/bank-owned property or a traditional resale. Now…their options are pretty much limited to traditional resales, which is good for you
Two years ago, you couldn’t walk out your front door in Loudoun/Northern Virginia and not see a foreclosure/bank-owned property for sale. But something interesting has been going on for the past 12 months…the number of foreclosure/bank-owned properties on the market has been quickly dwindling.
As of today, there are only 60 active foreclosure/bank-owned properties on the market in Loudoun. That’s a total of only 6 percent of the total existing home inventory on the market in Loudoun County. This is a far cry from what we were seeing in 2007, 2008 and even the beginning of 2009.
How is this possible despite record foreclosure filings throughout the US?
One possible reason is that the bans are holding on to their inventories on purpose. Releasing them all at once would sink the market and the value of all properties (including the ones the bank are holding to) would fall. This means that the overall worth of the properties the banks are holding on to would fall - not something banks or their shareholders want to see.
Another reason may be that the government is buying up these “troubled assets” so that they don’t get released on the market and sink it. Just look at the millions the government is spending buying up Mortgage Backed Securities (MBS).
Will we see a flood of foreclosure/bank-owned properties hit the Loudoun market in the near future?
I’d say “not any time soon” for a variety of reasons including political ones. But I don’t have a crystal ball so don’t take what I say to the bank.
Either way, the majority of homes on the market in Loudoun and Northern Virignia in general are short-sales and traditional resales. Practically speaking, this means that buyers who need to settle within 30 to 90 days have pretty much only traditional resales to choose from (blog post on this coming next week).
Foreclosure, bank-owned and short-sale properties make up over half of total home sales in Loudoun County. This has been the case for some time now and will most likely continue through at least the end of 2009, if not longer.
A few things I’ve noticed…
- The percentage of foreclosure/bank-owned properties to total sales has decreased. This probably has to do with the foreclosure moratoriums that were in place from the end of 2008 to March 31 of this year.
- The percentage of short-sale properties to total sales has increased. This is due to banks becoming more willing to accept short-sales and because more sellers are trying to take the short-sale route rather than being foreclosed on.
- The increase in short-sales has left more home buyers frustrated than every before. The short-sale process is long, requires a lot of patience and has less chance for success than a foreclosure/bank-owned and traditional sale.
We should start seeing more foreclosures come on the market now that the foreclosure moratoriums have been lifted and Fannie/Freddie and other banks are back at it foreclosing on delinquent borrowers. In one way, this is a good thing because it will give home buyers more straight-forward and less stressful inventory to choose from. In another way, more foreclosures on the market could be bad because it could put downward pressure on prices. It all depends on the rate at which banks release all their foreclosure properties on to the market.
Many folks are wondering why foreclosure/bank-owned properties are still “winterized” even though it’s May. After all, winter is gone and spring is here. Well, the main two reasons banks are still “winterizing” properties is to cut carrying costs and limit potential damage to the property.
“Winterization” by definition is the process of preparing your irrigation system for winter so that the pipes don’t burst due to below-freezing temperatures. The term “winterization” in real estate has evolved to also include,
- turning off the water supply to the house
- draining all the pipes inside the home including the hot water heater
- turning off the electricity and gas supply
The bank has expanded it’s ”winterization” process to include some or all of these things for a a variety of reasons, two of them being,
- To save money by not paying utilities
- Minimize potential damage to those systems which could/would otherwise be on from the time the home was foreclosed on to when it was sold.
Not all properties are “winterized” in the above way. Countrywide for example, has the listing agent/broker put the utilities in their name prior to the property going up for sale and through settlement day. Countrywide then reimburses the listing agent/broker the cost of those utilities at a later date.
But many banks don’t follow this process and just have everything turned off. If you aren’t sure whether the property has been winterized or not, you’ll know the second you walk in the house. If it’s below or above room temperature, the lights don’t turn on and/or there’s blue tape on the sink and the toilets, it’s been “winterized”.
If you're facing foreclosure or trying to negotiate a short-sale, this video clip is a "must-see".
(If you don't see the video below, click here)
Many home buyers start seriously looking for a new home about three to six months before their preferred move date. Some give it even less time. But is two, three, even six months enough time? And does it affect what type of property you can try to buy?
Six, three, even two months may give you enough time to search for a new home, write and offer, go through the negotiation process, come to an agreement (ratify the contract) and then proceed to settlement - IF the property is a traditional resale or bank-owned (foreclosure). But it may not be enough time for a short-sale.
Though the time from which the offer is ratified to when settlement occurs is similar regardless of what type of sale it is, the negotiation process varies drastically especially when it comes to short-sales.
Here's the breakdown…
A traditional resale is a sale in which the property is not bank-owned nor is the seller attempting to do a short-sale (definition of a short-sale later in this post). The owners are selling it directly to a buyer without needing final approval from a bank or other creditors.
Traditional resales typically take anywhere from a day to a week from the time you present an offer to when the negotiation process is complete.
If you've given yourself between 3 and 6 months, you'll be fine even if you don't get the first or even second or third house you've made an offer on.
Bank-owned properties (aka "foreclosures")
Bank-owned properties have been foreclosed on and are now being sold by the bank on the open market.
Bank-owned properties typically take a few days to two weeks to negotiate. The reason for them taking longer than a traditional resale is that you're dealing with the bank's asset manager - they have hundreds of files on their desks at one time and they don't work nights, weekends or holidays.
If you've given yourself between 3 and 6 months, you'll be fine even if you don't get the first or even second or third house you've made an offer on.
Short-sales are situations in which the seller/borrower is attempting to sell the property for less than what is owed on it (they're "short") and the seller/borrower is trying to get the bank/creditor to agree to take the loss. The bank/creditor must give final approval on the offer in order for the deal to take place. (For a more detailed explanation of what a short-sale is, click here)
The average response time from the bank on a short-sale is 3 months though I've seen responses take as long as 6 months. And here's the kicker…only about 20 percent of short-sales are approved.
If you've only given yourself 2 to 3 months before having to move, you're outta luck - short-sales are not for you. Even if you've given yourself 6 months, you may be cutting it close because it may take the full 6 months to hear a response. But…if the bank doesn't approve the short-sale, you're back to square 1 and you've lost an average of 3 months (if not more) of house-hunting time.
If you'd like to look at short-sale properties, you should give yourself enough time to find a home PLUS another 4 to 7 months (average response time plus time to close).
The home buying process is stressful for many - especially first time home buyers. The last thing you want to do is feel rushed or, even worse, find yourself having to double-move or living out of a hotel. That's why knowing the timing involved with each type of property and planning accordingly is so important.
Loudoun County just released the name of the neighborhoods that qualify for the Neighborhood Stabilization Program (NSP). This is part of the NSP application process to, which Loudoun will submit to Virginia at the end of this month in hopes of securing at least $2 million to buy foreclosed properties for rehab.
The designated neighborhoods are (Adobe Reader required):
- Crestwood Hamlet
- Heritage Square
- Hunington Ridge
- Sterling Park South (A)
- Sterling Park South (B)
- Sugarland Run
The application for the Neighborhood Stabilization Program requires Loudoun County to provide a list of qualified buyers that would be interested in purchasing a property in these designated neighborhoods.
If you are interested in purchasing a property in one of these designated neighborhoods through the Neighborhood Stabilization Program, contact me and have the following information ready:
- Phone number
- Pre-qualification letter from a lender (aka "approval letter" or "lender letter")
- The deadline for these applications is January 27, 2009 (the application from the county is due to Virginia at the end of the month and these applications need to be a part of that)
- Without the above information, the County will not process your application
- The information listed above is required by Loudoun County as well as Virginia - this is not a gimmick to get your information for my own records (I was asked by Loudoun County to be part of the group providing input into the program and application process)
My contact info: danilo.bogdanovic (at) gmail (dot) com - 703.582.6900 (cell)
If you're curious as to where all the foreclosures in Loudoun County are located or which areas of Loudoun are most affected by foreclosures, check out the map below (click on map to enlarge)…
As you can see by the where most of the red dots are, the areas of Sterling and SE Leesburg are where most of the foreclosures are located. Incidentally, that's where some of the biggest drops in home values in Loudoun County have occurred.
Another thing the map shows is the total number of foreclosures in Loudoun County for the first, second and third quarters of 2008. Notice the increase in foreclosures as the year has progressed though the rate of increase has decreased.