Your LA REO of the Day 04-30-2008

5162 PICKFORD WAY , CULVER CITY ,CA 90230
Type: SFR
Units: 1
Price: $619,900
List Date: 04-30-2008
Broker: Leo Nordine Realtors MLS: 08-276251

Needs a little updating, but this will be a great family house in quite area of Culver City. Close to schools, the park, and a few miles from the beach. Homes in the area have recently sold for hundreds of thousands more. Contact me for property profile that includes rescent sales. Just listed today.

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Your Los Angeles REO of the Day 04-28-2008

2817 IDELL ST , LOS ANGELES ,CA 90065
Type: 4plex
Units: 4
Price: $400,000
List Date: 11-10-07 Reduced: 04-23-08
Broker: PINNACLE ESTATE PROPERTIES MLS:07-237055

Another 4plex with great incomes, this one in Glassell Park. Huge 11,000+sf lot in up an coming neighborhood. Not bank owned but the rents quoted, $2836 total, were so good I had to post it. This is a cash positive rental in Los Angeles Owner Reduced listing from $874,000 to $400,000 on 4-23-08.
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Your LA REO of the Day 04-24-2008

2116 KENT ST, LOS ANGELES ,CA 90026
Type: 4plex
Units: 4
Price: $399,000
List Date: 04/17/2008
Broker:Real Solution MLS:08-272661

Nice 4plex in Echo Park North of 101. Listing states total rental income of $2498 for 3 units plus vacant unit for owner. Don't wait to put in an offer. Easy qualifier for first time buyer or investor.

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FHA Loans Help First Time Buyers.

The expansion of FHA conforming loan limits to $729,750 has greatly helped REO and foreclosure home buyers in Los Angeles. There are also programs that allow for the seller to give up to 6% of the purchase price to the buyers to apply to expenses and closing costs. Other programs allow buyers to have up to 60% debt to income ratio.

The 203(k) program is great for buyers who are still buying fixers. This program loans you additional funds to make repairs on a property up to four units.

FHA loans can take a little longer to process so get PRE-APPROVED NOW to be ready when that perfect REO or foreclosure property comes up.

Why Foreclusures Create Such Amazing REO Deals.

As we all know the number of foreclosures have soared. This is mostly due to two reasons, predatory lending and 100% Financing, or a combination of both.

Predatory lending is when the lender places the owner in a loan that is not possible for them to sustain. For example adjustable rate mortgages that adjust as often as every month. A borrower that is stretching on a $1,800/month payment can't possibly keep up when their monthly payment is increasing a few $100 every month.

But I believe the biggest reason the foreclosure rate is so high is 100% financing. Because of the ways the laws are today, if a home is sold in a short sale, all lenders must agree on a price, and most likely everyone will take a loss. On the other hand, if a home is taken by foreclosure, the junior debts are wiped clean for the primary lender and the bulk of the loss is incurred by the junior lien holders. Because of this it's not really in the Banks (primary lien holder) interest to negotiate a short sale. Let's look at an example.

A house is sold for $500,000 with a 100% financing.
The 1st is $400,000
The 2nd is $100,000

Let's say the market value has dropped 15% giving you a home value of $425,000. In this case a short sale is generally not possible, and the primary lien holder will take over the property and the 2nd will be removed. The lender can then sell the property for the market value and break even including their expenses. You can see why lenders have no incentive to work out a short sale or terms with an existing owner.

This also provides buyers and investors with an amazing opportunity as long as this scenario exists.

BTW, I don't necessary like that the market is set up this way, but I might as well help my clients get great deals as long as it is. I also don't think this will go on forever. It is very likely that Congress will step in and change the laws forcing lenders to work with owners through bankruptcy, so NOW IS THE TIME TO BUY.

Foreclosure Definitions

Foreclosure - The legal process that banks and mortgage companies use to force the sale of your home to repay a debt; usually the mortgage on your home. Even if one payment is missed the lending institution can take the property back and then sell it to repay the money owed them.

Short Sale - Your lender agrees to accept less than the total owed in exchange for releasing the mortgage as a lien on the property. There is a specific process that you must go through to be eligible for a short sale and the lender is not always amenable. There may also be tax consequences for short sale (the difference between the sale amount and the loan amount must be reported as taxable income), but this has been temporarily removed. Contact your accountant for your exact circumstance.

REO – An acronym for Real Estate Owned which refers to property which is in the possession of a lender as a result of foreclosure or forfeiture.

Deficiency – The difference between what is owed on the loan and what the house sells for.

Junior Lien Holders - these are second and third mortgages such as the equity lines so commonly used in 100% financing over the last few years. If the sale of the property does not cover all the debts, the junior liens become merged debts.

Merged Debts - This applies only if you have a second, third, or more mortgages. If the lender holding your first mortgage forecloses then the second, third and so forth lenders no longer hold any right or title to your home. Once foreclosed on, they have no security interest in the home nor any right to foreclose on the home.

First Time Buyers and Foreclosures

Now is an amazing time to buy for first time buyers. Rates are incredibly low, and prices are dropping to levels we saw three to four years ago. Best of all the increases in the FHA loan amounts in the Los Angeles area to
$687,500 SFR
$880,100 Duplex
$1,063,850 Triplex
$1,322,150 Fourplex
allow many more homes to qualify for FHA approved loans. (check here for other counties FHA Loan limits)

What does this mean to you? Buying a home is more affordable than it has been in years and now may be your best opportunity to buy ever. The most important thing is to be prepared because when the deals come they sell fast. Here a few things we can do to make sure you are ready when your dream foreclosure comes up.

1. Find out how much you can afford by being pre-approved. THIS IS THE MOST IMPORTANT THING. Pre-quals are no longer acceptable. To compete for these homes you need to show the bank you are a qualified buyer and that you have been approved for a loan with all your paperwork submitted.
2. Know what you are looking for. The great thing about this moment is THERE WILL BE MANY HOMES AVAILABLE. You need to decide what are your wants and needs in a home. We can help you with this by sitting down and prioritizing your needs so when that perfect home comes up you are ready.
3. Have an inspector lined up to look at the property quickly. Most REO's are sold as is and often do not accept offers with inspection contingencies. This means that you need to have an inspector out immediately.

Now is an amazing time to buy so sign up as a Premier Member at no cost and get started now!