All the real estate talk in the DC metro region nowadays is about finding great deals. Most of the deals can be found through foreclosure homes in Northern Virginia and Washington DC. However, the process can be more complicated and risky than one may think. Here are some things you should know:

There are three different stages of foreclosure, each of which presents different opportunities for buyers. The first step is to figure out which one makes the most sense for you.

Pre-foreclosure

A home goes into pre-foreclosure when a borrower has fallen behind on his payments, but the house has yet to be auctioned off. Homeowners are looking for a way to get the financial burden off their back. So it’s not a bad idea to look over the delinquency notices that lenders file with county courthouses when a borrower misses a payment.

Owners are usually open to doing a short sale which is when the buyer pays less than what they actually owe on the mortgage. Banks are reluctant to do these such deals because they take a loss. It can take months before a deal goes through and even after that long period of time, there is a chance that the bank will not accept it.

In this market, we’re finding that the banks are more inclined to agree to the short sales. It makes sense for them to liquidate early rather than going through the foreclosure process costing lenders around $50,000.

Do not be turned off by dirty carpets or ugly paint jobs. That’s where the best deals are.

Sheriffs’ sales

In the next stage of foreclosure, homes in default are auctioned off on the county courthouse steps. These homes can be real bargains, but the process is a crap shoot.

There are downfalls that can arise with this type of process. Bidders cannot inspect the property prior to the auction so there is no telling what needs to be fixed. You also run the risk of buying the home with liens still against it because of unpaid taxes which can jack up the cost of the home. Finally, the kicker, buyers need to come with cash ready to put down 10%-20% and pay the rest in a matter of days. So if you want to buy on the courthouse steps, you’d better be a pro.

Even after a purchase, a deal can fall through if the current owner can come up with enough cash to repay the buyer the amount of the winning bid.

Post-foreclosure

After a lender takes back a house, the property goes back on the market as what’s called an REO (real estate owned) property. These are treated like ordinary sales, listed with a broker. Typically, bargains are not as sharp.

Young, hungry real estate agents are the ones that are usually screening REOs all the time. Go out and find one and put them to work for you. These are a lot less risky because the process is so clean; the title is clear and the property is delivered vacant.

Click *HERE* to actively search for foreclosures in Northern Virgina and Washington DC

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As I mentioned the other day,  the new housing stimulus package is allowing a $7,500 tax credit for first time homebuyers.  So what exactly is this you ask?  Anyone who has been reluctant to purchase a home in these so called “bad” real estate conditions should keep in mind these dates: April 9, 2008 through June 30, 2009.

These important dates mark the eligibility time span for the home-purchase tax credit created by the new housing bill. If you have not owned a house during the past three years and can go to closing before the end of next June, you may be eligible for up to a $7,500 credit against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).

Here’s a quick overview of the credit in its final form:

· The basic idea: To jump-start housing sales and clear out unsold real estate inventories, Congress is offering tax credits to pull in new buyers. Within the designated time period, buy any house — new, old, any location or condition, any price range — and the IRS will cut up to $7,500 off your tax bill for either this year or next. For example, if you’re an eligible buyer this year and you owe the IRS $4,000 on your total 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund. The new tax credit is what the government calls “refundable”: If your tax bill is less than the credit amount, you get the difference back from the Treasury.

· Eligibility rules: Do you own a home? If so, you’re not eligible for the credit. Did you sell your home more than three years ago and now rent? You are eligible. You’re also eligible if you have never owned a home. Close on a house before June 30, and you can claim a credit of up to 10 percent of the purchase price of the property, up to $7,500. If your adjusted gross income exceeds $150,000 ($75,000 if you’re single), the credit maximum begins to phase down. You cannot claim the credit if you are a nonresident alien, financed the property using a state or local housing agency’s tax-exempt bond mortgage, or do not plan to use the house as your principal residence. Buyers who use the District’s first-time-buyer credit program cannot double-dip and use the new federal credit, too.

· Payback: Unlike some other tax credits, this one requires beneficiaries to repay the credit. Starting in the second tax year after purchase and continuing for up to 15 years, taxpayers are expected to make pro rata repayments to the government on their federal filings. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year. If you sell the house before the end of the repayment period and you have no gain on the sale, you won’t be expected to pay the credit back from the proceeds. If you have a net gain, the “recapture” cannot exceed the amount of your gain. In other words, the federal government is taking on all or much of the risk that the value of your new house won’t increase over time.

At its core, the new tax credit functions very much like an interest-free loan for up to $7,500. You pay only the principal back over time.

How do you claim the credit? If you pass the eligibility tests, simply request the credit on your tax return for either 2008 or 2009. Even if you buy in 2009, you can take the credit against your 2008 taxes by filing an amended return. The association has launched an educational Web site, www.federalhousingtaxcredit.com, with additional information for consumers

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Freddie Mac is doubling the amount of money it pays loan servicers for each successful mortgage workout among other measures to keep struggling borrowers out of foreclosure.The mortgage financier is also giving more time to negotiate workouts in states with fast foreclosure processes and will reimburse servicers for door-to-door outreach.

Freddie will pay $500 for each repayment plan and $800 for each loan modification on Freddie-owned mortgages. Servicers will receive $2,200 for each short sale where Freddie accepts less than the full amount owed on the mortgage.

In some states and Washington, D.C., the government-sponsored entity will give up to 10 months from the due date of the last payment to find sustainable workouts for strapped borrowers. These states allow a lender to foreclose in less than 10 months.

These new policies go into effect TODAY, August 1st.

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Congress has been working over the last several months to pass a housing stimulus package that will alleviate some pain for home buyers and sellers in the DC Metro area and the rest of the US. It now appears that they are getting close to a vote on the final bill which could happen in the next day or so with the President signing it into law shortly thereafter. ***Update: President Bush signed off on the 2008 Housing Stimulus Bill on July 30, 2008! I wanted to make you all aware of a few of the major provisions of the bill that may directly affect you.

• First Time Homebuyer Tax Credit: What Congress is currently calling a tax credit of $7,500 will be available to all first time home buyers (or buyers who have not owned a home in the last 3 years) who close(d) on their new home between April 9, 2008 and July 1, 2009. The proposed credit is in essence, an interest free loan that is payable back to the government over the subsequent 15 years at $500 per year. Obviously the main beneficiaries of this provision are the first time home buyers.

• Seller Funded Down Payment Assistance Programs (ie. Zero Down, AmeriDream, “100% Financing”. Nehemiah, etc): Any down payment assistance program involving sellers or interested third parties will be terminated on October 1, 2008. This means that buyer loan approvals need to be completed on or before September 30, 2008 to be eligible for any currently existing down payment assistance programs. If you assume a 30-45 day loan approval period that means this program will only be available for sales prior to August 15^th or shortly thereafter.

• FHA Cash Down Payment Requirement: The new minimum cash down payment proposed in the bill is 3.5% raised from 3.0%. This provision will take effect immediately upon enactment of the Bill. This means that any home sale subsequent to the signing of the bill will require a minimum down payment of 3.5%.

What does all this mean? It’s time to take advantage of these programs before they’re gone. If you’re in the market to purchase a home in Northern Virginia or Washington DC, there is no sign bigger than this: “THIS IS THE TIME TO BUY!”

Contact us at 1-888-998-9455 for top-notch buyer representation on your new home purchase!

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With so many homes on the market now in Northern Virginia and Washington D.C., there are a lot of deals out there. Some of these deals are short sales and foreclosures. However, most people don’t know what each entail. Yeah, the price looks incredible and you can’t wait to put an offer in. What you don’t know is that these types of homes are not a typical real estate transaction. How are you suppose to know? I mean all you care about is that it’s $100K less than the house selling down the street. To start off, I’ll dip into short sales.

About 99% of the time, the home listed as “short sale” or “third party approval”, has an attractive price that has not been approved by the bank.  In order for a distressed seller to do a short sale or sell their home in an “upside down” scenario, means that they are asking the bank to accept an amount less than what’s owed on the loan. People choose this option if they are unable to continue making payments. This method doesn’t affect your credit as bad as a foreclosure does. So let’s say a home has a real attractive price tag on it and there are 10 offers on it already submitted. The goal of the seller is to get as many offers as possible in hopes that they will keep outbidding each other. Once all offers are in and maxed out, the seller will choose one to send to the bank for approval. This process usually takes about 4 - 6 weeks. Plan on sitting around for a while twiddling your thumbs. The worst part about short sales is that after that 6 weeks, the bank can reject the offer and you have just wasted 6 weeks of searching for a home as a buyer. One more thing, the home is sold “as is” meaning that the seller does not have to fix anything that you want repaired. If you have the time to wait around, then you may want to look into short sales.

Foreclosures or REO’s (”Real Estate Owned” by the bank) are a different story. These are properties that have been acquired by the bank after they have failed to sell at a foreclosure auction. The price on the home will most likely be accepted if you submit an offer for it for full price. The amount of time it takes for these to close is approximately the same as a normal real estate transaction, 30 - 45 days. Although these homes may look great from the outside, more often than not they need some major TLC (tender loving care). In other words, like in a short sale, you have to purchase these homes in “as is” condition. This isn’t always a bad thing though. If you invest some money for new paint and carpet, you’d be surprised how much of a difference it makes. You’ll need to have an imagination when you walk into a home that turns you off right away. What I mean by this is, look around the house and see if there is any damage to the foundation, water damage or mold. If there is only cosmetic damage, it’s an easy fix. You can really take advantage of turning a huge profit if you know what you’re doing. I would only suggest buying a DC metro area foreclosure if it’s in good condition, you’re an investor, handyman, or ready to hire a contractor.

Now are you ready to search for short sales and/or foreclosures?  In Northern Virginia and the Washington DC metro region start here!

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Alright, if you have been on the search to buy a home, it’s time to buckle down and pull the trigger. You will want to lock in your rate now. The interest rates have spiked in the past 10 days and there is a potential danger that it could get worse. The average interest rate on a 30-year fixed loan has soared to 6.02% from 5.82% in just a week. The cause of this is the rising inflation fears that have sparked a jump on the long-term government bonds.

That means on a $300,000 mortgage, your monthly payments will increase $38 and the total interest on the life of the loan will increase $4,000. You can still get some good deals as there are a few lenders out there offering rates below 6%, but not many.

No one knows what is in store next, but if you find a reasonable deal, don’t think twice about putting a deposit to lock the rate in for a month or two if you are able.

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