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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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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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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President Bush signed into law today a new bill providing tax relief for homeowners facing foreclosure or bankruptcy. The bill eliminates federal taxes due from homeowners who have had mortgage debt forgiven as part of a foreclosure, short sale or the renegotiation of a loan. Currently such debt forgiveness is treated as taxable income. The law applies to all ACQUISITION (not refi) debt forgiven from Jan 1, 2007 and on.

The bill came in response to the current mortgage crisis, which has become more prevalent in booming metropolitan cities over recent years including Northern Virginia and Washington DC real estate. It is anticipated to reduce taxes on strapped homeowners by $650 million. “When you’re worried about making your payments, higher taxes are the last thing you need to worry about,” Bush said. With some 2 - 2.5 million adjustable-rate mortgages scheduled to reset through 2008, the new law will be a nice holiday gift for many homeowners facing foreclosure in Virginia and Washington DC.

If you fall into this group, be sure to ask your tax preparer what paperwork you may need to provide from your short sale or foreclosure in order to file the proper forms with your tax return.

If you know someone who would like assistance from a short sale Re/Max Realtor in Northern Virginia or Washington DC, please contact us ASAP at 1-888-998-9455 or info@homezill.com - time if of the essence!

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Foreclosures in Northern Virginia, Maryland and Washington DC have been fueling price depreciation and a glut of housing inventory over the past several months. Today, the White House announced their policy to freeze subprime interest rates for 5 years in order to help hundreds of thousands of homeowners stay in their homes and avoid foreclosure. The deal with the mortgage industry is “a step in the right direction” after the increasing number of foreclosures have driven home prices down, hurt neighborhoods and threatened the economy.

The plan will not effect everyone facing foreclosure, but only consumers with subprime loans, which account for 47% of recent foreclosures. The plan only applies for people living in their homes and who have not missed any mortgage payments. Officials say they hope to save 300,000 families from falling victim to foreclosure proceedings and help curtail declining homes prices and access inventory over the next few years.

Many home owners unaffected by the plan are voicing their anger as they feel that the government should not step in to ’save’ people who made poor decisions to lock themselves in risky subprime loans…”Why should we have to pay for our high mortgage if subprime borrowers get an easy out?”

I’ll leave this up for discussion. Do you think the government should intervene in a situation like this? Should they specify only certain “subprime” borrowers? Is it fair to other homeowners facing foreclosure with similar adjusting rates that are not “subprime”?

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Foreclosures and short sales in Northern Virginia and Washington DC are becoming more prevalent now-a-days as well as in most of the country. As a result of the rise in delinquencies, short sales have become popular as a solution for homeowners who need to get out of homes as trouble-free as possible.

A short sale becomes an option when the homeowner cannot afford to make the payments on their loan due to whatever circumstance. In a nutshell, the lender agrees to accept less than the total amount owed. In reality, the lender agrees to release the home from the lien of the Deed of Trust for less money than stated in the Trust. Not all lenders will consider short sales if it makes more financial sense to foreclose.

Lately, the short sale epidemic has resulted from adjustable rate mortgages (ARM’s) increasing with the combination of depreciating home prices. During the housing craze, many home buyers took out 100% financing, interest-only ARM loans. If a buyer took out an interest only loan without making a down payment, then essentially none of the principle amount owed on the home has been paid.

Now with the decline of home prices, these ARM’s are adjusting (higher), which consequently increases the mortgage payment. The only way to stop the adjusting rate is to refinance the loan into a fixed rate, which typically costs a few thousand dollars.

For example, lets say you bought a home two years ago for $500,000, and now it will appraise for only $420,000. If you need to refinance into a fixed loan, then you will have to put down $80,000 ($500,000-$420,000) + the cost of refinancing. Basically, you will owe the difference between what the home is currently worth, and the total amount still owed on the mortgage. In this case your only options would be:

1) Continue to pay the increased mortgage (in most cases the rate continues to adjust over a certain time period, ie. every month or 6 months, etc)

2) Work out a deal with your bank, ie. defer payments, work-out program, deed-in-lieu

3) Short Sale

4) Foreclosure

When homeowners decide that they can no longer stay in their home, our team comes in to help facilitate a short sale rather than having the home go through foreclosure. These days, lenders, wanting to avoid costly foreclosures, are more inclined to accept a short sale in which the loan balance exceeds the market value of the house. The short sale ends by agreement with the lender to approve the sale of the property to a buyer. This consequently results in an escrow, documentation and then a short sale consummation. 

One of the ultimate benefits is that as long as the home owner makes the mortgage payment up until the consummation of the short sale, their credit will NOT be impacted nearly as much as a foreclosure would on their record.

For lenders, there are several benefits for the short sale. The homeowner less likely to become disgruntled and tear apart the house. The lender doesn’t have to spend additional money on holding costs and wasted time tying up funds that could be lent out. If market conditions have deteriorated, then recapturing the debt at a foreclosure sale is unlikely. Lenders aren’t in the business of selling real estate, they are in the business of lending money… the last thing they want is to go through foreclosure proceedings if it doesn’t make sense financially.

If the property does go into foreclosure, additional fees will be accumulated and later reported by the lender to the IRS as losses. The foreclosure usually stays on your credit report for 7 years and you most likely won’t be able to get another mortgage with a foreclosure on your credit. The lender may also pursue the homeowner for a “deficiency judgment” (the difference between the highest bid at sale and the amount owed).

If the homeowner is proactive and contacts the lender before becoming delinquent, they have a much better chance of a successful short sale. Only after the homeowner has missed a few payments may it be too late for a short sale.

When it comes time to negotiate for a short sale, getting the necessary paperwork and tracking down the right people to negotiate with can be a very difficult task. Whether intentionally or unintentionally, getting to the right people to discuss the possibility of a short sale, seems to be a challenge in which there is no easy answer.

Unless you have a lot of free time to dedicate, having a designated short sale agent (usually a Realtor® or attorney) to assist you in selling your home and consult directly with your lender is typically the best bet. Especially when time is of the essence, you must be available to quickly respond to, and provide the lender with all of their requests along with showing, marketing and selling your home. From beginning to end, short sales are many times a 2-4 month process and can be a very stressful time for the homeowner.

It’s also important to understand that you may face a 1099 in the future, meaning you could be taxed as income on the amount of the lender’s loss. However, once an agreement is reached, the short sale can be the best opportunity to get out of a very bad situation with the least amount of harm for all parties.

HomeZill agents work closely with homeowners in Northern Virginia and Washington DC throughout the short sale process. We provide the homeowner with our expertise in negotiating, identifying the lender contact to negotiate with, and compelling the lender to agree to the short sale. Most of the time, lenders will not disclose the minimum acceptable price for the short sale until an offer is submitted and reviewed. Our real estate professionals have extensive knowledge of the short sale process and will use high-impact marketing strategies in order to generate an offer as quickly as possible.

If your mortgage interest rate is due to adjust in the near future and you’re not going to be able to afford the payments, be PROACTIVE and contact your lender ASAP to see what your options are. Your credit alone is way too important to ignore the situation at hand. If the lender mentions the short sale option, don’t delay for too long (time is of the essence!). When you’re ready to get the ball rolling, simply fill out the HomeZill Express Seller questionnaire. You must register first (it’s free) before getting started if you haven’t already. A short sale agent in VA or DC will contact you soon to begin the short sale process.

Feel free to contact David at 1-888-998-9455 x801 or david@homezill.com to speak with a ReMax short sale Realtor in Northern Virginia or Washington DC. To receive a weekly foreclosure list of homes as properties come on the market, enter your email address at the top of the page.

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