COMMON FAQ'S

How do you find foreclosures?
A: Notice of action and foreclosure sale dates are published in the local newspaper. Records are available for public view at the County Court House. REO Specialists have current information and are your best and most accessible source.

Q: Who are the primary players in the foreclosure market?
A: Freddie Mac and Fannie Mae.

Q: Do many institutions deal directly with the buyer?
A: No. Most use Realtors.

Q: What is the minimum investment? (down payment)
A: There are some 10% down investor programs available in Florida. Fannie Mae and Freddie Mac may offer investor programs with no PMI on their REO through designated lenders. Other programs depend on your personal financial situation for owner occupied and include 5% down with no PMI for Fannie and Freddie, 5% down conventional, 3% down FHA and in some areas "0" down Farmers Home Loans(if you qualify). The condition of the property often dictates the type of financing available.

Q: Can you just take over the payments?
A: Very unlikely. In the majority of foreclosure sales in Florida, the title has been cleared and there is no mortgage to assume.

Q: What about low cash to mortgage assumable non-qualifying mortgages?
A: The last FHA ANQ's were issued in 1988 which indicates the cash to mortgage is most likely $15K+ by now. Those days of picking up a property with little cash down and no qualifying are gone, and if a low cash to mortgage ANQ should exist out there, the Realtors probably found it first and bought it. If you read somewhere this was a good way to buy with low money down, you need to look outside this market area.

Q: How can you finance a property needing extensive repairs?
A: Although it is complicated, the FHA 203(k) program works for properties needing $5000+ in repairs . This is a combination home purchase-improvement mortgage based on the increased market value after renovation is completed. Or, you can ask the seller to make repairs prior to closing.

Q: What are the most important points to consider in making an offer on an REO?
A: Condition of title, value of the property and location, location, location.

Q: How do you know if the property is a 'bargain'?
A: Order an independent appraisal at a cost of $225-250 for a single family home. Ask your Realtor to provide a Comparative Market Analysis.

Q: Can you buy a property on the court house steps at a better price?
A: At the majority of Court House sales, the primary or secondary lien holder will acquire the property to protect their interest. Less than 10% of the foreclosure sales are to "others". Purchasing a list of foreclosure sales(part of the public record) from other than the County itself is a waste of money.

Q: How much profit can you expect on a 'fix-up' property?
A: It depends. Buying a house in good condition and hoping to earn a profit is not realistic. Don't count on buying a house, giving it a quick paint job and reselling it quickly for a big profit. Look for a sound well-located property priced below market value needing improvements that add more value than cost. The property offering financing is another plus as some rundown homes cannot otherwise be financed easily. Unfortunately there is no magic formula and you may need to hold for a long term or offer seller financing for a substantial profit.

Q: What kinds of improvements add value?
A: Paint, carpet, landscaping and other inexpensive cosmetics generally add value above cost. Major structural improvements (new roof, foundation repairs, plumbing replacement and rewiring) generally add less value than cost. Some improvements such as new cabinet facings and new appliances usually add only their cost in value but improve salability.

Q: What about appreciation in real estate values?
A: Average home sale prices are appreciating at about 3% annually, depending on whose statistics you believe, keeping pace with inflation.

Q: How can you be sure a foreclosure property is structurally sound?
A: Order an independent inspection by a professional building inspector. This report will detail everything that is wrong with the property as well as everything that's right and how you can make it better. A good inspector will give you an estimate of repair costs. The fee is about $225 and well worth it.

Q: How can you be sure to get a clear title with no liens against the property?
A: Institutional sellers in Florida traditionally provide a title insurance policy as part of their closing cost to give evidence of a title search and insure there are no outstanding liens against the property.

Q: Do you need an attorney?
A: Always advisable especially if you have any questions. Traditionally in Florida Title Insurance Companies, who have attorneys working for them, prepare documents for closing and handle the closing procedures adequately.

Q: What is the risk of buying a property 'as is'?
A: The majority of foreclosure properties are offered 'as is, as seen, at the time of closing' because the seller has probably never seen it and has no knowledge of the history. Most sellers offer an inspection period of 5-10 days after an accepted offer - take advantage of it and get a professional inspection so you will know exactly what you are buying.

Q: How low can you go on an offer?
A: Foreclosure properties are aggressively priced for a quick sale which means they are already priced 10-15% under market with consideration for repairs already factored into the listed price. In this area, foreclosure properties usually sell at 94-97% of list. If you come in with a very low offer, expect a counter back to full price or a rejection. But, institutional sellers do negotiate aggressively.

Q: How long does the negotiation process take?
A: Allow at least 5 days for a response on an offer. Some institutional sellers must go through several levels of management to get approval and it may take longer.

Q: Can you write an offer on your own contract form the way you want it?
A: You can certainly specify the terms and conditions you want, but most institutional sellers have their own contract forms and special addendums. Generally you must do it their way without any changes or deletions on the sellers' forms.

Q: Can you ask the seller to do the financing and get a better deal?
A: With Freddie Mac, YES. Fannie Mae's philosophy is evolving, but if their special financing is available, YES. The majority of other institutional sellers prefer NOT to finance their REO. (Some exceptions for finance companies like The Money Store, AVCO, Household Finance)

Q: What does an institutional seller look for in a buyer?
A: Pre-qualified buyer, earnest money deposit of $500-1000, no contingencies other than financing, quick closing date.

Q: Can you make an offer based on the sale of another property(present home)?
A: No.

Q: Do you get a discount for all cash offers?
A: The closing date is key and the end of a calendar month closing may mean $$ in carrying costs to the institutional seller. If source of cash funds can be verified, a cash offer is usually seriously considered with a quick closing date.

Q: How much do you need for closing costs?
A: The buyers' closing costs are those associated with obtaining a mortgage and include survey, appraisal, termite inspection, points, origination fee, title insurance(mortgagee), documentary stamps on the note and other miscellaneous fees + optional fees for home inspection, warranty, radon test, etc. The seller traditionally pays for title insurance (owner policy), documentary stamps on the deed, recording fees and the brokerage. These costs are traditional and vary by area.

Q: Can you find a foreclosure with a 'rent to own' or early move-in prior to closing?
A: No.

Q: What is the best strategy to compete in the bidding process?
A: Most institutional sellers hear offers on a first come basis. Offers are presented in the order they are received. HUD and VA foreclosures accept bids up to a published deadline and most of these properties are sold well above the published minimum. In a competitive situation, offer your highest and best based on the most reliable information and a thorough inspection and hope for good luck.

COMMON FORECLOSURE TERMS

Absolute Auction - An auction with no minimum bid amount. The highest bidder gets the property no matter how low the bid.

Abstract of Title - A summary of the conveyances and other facts relied on as evidence of title.

Accrued Interest - Interest accumulated on the mortgage since the last payment.

Action - The 'notice of' is the published legal beginning of the demand for payment in a foreclosure proceeding.

Appraisal - An opinion of value.

Assessed Value - Value placed on property by the County for the purpose of computing real property taxes. In Florida the assessed value is usually 15-20% below market value but will vary by area.

BPO - Broker's Price Opinion also called a Comparative Market Analysis. A method of appraisal in which selling prices of similar properties are used as the basis for arriving at the value estimate. Institutional sellers usually rely on a BPO prepared by a real estate agent and a professional appraisal to determine a listing price.

Certificate of Sale - A certificate issued to a buyer at a judicial sale (e.g. foreclosure)

Certificate of Title - In Florida this certificate is issued to a buyer 10 days after the foreclosure sale.

Certified Funds - Same as cash. Buyers monies must be brought to the closing in this form.

Closing - The final accounting of the real estate sale. The closing Statement outlines the costs on both the buyers and the sellers side of the transaction.

Contingent - Dependent upon conditions or events. There are conditions the institutional seller will consider in an offer to purchase such as the ability of the buyer to obtain a mortgage or perform inspections. The sale of another property to raise sufficient funds is an example of a contingent usually not considered.

Contract - A promise. Only when an offer to purchase has been fully executed (signed and initialled) by buyer and seller does it become a contract.

Default Judgment - against someone because they failed to show up in court.

Deficiency Judgment - Decision requiring a borrower to pay the lender the difference between the mortgage balance and the amount realized at the foreclosure sale.

Earnest Money - An amount of money given with the offer to purchase as a "good faith" gesture of the buyer's serious intent. Although not required by law in Florida, most institutional sellers require a minimum $500-$1000 deposit in a trust account with an offer

Escrow - The deposit of funds with a bonded neutral third party with instructions to carry out the provisions of a contract. Earnest money deposits are usually held in the trust accounts of either a real estate Broker, title company or attorney.

Fee Simple - Complete legal ownership of a property.

Federal Housing Administration (FHA) - The federal government agency which administers FHA insured loans.

Federal Tax Lien - An obligation to the federal government as a result of non-payment of taxes.

F.N.M.A. - Abbreviation for the Federal National Mortgage Association affectionately known as "Fannie Mae", an agency which buys blocks of loans from banks. Due to its size, Fannie Mae Foreclosures make up a significant percentage of our Florida inventory.

F.H.L.M.C. - Abbreviation for the Federal Home Loan Mortgage Corporation affectionately known as "Freddie Mac", an agency performing a similar function to Fannie Mae and now much larger. Special financing is offered on Freddie Mac Foreclosures.

Foreclosure - Forced sale of property ordered by a lender due to delinquency in mortgage payments. A foreclosure sale terminates all rights of the mortgagor.

G.N.M.A. - Government National Mortgage Association affectionately known as Ginnie Mae is an agency in the secondary mortgage market dealing primarily in recycling VA and FHA mortgages. Grantee. The buyer.

Grantor - The seller.

HUD - Abbreviation for the Department of Housing and Urban Development, an agency which oversees FHA. FHA foreclosures are called HUD Homes.

Institutional Lender - Financial institutions whose loans are regulated by law such as banks, credit unions and commercial loan agencies.

Involuntary Lien - A lien imposed against property without the owner's consent such as taxes, special assessments, federal income taxes, etc.

Junior Lien - A lien that does not have first priority making the property security for payment of a debt.

Lien - An encumbrance using the property as security for the payment of a debt or obligation of the property owner.

Lis Pendens - Lawsuit pending. This usually recorded in Florida to give constructive notice of pending litigation.

Loan to Facilitate - Some institutional sellers offer financing to make their properties more attractive in the market.

Market Value - The price a property will bring in the open market under normal conditions.

Mechanic's Lien - A lien placed on property by laborers or material suppliers who have contributed to an improvement.

Mortgage - A legal conveyance of property to a creditor for security (from the Latin meaning death pledge).

Mortgagee - The lender.

Mortgagor - The borrower.

MLS - Multiple listing service run by local Realtor associations.

Notice of Default - A notice filed to show that the borrower under a mortgage is in default (behind on the payments).

Option - The right to buy or lease with specified terms for a specified period of time.

OREO - Other Real Estate Owned by institutions. Sometimes used to refer to foreclosure properties but can refer to branch offices, etc. owned by the bank

Points - A charge made by the lender for loaning money. One point equals one percent of the loan.

Portfolio Loan - Loan originated and held 'in house' as part of a lender's investments.

PMI - Private mortgage insurance required as part of the monthly payment in loans less than 80% loan to value (less than 20% downpayment).

Pre-foreclosure - Period between when a borrower becomes delinquent and the property is foreclosed upon.

Principal - A person acting for him/herself in a transaction. Also the amount of a loan exclusive of interest.

Qualifying - Process of demonstrating a person is credit worthy and has enough money to buy a property. Institutional sellers may require "proof" in the form of a letter from a lender or some verification of the source of funds if the sale is cash.

Quick Sale Value - Price estimated to sell in less than normal market time and therefore below market value.

Quiet Title - Legal process to eliminate title problems.

Quitclaim - A form of deed in which the grantor is giving the grantee rights to a property but makes no warranties about rights others may have.

Realtor - A broker or sales agent who is a member of a local real estate board affiliated with the National Association of Realtors.

R.E.O. - An abbreviation for Real Estate Owned most commonly used to describe properties acquired in foreclosure and owned by institutions.

Right of Redemption - Right to buy a property back for a limited period of time(usually 10 days) after a foreclosure sale.

Secondary Mortgage Market - Fannie Mae, Freddie Mac, Ginnie Mae were originally chartered by the federal government to stimulate the economy by either buying or recycling packages of loans from financial institutions.

Sheriff's Deed - Deed given by court order to satisfy a judgement.

Short Sale - In some instances in Florida a lender may agree to adjust the amount owed in order to get the property sold.

Special Asset - Term also used to describe properties acquired in foreclosure and owned by an institution.

Special Warranty Deed - See warranty deed. "Special" indicates there are limitations.

Title - Evidence that an owner is in lawful possession; instrument evidencing ownership.

Title Insurance - Policy written by a title company to protect a property owner against loss if the title is imperfect.

Title Search - Process to determine validity of the title to real estate.

Warranty Deed - Assures the title conveyed is good and possession will be undisturbed.

Workout - A special process in which some lenders and property owners may seek a solution to impending foreclosure by a payment plan or refinance.