Cure me of my housing ignorance

In My Humble Opinion
21

If you buy with cash it’s not. But if you are taking out a loan, there are a lot of problems that come up.
A lender is looking at the worst case scenario which is that you lose your job and end up getting foreclosed on and they have to turn around and sell it.
To make sure that they get the most out of that property so they can sell it quickly and lose the least amount of money, it has to appraise for as much as you are offering to pay.

That’s the first hurdle. Foreclosed properties are considered “distressed” because for the most part the bank that owns them doesn’t want to fork over money for repairs or upkeep. Just because it is a foreclosure it is going to appraise for less than a house in the same exact condition that is being sold by an individual.

In addition no one has been living in the house for who knows how long. The chances of their being unknown issues caused by pests is a lot higher.

So the appraiser the bank sends out might come to a price that is lower than your contract price. Most banks won’t negotiate their price and will wait for another buyer to come along who has cash or is willing to eat the difference.
It just depends on how long it’s been on the market and how desperate they are to get rid of it.

So let’s assume that the appraisal comes in at or above your contract price. That’s great. But now the lender wants to prove that the utilities are working.

The bank that owns the property doesn’t want to pay to turn the utilities on. So you have to go to at least three utility companies and explain your situation and hope they will turn them on on your name even though you don’t own the house yet.

Then you wait for them to turn them on, and they won’t tell you when exactly they are turning them on but some one has to be there when they are there, so you have to coordinate with the banks real estate agent to get access to the house.

Then what if there is a problem and the furnace doesn’t work or the oven won’t turn on? Your lender isn’t going to lend you money on a house that doesn’t have working appliances.

Or you find out squirrels have damaged the wires in the attic.

So you get through all of that but then the inspection you have done indicates that there’s a problem with the roof. So you negotiate with the bank and they agree to lower the sales price.
You submit the addendum to your lender and they insist on seeing the inspection. Then they insist that the repairs be done prior to close but the bank who owns it won’t do the repairs.

So then your deal falls through.

But say you get past that point. Now the owning bank insists that they have to review the final HUD a week before closing. But the title company finds out that when the house was foreclosed on the title wasn’t done correctly so they have to get the past owner and the bank to refile the paperwork with the county, so now you are going to have to push closing back another week.

See what I mean?

22

What amorali hasn’t included (and I only know from watching tv and reading posts here, so if someone knows different, please set me straight) is that you can attach timeframes of weeks to months to each of those steps.

23

Oh yes. Very true! And if you have already told your landlord you are moving out on a certain date, you have nowhere to live.
If you have kids they are in limbo with school.
You might have to put your belongings in storage and live in a hotel. It happens.
You might not be able to find a temporary place to live that will let you bring your pets.

I know some people save a ton of money but when we looked at houses I just knew I couldn’t put us through the trouble and stress.

Short sales can be even worse because the bank of the seller has to approve them to do a short sale and that can take months.

24

Thank for the tip on NOAR. Your explanation of buying a foreclosure has really been helpful also, I really appreciate it. As far as prices only being able to go up, wouldn’t that depend upon the mortgage interest rate? From what I have been told, the fed has kept the interest rates at historically low levels, and they could raise the interest rate significantly depending upon economic conditions. If the interest rate is raised, then there would be a decrease in home prices because fewer people would be able to qualify for a loan. Is that a valid analysis of the situation, or are there many details I am missing?

25

I grew up in PG County, and go back at least once a year.

I’d stay away from Suitland, and I’d be wary of many parts of Oxon Hill. Fort Washington is somewhat pricier, and decidedly nicer. The Oxon Hill / Fort Washington area is changing fast because of the National Harbor and subsequent retail development, so investigate thoroughly and pick your spots. Bowie and Seabrook have fewer problem areas, but are correspondingly more expensive.

A lot of real estate price issues come down to school district quality, with a focus on standardized test scores. The betters the schools, the higher the prices. PG doesn’t have as good a rep as other suburban school districts in the DC area.

Washington DC proper is rapidly gentrifying, even areas that were seen as no-go when I was growing up. Bargains are still possible, but prices are rapidly rising.

26

It could happen but I don’t think we are going to see a huge decrease like in 08 again. Knock on wood.
Some of the big banks are considering using private banks as investors instead of Fannie Mae and Freddie Mac. Obama has called for the end of FM and FM, and if that happens it could be good or bad.
The FMs tend to have extremely picky documentation requirements for borrowers while private banks are usually less strict. So in a way that could help more people be eligible for loans.
If interest rates keep increasing it’s because the economy is doing better, which means more people have jobs and can afford a higher interest rate. That’s if the fed does their job right.
They have already ended the refinance boom in the last year by raising rates but purchases seem to be holding steady.

27

Unfortunately, you have to choose two from your list. Anything close in to DC that has a low crime rate isn’t going to be all that affordable. What is your budget?

I’ve been looking for a while and there aren’t that many foreclosures for sale in DC proper. I remember looking at a house in DC this summer that was priced at $599,000. It was in a nice but not fancy neighborhood and it was east of Rock Creek Park. The floors were uneven and the house hadn’t been updated since the 50s or early 60s. The bathrooms were in pretty bad shape as well. The house sold in a week.

28

Depending on what your budget, financing type, preference of type of housing (condo, townhouse, single unit), commuting needs, etc. it’s really hard to offer any advice that’s too specific.

Maryland is one of the most foreclosed upon states in America. There are some real craphouses here, but there are also decent houses where the owners just fell upon hard times, or investment properties that are having difficulty finding renters.