Archive for August, 2011

Fannie Mae Charges Buyers a “Re-Keying” Fee

by: Maria Hass*
Home buyers purchasing Fannie Mae homes should be aware of an extra fee that Fannie Mae charges the buyer. It is called a “Re-keying” charge, and can amount to as much as $150. Fannie Mae wants all homes re-keyed upon closing to take the locks off its master keys. My understanding is Fannie Mae holds one master key for all Fannie Mae homes. One of my recent buyers wanted to re-key the house himself using higher-end quality door knobs and asked if Fannie Mae would waive the “re-keying” charge if he did the work himself. Unfortunately, Fannie Mae would not allow this. So, the re-keying charge remains. I found it unreasonable for Fannie Mae to charge the buyer for a service that does not benefit the buyer, only Fannie Mae. This charge should be a seller’s expense, not a buyer’s expense. But again, when you are dealing with Fannie Mae or Freddie Mac, these government-owned agencies are looking after their best interests, not ours. It will take a legal battle or strong lobbying efforts to create changes. Meanwhile, if you really like a house, most of the time, you will just “go with the flow” and move on.

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August 16, 2011 at 4:19 pm Leave a comment

What’s the Policy on buying a Fannie Mae Home as a Living Trust?

by: Maria Hass

A question came up during a transaction I was handling for a recent client who was purchasing a Fannie Mae property as a primary residence. My client wanted to initiate an amendment to change their names, as owners, to a “Family Living Trust” prior to closing. Would Fannie Mae allow a “Family Living Trust” as the named buyers for a primary residence? Fannie Mae responded by saying, “We only allow natural persons to be owner-occupants. If the buyer changes to a Trust they would have to cancel and resubmit as an investor buyer. They would not be eligible during any First Look period nor would they or their agent be eligible for any owner-occupant promotions.” Obviously, my client decided to leave things as they were, with their actual names as “natural persons” to receive the 3.5 percent buyers’ closing cost assistance and to retain the $1,200 agent bonus for owner-occupant buyers.
My understanding therefore is, buying a Fannie Mae home as a “Living Trust” is only acceptable for investment properties not with owner-occupant/primary residents.
Lastly, when dealing with REO properties, two major rules come to mind: 1. The lender rules. 2. Buyer beware. The property is sold as-is without repairs.

August 12, 2011 at 1:33 pm Leave a comment

What Really Happens at the Maricopa County Public Auction?

by: Maria Hass
It’s just another day at the steps of the Maricopa County Courthouse located at 201 W. Jefferson St. in Phoenix, AZ. The third session of the trustee sale also known as the public auction starts at 2 p.m. A crowd of eager investors wearing shorts, t-shirts, tennis shoes, flip flops and baseball caps gather around the youthful-looking auctioneer seated at the corner of the outdoor courtyard of the Maricopa County Courthouse building. For the first 20 minutes, the auctioneer announces any postponement or cancellations on 128 homes listed for auction at the 2 p.m. session. Two earlier sessions were conducted at 10 a.m. and 12 noon.

Once this is cleared, he opens the bid for each house on the list. A majority of the bidders are wholesale investors bidding for their company or bidding for a client. In May of 2008, out of 200 homes auctioned at the 10 a.m. and 12 noon sessions, eight of them actually sold. That would mean that 96% of the homes went back to the bank. The reason for the few sales is the high starting bids. There is an average of 400 homes listed for auction everyday and about 96% of them end up as REOs/bank-owned. However, the auction has become more competitive lately with more investors taking advantage of distressed homes and the percent of homes going back to the bank has been significantly reduced to about 50 percent.

Below are FAQ about the Trustee Sale or Public Auction:

1. Where and when does the public auction take place?
Every weekday at the steps of the Maricopa County Courthouse, located at 201 W. Jefferson St. in Phoenix. There are three sessions held at 10 a.m., 12 noon and 2 p.m. Sometimes, trustee sale auctions are held at the trustee office or lawyer’s office. A Realtor will be able to find out information on the trustee or you might be able to get this information at the county assessors website.

2. Who can bid at the public auction?
Anyone who has a $10,000 cashiers check is qualified to bid.

3. What if I win the bid?
Your $10,000 cashiers check will be withheld. The remaining balance is due no later than 5 p.m. the next business day. If you are not able to pay in full within the timeframe given, you will lose your $10,000 cashiers check and may be barred from future participation in the public auction.

4. What is the starting bid?
The bank decides what the starting bid is at a price they think is fair. Typically, half of the bids begin at a “full debt credit bid”. This bid is based on what is owed on the property, plus legal fees and other fees associated with the trustee sale process. In many cases, the starting bid is higher than the current value of the home. These homes usually go back to the lender. There is also the “Specified or Drop Bid”. This type of bid is specified by the bank and are drastically reduced overnight and could get snatched up pretty quickly by investors.

5. What should I do if I’m interested to bid in a public auction?– Conduct a due diligence review on the property you would like to bid on. Do a drive-by of the property, conduct a CMA. Know as much as you can about the property you’re interested in. Postponement and cancellations are announced minutes prior to the auction. Check frequently on the most current status of the property of interest to you.
– Structure your financing through a hard money lender before hand (regular banks don’t loan for properties bought in a trustee sale).
– Plan your investment strategy before securing a loan. E.g., how much money do you have for repairs, what is your holding cost, maintenance cost, tax liabilities, etc.
– What is your exit strategy if things don’t go as planned?

6. What type of deed do I receive at a trustee sale?
Trustee deed. This deed clears you from paying Junior encumbrances such as 2nd Mortgages, mechanics lien, contractors lien or any unpaid debt. This deed is subject to Senior encumbrances meaning, the buyer has to pay all senior liens such as taxes, IRS liens or any federal liens if any, to own the property free and clear. The Trustee deed is received a few weeks after full payment. Once the deed is received, it is the responsibility of the purchaser to record the sale and pay up all existing Senior liens.

7. What if the previous owner failed to pay taxes to the IRS and a lien is placed against the property?
The IRS is a senior lien and is allowed to redeem the property within 120 days after the sale. The IRS will return all purchase money to the buyer and add 6% interest of the purchase price per day to reclaim the property. You may get in touch with the IRS to see if they would release the lien for a negotiated price. Sometimes, the IRS may decide to go after the previous owner and release the lien at no cost or the purchaser may have to weigh out the 120 days redemption period.

8. Is this the best way to snatch up great deals?
In my opinion, buying an Bank-owned property is a better way to go. It is less complicated, easier and can offer you bigger savings. Once a home is bank-owned, banks are more desperate to get rid of the home because they have held the property for so long (at least nine months without seeing a penny). Also, according to mortgage financier Freddie Mac, the typical foreclosure cost is nearly $60,000. The banks lose around 20% to 25% of the loan’s value on a foreclosure. On top of this, REO (real estate owned) or bank-owned homes are available for showings unlike those homes in the public auction. As a buyer, you are able to see the condition of the home and also inspect the home prior to closing a deal. In a public auction, you buy the property site unseen without inspection in most cases. There is a bigger risk involved in purchasing homes at the trustee sale that may cost you sleepless nights.

9. Are All Trustee Sales Final or Absolute?
In some rare instances, the homeowner may have filed a bankruptcy just a few minutes before the sale. If this happens, the sale is reversed. All monies owed is returned to the buyer and the sale does not consumate.

10. Can the lender profit from a trustee sale?
No, if there are any surplus in the amount, this amount is alloted towards lawyer fees and processing cost.

11. What if the property I purchased in the trustee sale is occupied by the previous owners?
The right of the previous owners to live in the house terminates the moment the house is sold in the auction. The new owner has the right to evict the previous owners as soon as possible.

12. What if the property I purchased in the trustee sale is occupied by a tenant?
Under the Tenant protection Act good through 2012, the investor buyer has to honor the lease of the tenant. If the purchaser intends to occupy the property, the tenant has 90 days to vacate the property from the time of sale.

13. If it’s too risky to purchase a home at a Trustee sale, why do investors do it?A buyer can purchase a home quickly (within 48 hours) at a trustee sale. Whereas, it takes an average of 30 days for an REO or traditional real estate sale to close. If you do your research and due dilligence well, you’ll find some great deals at the public auction.

14. Who do I contact regarding hard money financing if I don’t have cash to pay for the property? Contact me at (480) 650-0075 for more information.
15. How do I learn more about the public auction process?
You may contact me at (480) 650-0075 to begin the process or to answer any questions that you may have.

To view a brief YouTube video of a Maricopa County real estate auction, click here.

Maricopa County Trustee Sale in Phoenix, AZ

Maricopa County Trustee Sale in Phoenix, AZ

August 10, 2011 at 7:05 pm 15 comments

Are Home Prices Up, Down or Flat in Arizona?

When a market is attempting to recover from a long and disastrous plunge, there are plenty of conflicting signals:

Signs That Prices Are Going to Go Down•The average list price per square foot for pending listings continues to drift downwards, down 1.5% in the last month.
•The average asking price per square foot for normal listings has fallen by 1.6% in the last month.
•Monthly average sales prices are reaching fresh lows.

Signs That Prices Are Going to Go Up
•The average asking price per square foot for lender-owned homes has risen by 7.4% in the last month.
•Sold price as a percentage of list continues to go up.
•Remarkably few listings are being canceled or are expired.
•Investors are now purchasing nearly 40% of the properties auctioned at trustee sales in Maricopa County.
•Average days on market for closed sales is coming down.

Signs That Prices Are Going to Stay Flat
•The average asking price per square foot for short sales and pre-foreclosures have barely moved in the last month.
•Median sales prices are essentially flat.
So you can take your pick. It seems to me that although the supply/demand imbalance is becoming extreme, demand from investors alone is unlikely to sustain a significant upward price movement. We may have to wait until the general public realizes the degree to which the reality and perception of the supply picture have diverged, so that fear of missing out on a bargain overcomes the fear of prices dropping yet further.

*Information taken from Cromford Report

August 7, 2011 at 2:56 pm Leave a comment