Foreclosures
- Build Your Team - Part 2

The Denninger Report  - by Gini Denninger

Finding the right agent is paramount. Working with an agent costs buyers nothing. Sellers pay the listing agent, who in turn pays the buyer’s agent. There is no advantage to not having representation. The right agents understand the ins and outs of buying foreclosures. Full time agents work every day in the market place and are aware of neighborhood trends. If not, they have the tools to see what the trends are. Agents prepare offers, properly structuring them for the buyer’s advantage and protection.

A smart agent will insist the buyer line up a mortgage company or provide proof of funds - if a cash buyer - to make sure the client is finance-able or has the money to buy. There is no bigger waste of time than an agent who takes clients to see properties not knowing if they can actually buy them.

The mortgage officer should be familiar with financing foreclosures and be able to offer options and suggestions to structure the loan. Sometimes a foreclosure doesn’t qualify for conventional, FHA or VA financing due to property condition. “HomePath” or 203K loans allowing buyers to roll rehab costs into the mortgage may be offered. These loans are not simple and require a qualified mortgage officer to explain them to their client, as well as process them to the closing table. Not all mortgage officers think outside the box - with foreclosures they need to. Buyers must be honest with their mortgage officer about whether they plan to live in the property or want to flip it. There are restrictions with some of the loans in regards to flipping, with serious penalties. A quality loan officer can make the difference between a deal coming together or not.

Never buy foreclosures sight unseen! It’s crucial to calculate costs to make the home habitable. It may have been completely trashed or stripped out, missing cabinetry, copper plumbing, lighting, air conditioners, even the furnace. If not destroyed, they might have been removed for resale! Repair costs must be decided before writing the offer. The actual cost of the home is what you pay PLUS the cost of repairs. A property may be bought for $80,000, but if repairs total $20,000 and the actual value is only $100,000, even after repairs - it's not a bargain! Financially this home does not work, if the plan is to resell it. In Rochester, this is a common scenario, making flipping of properties pretty hard to do.

Once a potential buy has been gone through and identified as a “buy”, quality agents’ supply needed information, including a comparative market analysis. Buyers and agents should research the neighborhood. Is it stable or in a downward trend? If it passes muster, the agent should help with pricing. Offering random numbers like half of the asking price, is a waste of time for everyone. Banks are not desperate; it’s a rare situation where a bank accepts such a low offer. A more realistic offer is found by estimating the worth of the house in good condition and subtracting the cost of repairs (don't exaggerate).



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