Archives

February 2007

Buying Foreclosures - Part 2

Posted at 3:53 AM, Feb. 26, 2007

Since foreclosed homes that go to the auction block cannot be inspected prior to sale and there is no admonition or disclosure by the auctioneer as to any hidden debt, the investor can mitigate the anxiety about taking this type of risk by performing as much due diligence as possible. 

This means checking courthouse records for evidence of any other liens,and finding out how much equity there is in the property.  It would also serve you well to drive by the property to perform an inspection of the exterior.  CAUTION:  You may encounter the homeowner who may be none too happy to see you and  you could be considered to be trespassing.  Do this at your own risk.

If you do make a visit to the property, when looking at the exterior, look for signs of roof damage or aging shingles, look at the siding, gutters, soffits, and the heat pump/compressor or oil tank., observe for overgrown grass, weeds, and general neglect.   These are all signs and indicators of problems that could possibly exist inside the home as well.  Since homeowners facing foreclosure are usually preserving all their cash just to make the mortgage payment, you will often find examples of this kind of deferred maintenance. Estimate what you think it would cost to replace the HVAC, roof, plumbing, etc. and then factor that into your decision to make an offer at the auction.

Foreclosure Opportunities - Buyer Beware

Posted at 3:43 AM, Feb. 24, 2007

Many investors and would be-investors are reading with great interest the recent news reports and articles concerning the looming foreclosure crisis in the U.S.  It's true that a certain group of homeowners are now facing potential foreclosure due to the impending rate changes associated with very low introductory interest rates and adjustable rate mortgages.

While foreclosure properties can be a very lucrative investment, they also can pose some problems that the prospective purchaser will not know about until AFTER they've made the purchase.

When homeowners default on the mortgage, the majority have also allowed basic home maintenance and repairs slide because they've been doing everything they can to save their home and spending money on maintenance is not high on their priority list.  There is also the possibility of hidden debt.  Not surprisingly, some of these homeowners have refinanced, taken 2nd and 3rd mortgages, or have mechanic's liens or tax liens on the property.  As with maintenance and general property condition issues, the prospective purchaser will not know until it's too late.

TOMORROW:  Performing Due Diligence in Buying Foreclosure Properties

Sticker Shock - Real Estate Tax Assessments

Posted at 4:52 AM, Feb. 18, 2007

With the change in the real estate market over the last year or so, many Richmond area residents were probably hoping that tax assessment increases for the 2007 tax year would be less dramatic than in the past few years.  Imagine the surprise of Chesterfield County residents when many of them saw average increases of 20% over 2006.

Not to be outdone, the City of Richmond also sent some unpleasant tax bills to its residents.  One of whom, Donald F. Chandler II, of Brook Rd., found that his assessment had increased a whopping 91% over 2006!  He successfully appealed his assessment to the City and it has now been reduced to within the approximate resale value of the home if he were to put it on the market now.

Tax relief is on the minds of the Mayor and City Council.  Mayor Wilder proposed limiting the increase in real estate revenue to 10 percent per year, which would require a 4-cent decrease in the tax rate from $1.29 to $1.25.  City Council members, Bill Pantele and Rita  Trammel applauded the mayor's initiative and promised to work hard to lower the tax rate again this year. Last year, the council lowered the rate to $1.29 per $100 of assessed value.  Councilwoman Trammell has proposed a tax relief plan.  Under the plan, any citizen – regardless of age or income – could defer payment on any amount that exceeded a five percent increase of last year's assessment. The accumulated amount of taxes deferred would have to be paid upon sale of the property, or within one year after the owner's death.

In Chesterfield, the chairman of the Chesterfield County Board of Supervisors wants to ease the tax burden on seniors struggling with sticker shock from their increased real estate assessments.   He has asked county staff to investigate the option of allowing seniors to defer paying real estate taxes until their property changes hands or they die. It's an option that  Richmond also is exploring. 

Chesterfield demographer Bill Handley said there were slightly more than 21,000 county residents 65 and older in 2000.

"It would be reasonable to expect that in five years, we've added 5,000 to 7,000 more, and that's because a lot of people are aging in place," he said.