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RSS FeedHilton Head Island Foreclosures-Are You Afraid? |
Posted at Hilton Head Island Kat by Katheryn "Kat" Gardner
Oct. 26, 2009
Hilton Head Island Area Foreclosures, Are You Afraid?
Halloween brought out the creatures of horror for some people. Ghosts, vampires and goblins of all kinds came out in search of goodies, but all in good fun. Although Halloween is gone, some scary creatures are still all around us. What "scary creatures" am I referring to? Foreclosure homes, of course!
Many prospective buyers have been scared away from this market due to the horror stories they have heard. “The appliances had been torn out!” The cabinets were ripped from the walls!” “All of the plumbing had been stripped!” The stories are, unfortunately, true and endless. Not all foreclosures are "damaged goods". Some have been cared for as well as possible but almost all foreclosure homes are sold "as-is". Generally speaking, if the owner is losing the home, they are certainly not going to spend their money on taking care of a home that soon will belong to the lender.
The process of purchasing a home can be daunting in itself without having to worry about how you are going to repair all the damage you can find in a foreclosure.
Another factor to consider is the money that it will take to make the home whole again. Many people are afraid that once they purchase a foreclosure home, they will not have the funds to do all the work that will needs to be done. In other words, they are buying a “money pit”!
Well, take a step back and prepare to have the monster unmasked!
There is a little known FHA program that can help tame the monster. It is call the 203(k) program. Here is an excerpt from a recent RE/MAX newsletter.
“A 203(k) loan is available to any owner-occupant buyer and applicable to all homes within the FHA's normal limits. Its primary strength, though, is helping cash-strapped buyers purchase a fixer-upper they perhaps couldn't afford in its original condition. Here's an example: A 203(k) could help a couple buy a $150,000 house that needs $25,000 worth of qualified repairs. An FHA-approved appraiser estimates the impact of the various improvements, and the buyers line up contractors and secure bids before finalizing the loan. Then they borrow the $175,000 (minus their down payment), with the $25,000 put into escrow and paid out to the contractors completing the work. The repairs, which must be done within six months of closing, raise the home's appraised value. The new owners now have a true equity stake in a property that's worth significantly more than $150,000.
Largely unused until now
Created by HUD back in 1978, the 203(k) package was stifled by cumbersome rules and procedures for many years. In 2005, though, the FHA created a streamlined version. Trouble was, no one needed this type of financing at that time, when less than 3% of loans were FHA-insured. The enhancements went largely unnoticed. The changing market has given the 203(k) program some momentum, but the process -- which includes many extra steps and details -- is still far from simple.”
© 2009 RE/MAX International. Permission is granted to RE/MAX Affiliates to reproduce or forward this newsletter in its entirety, provided this notice is retained. All other rights reserved.
Please note that the FHA 203(k) loan program will certainly not be applicable every potential foreclosure home. How to know which ones are covered? Keep reading!
As this article states, this loan can be boon to potential buyers of foreclosed homes. It can also be difficult to navigate through the loan maze. This is where it is critical for a buyer to have a good team working for them.
Your agent should be able to help you locate foreclosures, find an inspector or other professional that can accurately evaluate the needed repairs, possibly recommend contractors and generally keep things running smoothly.
The next member of the team is extremely important. This would be the lender. Make absolutely certain that your lender understands your goals. They MUST be familiar will all aspects of FHA loans and in particular, the 203(k) program. This is not something that you want to learn “on the job”! Your lender must be there to guide you every step of the way and they can not do this if they don’t know the steps themselves.
Armed with this information, it may be time to reconsider purchasing a foreclosure. Set your goals, find your team and build your future!
To see real estate in the Hilton Head Island/Bluffton area, please visit my website www.KatGardner.com, or contact me at Kat@KatGardner.com or 843-422-3381.
I love sharing the Low Country so come on down!
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