1.  Who is FRG and what role do they play in helping me get my contract  approved?

FRG is the loss mitigation and short sale arbitration company who processes short sales by arbitrating/mitigating and or negotiating the best deal possible for all parties. (See Company Overview).

 

2.  Why should I buy a short sale?

It is the single best way to purchase a home at the best price. Lenders are willing to take less money for homes in pre-foreclosure status to avoid costly foreclosure processes. An average foreclosure according to a 2002 study by Craig Focardi with the Tower Group Foundation found an average cost of a foreclosure sale is $58,759.00. FRG actually procures a return on investment summary for the lender allowing the lender to make good financial decisions saving them thousands of dollars allowing buyers to purchase FRG negotiated sales at the best possible price.

 

3.  Once I submit a contract how long will it take to get the lender to approve?

An average approval from most lenders takes 90 days or more with most other loss mitigation companies. However; FRG averages just 30 days to get an approval with most lenders except for Countrywide Home Loans which is taking approximately 90 days. FRG packages the short sale with everything the lender needs to insure quick approvals. FRG has also developed relationships with management members of lenders who help get deals pushed thru when necessary.

 

4.  Why should I submit an Earnest Money Deposit with my contract?

Lenders have several thousand short sales on their desks. Lenders focus on short sales with earnest money deposits first because they know it is a serious buyer. So the first contracts they pull are the ones with Earnest Money Deposits because they know it is not a Short Sale Investor who has submitted 5 contracts even though the investor plans to only buy one property. Choosing to focus on Short Sales contracts with earnest money deposits, eliminates a lender from spending 30-90 days on 4 of the other 5 contracts that will never materialize.

 

5.  Once the lender gives an approval letter, how long is given to close?

Usually 1 -3 weeks. Some FHA loans may be longer.

 

6.  Why should I close within 1-2 weeks of an approval?

Usually the seller is in a hardship situation and the longer you wait to close gives opportunity for the seller to change their mind maybe due to new legislation being announced to help homeowners. In addition, the seller could be faced with additional debt collection efforts where lawsuits or garnishing wages might be lingering forcing the homeowner into Bankruptcy causing the deal to be delayed for many months. These examples are few and far between, however you don’t want to be one of the examples by delaying your closing for too long. FRG negotiated deals have the fastest turn around times on short sale approvals allowing buyers to close deals fast.

 

7.  Why do I have to be pre-qualified for financing or provide proof of funds to submit a short sale offer?

Lenders now require it to process a short sale.

 

8.  Can I inspect the house prior to submitting a contract?

Yes. Your Real Estate Agent will coordinate this with you and the seller and or seller’s agent.

 

9.  Will I get to have an inspection before I close?

Yes. You should at least get a home inspection completed. If you have Government sponsored loans they might even require a termite inspection and a certified appraisal.

 

10.  I have FHA financing, so will it take longer to close?

Yes. Usually it might add 2 -4 weeks additional time to close depending on the type of loan you may have. You should work with your Real Estate Agent to make sure you have everything completed or planned to be completed.

 

11.  Will FHA financing approve financing for a home that needs a lot of repairs?

Some FHA plans might not. However, if a lot of repairs are required to get a FHA loan you should consider a FHA 203k loan designed to finance homes that need a lot of repairs.

 

12.  What are the qualifications for the government sponsored tax credit for 2008-2009 American Recovery and Reinvestment Act 2009?

First time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before December 1, 2009. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit is now 10% of the home or no more than $8,000 for a new home. For more details and a complete overview see FRG’s, First Time Homebuyers Tax Credit. A first time homebuyer is defined as anyone who has not owned a home in the last 3 years.

 

13.  Why have some real estate agents been hesitant about buying/selling pre-foreclosure homes (short sales)?

Over the past years, pre-foreclosures and or short sales were not a very big market and so many real estate agents didn’t want to spend the necessary time to become educated and sufficient in selling these types of properties. The real estate investor focused on this market buying homes from homeowners and then flipping the home to make a profit. In addition, in past years short sales were not priorities for lenders, so getting them approved was not high on their list causing many buyers to walk due to the length of time they would take. Situations like this created a bad taste for real estate agents. Some real estate agents who tried to negotiate their own short sales didn’t realize the amount of work required to do short sales and became frustrated with the process. Most real estate agents who did negotiate their own short sales found little success and lost money and time in the process. Many real estate agents trying to do their first short sale on their own found out they ran out of time and their clients homes were foreclosed and auctioned causing frustration with their clients. Today real estate agents who are experienced and specialize in short sales endorse short sales, as the best opportunity to get most value for a home. Also, real estate agents who specialize and understand the requirements of short sales hire loss mitigation/arbitration “short sale” companies who are specialists to manage and complete their short sales.

 

14.  Will the lender accept my proposed offer or is there a possibility the lender may counter-offer?

If the offer is a fair offer the lender will most likely accept it. Some homes are already valued between 40-65% below its peak values between 2006-2007. “Lowball” offers are a waste of time for everyone and will usually be rejected or counter offered and delay the process. Offers within reasonable ranges will usually be accepted.

 

15.  Why does a pre-foreclosure (short sale) usually provide the best value even over REO’s and new homes?

Pre-foreclosure/short sales are relatively a secret and according to statistics an average of 85% actually complete foreclosure and are auctioned at the courthouse. Basically it is still a market that is relatively untapped and will continue to grow. Many pre-foreclosure homes are 40-65% below the value the home appraised for in 2006. Today’s financing rates can make many pre-foreclosures in Florida as low and lower than buying the same home between the years 2000-2002 almost 8-10 years ago. Many market experts believe pre-foreclosures are a can’t miss investment and has the potential to double or triple in value over the next 5-10 years.

 

16.  Can I get better deals in Foreclosure/Auction Sales at the Courthouse?

There are two types of Auction Sales: (1) Courthouse Auction (2) Auction Realty Sales. A lender representative shows up to Courthouse Auction and usually buys the home back. It is not good to buy the home at a courthouse auction because you are stuck with the home no matter what and buying it “as is”. You don’t know if it has structural damage, termite infestation or Chinese drywall etc. After the home is purchased back by the lender and if they choose an Auction company or Real Estate Broker to sell it, you will at least have an opportunity to have inspections completed before you buy the home.

 

17.  Can I get a better deal with an REO home that is sold via an auction company?

Auction sales have been one of the favorite ways to sell REO homes. One reason is they are fast and the other reason is auction sales actually get a higher margin which means homebuyers pay higher prices. The reason is Auction companies have mastered the perception that you will get homes at unbelievable savings. This perception created demand and this demand caused thousands of people to bid on the same home driving the prices up to usually market prices and sometimes above market prices. In addition a buyer is required to put usually a minimum of $5,000 deposit in escrow before they can even bid on a home. A recent auction in Orlando Florida attracted more than 4,000 buyers in person and another 20,000 buyers online inquiring about the homes. It is not unheard of for some auction sales to attract 8,000 or more people over a weekend to bid on homes. In a short sale, the exposure is not even close and you may only have 5-10 buyers looking at the house. The Auction companies publish and promote in the media homes they sell are 60-80% below market value for marketing perception. Usually this 60-80% discount is not from current market pricing but was what the home was worth in the 2006 time frame which is really no different than most home valuation prices in the same area that are comparable. Auction Companies don’t promote to the public most homes auctioned are purchased at market value with usually a 10% premium making the home value above market pricing. On average you can usually save 10-20% on Pre-foreclosure home purchases.

 

18.  Why is Central Florida considered by many high level Real Estate Experts to be the safest investments including many believing it to provide the highest returns on investments over the next 10 years?

Baby Boomers – 80 million strong! The baby boomers will continue to retire over the next 10-15 years. Baby boomers are looking to retire in warmer weather climates like California and Florida. The cost of property along the coast of Florida and California are simply too expensive for the majority of baby boomers wanting to retire. A baby boomer can still buy similar properties for about half the price in Florida as opposed to California. Texas is too hot for the baby boomers and Florida has been and continues to be the preferred choice for Middle America and the North East America baby boomers. This demand by baby boomers will drive Central Florida property values higher. By 2010 economist forecast Florida will be the third most populated state in the country. Florida has been one of the fastest growing states in the U.S. for each of the past seven decades. Florida’s business climate ranked fourth among executives and sixth overall on site selection magazines 2008 Top State Business Climate rankings. Finally, Florida is and continues to be one of the most visited states in country due to all the tourism including theme parks such as Disney, Universal Studios, Bush Gardens and all the world renowned beaches. The business community continues to make Florida one of the top spots in the world to hold conventions and sales meetings.

 

19.  Can I use funds out of my IRA/Retirement/Savings fund to make a down payment?

Yes in many cases. You should contact your attorney, CPA or financial advisor. You have to find someone who is experienced in this in order to keep your costs down. You can withdraw up to $10,000 out of your IRA to buy a home and not pay a 10% early withdrawal penalty and or have to pay it back to your IRA. You must use the money within 120 days after the day you receive it. It must be for a primary residence of a first time home buyer that must be for you, your spouse, children or grandchildren or ancestors. If both you and your spouse are first time home buyers each of you can withdraw $10,000 each without penalty however you both would have to have separate IRA’s. Under this law, a first time homebuyer is defined as not owning a home in the previous two years. Under the American Recovery and Reinvestment Act of 2009 you can receive an additional 10% tax credit on the purchase of a home up to $8,000 if you have not been a home owner the last three years. This could take time to do, so you should plan this before finding your pre-foreclosure dream home.                                                  

 

20.  My child is going to school in Florida and I was wondering if my child could use part of their school loan as a down payment to buy a house or condominium during the four years they will be residing there?                                        

Yes, some student loans will provide several thousand dollars to use for school including covering room and board. We have been informed; some accountants and financial advisors have used this with their clients usually in private student loans financed by banks. You should contact your financial advisor and or banks providing student loans. Not every bank will provide such services. Finding the right pre-foreclosure home or condominium could allow your child to live in a nice property. For example, a $140,000 2/3 bedroom home or condominium based on 2006 vales could be purchased as low as $55,000 - $70,000 today. Four years of room and board will cost an average of $600/month or $7,200/yr ($28,800 for 4 yrs). When your child graduates in 4-5 years they will most likely be living in a home or condominium that at least doubled in value making your child’s education almost free. In addition, your child could rent the other two rooms out for $500.00 a month each and still have $300.00 left over for food and groceries. You may not be able to do this with all school loans and should consult your financial advisor and or bank who may be supplying the loan. A better approach might be to use your $10,000 IRA credit to purchase a home/townhouse/condominium for your child. (see Question 19 above).

 

21.  I am buying a short sale property for an investment rental property. Can I use my self-directed or Roth IRA to buy my investment property and keep all the profits/revenue tax free?

Yes. However all retirement plans do not allow these types of investment vehicles. You should contact an experienced financial advisor who handles these types of transactions. All of the appreciation on the home and all of the revenue generated from your rental income will be tax free to you. For example, if you purchased a property for $100,000 and it doubled in value to $200,000 in 3-5 years the increased appreciation is tax free. If you charge $800.00/month in rental income, that revenue will also be tax free. For more detailed information see questions and answers for investors.

 

22.  When will the housing market pick back up where my home may increase in value?

Today home values in Florida are approximately 13.3% higher than the average home value in 2003. New construction of homes has decreased almost to a standstill. This means there are beginning to be less and less homes available for sale which will eventually cause demand for pre-foreclosure and existing homes which will increase values for both pre-foreclosure as well as existing homes. Some market experts believe the home values will stay flat line thru 2009 and maybe even thru 2010 and begin to increase over the next 3 years. Chief Economist Mark Zandi with Moody reported in the Wallstreet Journal on February 6, 2009 that home values should stabilize in 2011 for markets like Florida that were hit hard with the recession. The same market experts believe it will take 3-5 years for homes to gain back their market values they experienced in 2006. Over the last 200 years no will argue that the purchase of homes have been one of the best and safest investments and history has shown that recessions like we have generally do not last more than 3 years.