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7 Myths About Foreclosures
Debunking common misperceptions about this often overlooked market of real estate
Because the foreclosure market has been relatively dormant in recent years, many people don’t fully understand how foreclosures work. This lack of understanding can foster foreclosure myths that are dangerous both for homeowners who want to avoid foreclosure and buyers interested in purchasing a foreclosure.
Here are seven of the most common myths about foreclosures:
Myth 1: Foreclosures only happen in poor areas.
Foreclosures come in all shapes and sizes and occur in all neighborhoods. From low-income to million-dollar properties, you will see the full spectrum of homes entering into the foreclosure process. Economic forces such as rising interest rates and decreasing home values affect homeowners from all types of neighborhoods.
Myth 2: Financial irresponsibility causes most foreclosures.
While there are always those cases of financial neglect, most homeowners have shown some high level of financial responsibility in order to qualify to purchase a property in the first place. Unforeseen events such as job loss or a catastrophic accident can cause sudden and unpredictable financial havoc for homeowners. In addition, foreclosures also tend to increase when interest rates are up and property values begin to decrease. When this occurs, homeowners may find themselves paying higher monthly mortgage payments for a property that is no longer worth what they originally bought it for.
Myth 3: All foreclosures are in disrepair.
While some foreclosures can be in less than ideal shape, many are in great condition. The myth that all foreclosures are in disrepair seems to be driven by the other myth that foreclosures are usually caused by financial irresponsibility. Many homeowners who find themselves in a default situation encounter circumstances that are out of their control. Even so, this usually does not negatively affect the condition of the property. However, if you are not an expert in buying foreclosure properties, it is highly recommended that you seek the advice of a professional who is experienced with these types of sales to avoid common pitfalls.
Myth 4: Lenders want to foreclose on homeowners.
The foreclosure process is costly and time consuming, and is a last resort for lenders to recover their investment. When a homeowner defaults on a mortgage agreement, the lender must first file a public default notice after which the homeowner is given a grace period known as a pre-foreclosure period. During this time, the homeowner can pay off the debt or choose to sell the property. The minimum timeframe for a pre-foreclosure period varies by state and can range from 27 days (Texas) to 290 days (Wisconsin). Only at the end of the pre-foreclosure period can the lender auction the property off to a third-party buyer or repossess the property and sell it on the regular market.
Myth 5: Foreclosures are often bought for pennies on the dollar.
While it is true that foreclosures are often purchased below market value, one should be leery of anyone claiming that one can consistently find discounts of less than 10 percent of market value. According to a RealtyTrac analysis of foreclosure sales in the last seven months, the average savings on foreclosure purchases nationwide is approximately 29 percent below full market value.
Myth 6: Foreclosure buyers usually take advantage of the homeowner.
While homeowners in default should be wary of unscrupulous buyers and investors who try to take unfair advantage of the situation, most foreclosure buyers can actually help an owner to walk away with something to show for equity in the property and avoid a bad mark on his or her credit history. During the pre-foreclosure period, a potential buyer may approach the homeowner in default and arrange to buy the property before the foreclosure actually takes place. This pre-foreclosure sale also benefits buyers, allowing them to often purchase properties below full market price.
Myth 7: Foreclosure buying is only for professional investors.
Perhaps at one time this may have been the case, but with all of the tools available to today’s buyers, more people than ever before have the opportunity to purchase foreclosure properties. Using online resources such as RealtyTrac’s online foreclosure database, potential buyers can search nationwide for properties in pre-foreclosure, up for auction or banked-owned, as well as find extensive reports on each property listed. Buyers can also get financing and find real estate agents familiar with ins and outs of the foreclosure market to help create a smoother transaction.
By Jim Saccacio, RealtyTrac Chief Executive Officer
A Quick Guide to Home Improvement Financing
There’s no place like home. But how much better would it be with that addition, or with a new kitchen? Once you have created a vision for your home, you’re going to need some money to get the job done. How do you get from here to there? Well, that depends on your financing options.
Home Improvement Financing Options
Credit Cards. The go-to for your clothes shopping may be the best answer for home improvement financing as well. If the cost is under a thousand dollars, a credit card is cost-effective and hassle-free. There is no paperwork or up-front costs like appraisal and origination fees.
Home Equity Loans. Home equity loans and home equity lines of credit (HELOCs) allow you to tap into the equity you’ve already established in your house in order to finance your home improvements. This way, you can use the equity you’ve established without actually selling your home. As an added bonus, interest payments are usually tax-deductible: One of the keys to home improvement financing is trying to minimize the pain of this interest.
Home Equity Lines of Credit. A home equity loan is generally the best way to go if you’re doing a one-time project. If the project is ongoing, however, a HELOC is a more flexible way to go. In open-ended projects, there are sometimes unexpected costs down the line, and you’ll find you need more money than was initially estimated. If more costs come up, you can withdraw more, without the hassle and expense of having to reapply. At the same time, they retain the tax deductibility advantage of home equity loans, and the interest rate is usually much lower than that of credit cards.
401(k). Some retirement plans allow you to borrow against your fund for home improvements. Because it’s your money, the rates are usually low, and there’s no credit check and not much lag time. However, if you leave your job while you’re still in repayment, you will have to pay back the loan amount in full, or get hit with about thirty percent in withdrawal penalties and taxes. The same is true if you don’t pay back the loan within five years, meaning that this home improvement financing option is best for small to medium-sized jobs.
Life Insurance Loans. You may also look into borrowing on the cash value you’ve built up in your life insurance policy. This home improvement financing option is easy since there’s no credit check, and all you have to pay back is the interest. However, you may be lessening your death benefits by doing so—meaning that if you die before you pay it back, your family will receive less of a payout.
Borrowing against your stock portfolio is another easy home improvement financing option. However, there is some risk involved: If the market does well, you may not have to pay back the loan, but if it does poorly, you may be forced to sell the stock.
Title 1 Loans.
If you have limited equity in your house, you may qualify for a federal loan, insured by the Federal Housing Administration. These loans can only be used for essential improvements or to make a home wheelchair accessible.
Contractor Loans. This is one way to streamline the financing process, but it is one fraught with peril. For one, there may be hidden fees or finance charges in a contractor loan. For another, it means that the contractor gets paid up front, and if the work is not up to par, you have no recourse.
Final Thoughts for Home Improvement FinancingYes, one of the keys is to reduce the pain of the interest associated with financing, but you also need to guard against hamstringing your monthly expenses and budget. If you can’t make the payments, no type of financing is going to work for you. Building up equity in your home is still a solid pillar for your total finances, but you can’t finance $100,000 kitchen makeover and expect additional property value to rescue you from the wrath of lending institution. In trying to make your home the best it can be, it’s important not to lose it entirely in foreclosure.
Marcus Pickett is a professional freelance writer for the home remodeling industry. He has published more than 600 articles on both regional and national topics within the home improvement industry.
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Colorado Foreclosure Filings Drop for 3rd Straight Quarter
Denver Business Journal – by Mark Harden
New foreclosure filings in Colorado fell 15.7 percent in the second quarter from the same period of 2009, but foreclosures sales rose 17.7 percent, the state Division of Housing reported Thursday.
Officials attributed the rise in sales largely to moratoria on foreclosures a year ago that no longer are in effect.
It was the third consecutive quarter with a decline in Colorado filings — the first step in the foreclosure process — from the previous quarter, and the lowest quarterly filings tally in five quarters.
New filings — the opening of the foreclosure process — totaled 10,233 statewide in April, May and June, down from 12,135 in the second quarter of 2009, the report said. The latest filings total also was down from the first-quarter 2010 tally of 11,136 new filings.
The recent peak in filings came in last year’s third quarter, when there were 12,468 filings.
“With foreclosure filings at their lowest point in five quarters, we think this constitutes a future downward trend,” Pat Coyle, director of the Division of Housing, said in a statement Thursday. “It’s becoming increasingly clear that in Colorado at least, new foreclosure filings are inching down in spite of a steady unemployment rate.”
As for foreclosure sales at auction — the final stage of a foreclosure process if a struggling homeowner can’t come to terms with a lender — the statewide total increased in the second quarter to 5,885 from 4,999 in the same period of 2009.
But foreclosure sales declined 12 percent from the first-quarter 2010 total of 6,686.
Officials attributed the year-over-year increase in completed foreclosures in part to the fact that foreclosure numbers were kept artificially low in 2008 and 2009 as several national mortgage servicers suspended foreclosure processing as the federal government worked out a foreclosure-reduction strategy.
Coyle said that 5,000 to 6,000 foreclosures per quarter have been “the norm since 2006, but what’s notable is that in spite of the job losses in 2008 and 2009, the foreclosure sales numbers haven’t moved above those levels. This is where we’ve really seen the impact of the [state’s] Foreclosure Hotline and the housing counseling agencies in Colorado. They’ve really helped put a limit on how many homes end up on the auction block.”
The state foreclosure figures are primarily for single-family homes and condominiums but also include agricultural, commercial and multifamily properties as well as vacant land.
In county-by-county data, new foreclosure filings declined in the second quarter from the previous year in all metro-Denver counties. The rate of decline in the Denver area ranged from 30.4 percent in Denver itself to 10.5 percent in Jefferson County, the state report said.
As for completed foreclosure sales, they declined year-over-year in Denver County by 9.5 percent but rose to varying degrees in other metro counties, with the highest rate of increase being 36.1 percent in Jefferson County.
All metro-area counties saw declines in both filings and sales between the first and second quarters of this year, the report said.
By Steve Charlett|2019-11-30T19:34:43-07:00August 10th, 2010|Comments Off on 08/10/2010 – Real Estate News by Dr. Relocation: Rentals Near DU, & Belmar + 7 Foreclosure Myths, Home Improvement Finance Guide
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