Dallas

There’s a lot of talk regarding the purchase of foreclosure properties in the news right now, but exactly what does it take to purchase a foreclosure property? And how does this process differ from just buying a house that is listed for sale through a real estate company? This post will explain some of the basics behind the foreclosure process, and the risk/reward associated with purchasing in each phase.

Pre-foreclosure
This is the first phase of the foreclosure process. This period begins as the lender sends a Notice of Default to the homeowner. This is a legal document that informs the home owner that they are in default of the terms of their loan agreement and that the lender may elect to pursue foreclosure. At least 60 days must pass between this notice and the event where a public auction for the property is held. The Notice of Default is a legal, filed document and is accessible through public records search.

The Notice of Default is followed by a legal document called a Lis Pendens. This is the legal filing of the lender’s intent to foreclose. This is the point in the process where the government has recently contemplated placing a 90 day delay in the foreclosure process to allow the homeowner to recover before the foreclosure process continues. Again, this document must be filed and is available through public records search.

During the period of Pre-foreclosure, you must deal directly with the home owner (or their real estate agent). It is during this period that a “short sale” may occur. A short sale is the sale of the property for a price less than what is owed to the lender. The lender must approve the short sale, and although a cumbersome process, it can lead to the purchase of the property at a great price.

Foreclosure
If the homeowner is unable to reach agreement with the lender for either a restructured loan or a short sale, the next step in the process is Foreclosure, which begins with a public auction. The property is held for auction on the “courthouse steps” on the first Tuesday of the month. This is a sealed bid auction process, and the property is sold to the highest bidder. The lender will usually submit a bid for the amount still owed on the mortgage, and is frequently the highest bidder.

This can be a great event for someone to purchase a property at a highly discounted price, but comes with significant risk. In most cases, access to the interior of the property is not possible, which greatly limits the buyer’s inspection of the property prior to purchase. This is also a cash sale, so unless you are able to write a check for the property, it may not be a feasible purchase point.

Post Foreclosure
Following the auction, the lender frequently walks away with the property. The lender will then take the property to market, frequently through a real estate broker. In the MLS system, these properties are noted as foreclosure sales. The purchase of these properties works very much like the purchase of any other property for sale in the MLS, with a couple of distinct exceptions. First, these properties are usually sold on an “As Is” basis, meaning that no repairs are performed by the Seller (now the lender). Also, since the Seller has never occupied the home, it is impossible for them to provide an accurate disclosure about the properties history, so they don’t. It becomes incumbent on the Buyer to have the property inspected to determine it condition, and to make an offer appropriate to the physical condition of the property.

Buying foreclosure property can be a great way to obtain a home that has instant equity, but there are a number of heightened risks along the way. I strongly encourage you to seek the opinions of professionals in this process, it will make the whole process much easier, and the final outcome much more pleasurable.

Although scaled back from the $15,000 credit proposed in the Senate, the $787 billion economic recovery package signed into law by President Obama does contain tax incentives for first time home-buyers. The new program is a tax credit of 10% of the purchase price of the home with a maximum credit of $8,000.

USA Today reports that unlike the program that this legislation replaces, this is a true tax credit that is subtracted from the amount of tax owed to the government. To be eligible for the full credit, the person must be a first time home-buyer, and must make the purchase between January 1 and December 31, 2009. To avoid any type of repayment, the person must own the home for at least three years. Finally, the amount of the credit is scaled back if Adjusted Gross Income (AGI) exceeds $75,000 for a single person or $150,000 for a married couple.

Following the passage of the Stimulus bill, the markets have been shaky. The stock market has seen some tough days. For the moment, this has not affected the mortgage bond market and interest rates remain low. However, should the current trend continue on Wall Street, bond yields should begin to rise, which will ultimately move interest rates higher. If you have a loan in process, now would be a good time to consider locking your rate.

If you are a first time home-buyer thinking about buying a home in Dallas, now is the time to act. Take advantage of both the newly approved tax credit and the low interest rates in the market today. In Dallas, your bargaining strength as a credible buyer is exceptionally strong. There is a shortage of both higher quality properties and qualified buyers in the market today.

And by all means, please contact a Dallas REALTOR® if you are a first time home-buyer. It costs you nothing to obtain representation when you buy a home, and it can save you tremendously. The credit and housing markets are challenging in this times, don’t go it alone.

With a voice vote last Wednesday, the US Senate voted to expand the existing $7,500 first time home buyer tax credit. The existing program, which is better described as a zero interest loan went into effect last spring, and has been available to first time home buyers only. The National Association of Home Builders. The newly proposed $15,000 first time home buyer tax credit, in its current legislative state, would be applicable to any home buyer, provided that the home is to be used as the primary residence for at least 24 months. The amount of the tax credit is actually 10% of the purchase price of the home or $15,000, whichever is less.

Different than the $7,500 program that it replaces, this tax credit does not have to be repaid to the government – it is a true tax credit. The proposed legislation will replace the old program on a specific date, and will be applicable to any home purchased by a first time home buyer after the enactment date. US News and World Report. Beyond the increase in scope of participation and increase in value, this proposal also offers some additional features that may be of significant value. For example, as long as the home is purchased before your 2008 taxes are due, the credit may be applied to your 2008 tax bill. Finally, there is no apparent restriction on income of the participants – come one, come all.

New York Times notes that this is one of two amendments to the stimulus bill that the US Senate endorsed by voice vote last week. This measure is anticipated to have a cost of $18.5 billion based on the anticipated volume of home purchases. The second measure endorsed by the Senate was a measure to provide incentive to buy new automobiles.

Bloomberg press reports that a Stimulus Bill approval vote is likely to come on February 10 in the Senate. Following this measure, the bill would have to be reconciled with the version passed by the House of Representatives last week. Both the Senate vote and the reconciliation process allow an opportunity for things to change from the currently proposed form.

Stay tuned. As soon as the legislation is finalized, I will post complete information on the details of the program, and how to access the benefits.

Across the country, mortgage rates rose toward the end of January, from an average of 4.89% for 30-yr fixed loans in early January to rates averaging 5.24% in the latter part of January. This rise in mortgage interest rates caused a significant decrease in mortgage loan application volume, especially in the refinance sector of Dallas.

Although the government would like to see mortgage rates continue to remain low to revitalize the housing market, primarily Dallas’ mortgage rates, some of their efforts may be having the opposite effect. According to a recent USA Today article, the yields on 10-yr Treasury notes are actually rising due to the increase in government borrowing. This in turn is causing mortgage interest rates to rise, especially in Dallas.

So what happens to mortgage interest rates in Dallas in the near future? A recent survey conducted by Mortgage-X.com suggests that mortgage rates are likely to fall slightly in the next 30-90 days. The survey polls over 250 mortgage rate experts, and currently, about 64% of the participating mortgage professionals believe mortgage rates will decline slightly over the next 30 days and 43% believe mortgage rates will decline slightly over the next 90 days.

Mortgage rates could see some government assistance in the near future. The Senate will debate the stimulus bill this week, and there are several mortgage related ideas that are being put forth. First, there is a Republican proposal that would encourage lenders to offer a 4% fixed rate 30-yr mortgage. The government would guarantee the mortgage rate for some period of years so that if prevailing rates were at 5.25%, the government would make up the difference. More detail can be found in this CNN/Money Magazine Story.

First time home buyers in Dallas might also see assistance in the form of an income tax credit. Business Week Reports that as the stimulus bill moved through the House of Representatives last week, there was a proposal for a tax credit of $7,500 for first time home buyers who act in the first half of this year. The Construction Industry lobby is pushing to have this proposal increased in both dollar amount and time offered, as construction spending is seeing record declines.

So while the economic news might be grim for a lot of the country, those who are able to qualify for loans may just find that this is a great time to be buying a home, especially in Dallas- looks as if a great deal of assistance will arrive in the very near future.

There is an existing bike trail that circles White Rock Lake in east Dallas. This trail extends north from the lake along White Rock Creek all the way to LBJ Freeway and Hillcrest Road. The Santa Fe Trail is currently under construction. Upon its completion, White Rock Lake will be linked by a bike trail to Fair Park. For more information on the Santa Fe Trail

There are many great neighborhoods in Dallas. I have lived in Lake Highlands (northeast Dallas) for the past 18 years and am very fond of our community. Served by the Richardson ISD, we have great schools. Lake Highlands is also one of the few areas in Dallas where real estate values are still appreciating. For more info on Lake Highlands see the Lake Highlands Area improvement Association

There are three great programs run by federal government that allow first time home buyers to buy a house with little to no money out of pocket. FHA loans are available through the Dept of Housing and Urban Development. The Veteran’s Administration offers US military veterans a $0 out of pocket opportunity and The US Department of Agriculture sponsors Rural Housing Service Loans.

Although it may seem counter-intuitive, I believe that now is an excellent time for first time home buyers in Dallas to enter the market. Many entry level homes are available at great prices in Dallas, especially if you are a first time home buyer that can do a few repairs. The number of foreclosure properties in Dallas is increasing, but these properties frequently come with a few warts. Given that the last occupant could not afford the mortgage, it is likely that they could not afford to keep up with repairs either. However, with a little TLC, Dallas homes can be spectacular again. They are all at a discount price for first time home buyers in Dallas.
So how do you go about buying a home in Dallas as a first time home buyer? How do you know if you are getting a good deal? How do you get it financed? How does the closing process actually work? How do I obtain good advice when being a first time home buyer? All of these are great questions, and the answer to most of them is “don’t do what I did when I was a first time home buyer in Dallas.” Here’s my story…
Young and relatively new to Dallas, I was ready to be a first time home buyer. A US Navy officer at the time, I knew that I could obtain financing through the VA and have little out of pocket cost. I walked into a local real estate office in and announced that I was ready to be a first time home buyer in Dallas. I was soon signing a long term representation agreement with an agent that turned out not to know very much. It was up to me to figure things out, and I made some rather large mistakes (bought a house about 300 yards from the Dallas county line. Had I crossed over the line, taxes and car insurance would have been significantly cheaper).
So here are my recommendations to any first time home buyers in Dallas. First, work with a seasoned agent or broker that has years rather than minutes of experience about Dallas real estate. Get to know them before signing a long term agreement, and then only sign an agreement if you have a way out. Don’t get yourself tied up for six months. Good agents will always have clauses that will release you from the agreement. Also, if you are a first time home buyer in Dallas make sure that you really trust the person you are working with. Watch the way that they present information and ask questions until you can determine whether or not they seem knowledgeable and trustworthy. If you can get a reference from a friend, do so. If the references you use are provided by the agent, ask them hard questions.
Second, if you are a first time home buyer in Dallas get yourself qualified for a mortgage before you start a serious search. This will let you know what you can afford. No sense looking at $750,000 homes if you only qualify for a $200,000 mortgage as a first time home buyer. When it comes time to make an offer, you are going to have to prove to the seller that you can obtain financing before they will accept the offer. Going through the qualification process early as a first time home buyer in Dallas will help throughout the process.
Finally, think about the things that are really important to your life, and find a home near them. Being a first time home buyer, I purchased in the outer Dallas suburbs, but my life never moved out there. All of our friends and social events were in Dallas. Being a first time home buyer, I could have afforded to pay a higher mortgage in exchange for the fuel and wear and tear that I put on my cars.

Read national newspapers or listen to national evening news on any channel, and you’ll hear that real estate markets are in turmoil across the country. But in Dallas, we have fared better than most. In some areas the real estate markets are depressed, especially in the southern suburbs. But north Dallas real estate continues to see a good market. In fact, the Park Cities and northeast Dallas neighborhoods like Lake Highlands are actually seeing price appreciation.

Across the Dallas Fort Worth area, the number of sales transactions is significantly decreased from a year ago. It seems that only people who really need to sell their house (corporate relocation, divorce, etc) are placing it on the real estate market. The number of active buyers is also quite low. So if you possess the ability to obtain a loan, and are interested in purchasing a home, it’s a great time to buy a home in Dallas. With few other buyers in the Dallas real estate market, those who need to sell their homes are quite happy to see you. This is beginning to translate into improved negotiating posture for the buyer.
In the right part of town, the picture is not absolutely bleak for home sellers. Real estate in outstanding condition is few and far between, and is still commanding an increasing price in north Dallas and the Park Cities. The time to sell a home is rising, and on average has crested 3 months in Dallas. If you need to sell your home, make sure you bring it to the real estate market in the best possible condition. Clean the closets, paint the room that you’ve been neglecting, and get the yard cleaned up (yes, that means bagging up all of the leaves that have been around since autumn). Present your home well, and it may just sell quicker than you think, and for very close to the asking price.

For answers to specific buying or selling questions in the current Dallas real estate market conditions, feel free to call me.