There’s a new bill in Congress, The Housing Recovery Act of 2011, or H.R. 1526, which is aiming at getting the backlog of foreclosures sold, by allowing buyers to use retirement funds for purchases.

The new bill aims to clear the growing foreclosured properties’ backlog by allowing buyers to dip without penalty. The bill would amend the IRS tax code, so that qualified individuals could use distributions as a down payment to purchase residences that have been in foreclosure status for one year or more.

Typically, pulling funds out of an IRA, 401k, or similar retirement accounts prematurely would call for early distribution penalties, but Florida Congressman (and real estate agent) Bill Posey is hoping the IRS will waive it for the greater good. US Rep. Posey introduced the bill in the US House last week, and it was referred to the Committee on Ways and Means.

If it is passed, it will come with a few requirements:

1. The subject property must have been in foreclosure for one or more years;
2. The retirement funds must be used within 120 days of the close of purchase;
3. The foreclosed property must be held be the buyer for a minimum of two years to avoid any early distribution penalties. It will not allow investors to “flip” properties.

The bill is aimed at promoting sustainable homeownership, while giving homeowners a tax break. Let’s hope the Congress can move on this!

We all knew it was coming. Local governments are now getting  into the foreclosure mess:

A new law was passed in DeKalb County which will affect all properties that were foreclosed after October 27, 2010, in the Dekalb portion of Atlanta and unincorporated DeKalb county .  

The DeKalb County Foreclosure Registry was established “as a means to protect neighborhoods from becoming blighted through the lack of adequate maintenance and security as a result of properties that are foreclosed or where ownership has been transferred after foreclosure.” 

The foreclosing lender is now required to “register” the property with the county and to pay a non-refundable registration fee of $175.  The fee must be paid within 30 days of the foreclosure. Registration must be completed electronically on the DeKalb County website, and then a hard copy of the form must be submitted in person or by mail along with payment in cash or by check. Failure to register a foreclosed property will be subject to a penalty of $1,000 per day up to $100,000 (per property)!

If the foreclosing bank does not have an office in the metro Atlanta area (defined as Clayton, DeKalb, Fulton, Gwinnett, Henry, and Rockdale counties), the bank must designate a local property agent on the registration form, and this agent will be responsible for the security and maintenance of the property in compliance with the DeKalb County Code.  

There are no written exceptions in the new law for HUD, VA, or other entities such as Fannie Mae.   Agents, buyers, and closing attorneys should be aware of this law and confirm before a foreclosure resale that any DeKalb County fees have been collected.

Many buyers are choosing to buy real estate for cash, thanks to low prices, a huge inventory of foreclosed properties, and poor rates of return on other types of investments. In September, 2010, 20.9% of all buyers in the metro-Atlanta area paid all-cash for their property! 

 Although the only legal requirement for a cash purchase is the money, there are several important considerations for a cash buyer:

1.  Home inspection – never buy a property without one;
2. Appraisal – there is no lender appraisal, so this is the only way to insure that the purchase price is reasonable;  
3. Survey – always recommended for small lots and properties in older or urban areas;  
4. Flood zone determination – a lender always checks this, and a buyer should also;  
5. Hazard insurance – always have the property bound with insurance from the closing date (do not put this off);  
6. Termite inspection – a termite problem can be a major expense;  Water bills: look at recent water bills to make sure they are not unreasonably high. A high bill could reveal a leaky or broken pipe;  
7. HOA dues or condo dues – inquire about pending assessments or increases in dues – check the foreclosure rates, owner/occupancy rates, and financial stability of the complex and association;  
8. Owner’s title insurance – this is imperative for the cash buyer, especially when buying a foreclosed or distressed property such as a short sale.

Dekalb County prosecutors say they have uncovered a grand attempt to steal vacant houses across North Georgia.

In a month-long investigation, Dekalb and the FBI have investigated  an anti-government extremist group, calling themselves ”sovereign citizens”. The “sovereigns” refuse to answer to local or state authority. So far, the government has jailed four people and issued arrest warrants for four others. The members of the group often refuse to pay taxes or register their vehicles. Some told Channel 2 Investigative reporter, Jodie Fleischer, their homes are considered sovereign land.

Authorities say that the “sovereigns”  file fraudulent paperwork to take over a property, around the same time that a bank is forcing out the previous owners who are in foreclosure. Then, the “sovereign” signs over the property to himself for free. He changes the locks on the house and posts a sign on the property saying that he is the lawful owner. He also files paperwork declaring himself a sovereign citizen and immune to the laws of Georgia. Police have arrest warrants for those who’ve filed fraudulent deeds. Investigators say that by using the fake deeds, they have been able to establish electricity and alarm service at the properties. 

The largest problem with this scheme, is that it forces the real owners to prove that they own the property in court.  “They’re able to tie up the legal system by filing bogus paperwork and engaging in paper terrorism against anybody who dare comes after them,” said DeKalb County Assistant District Attorney John Melvin. Buyers may be delayed from closing on their homes, as the bank tries to sell the property to upscale home buyers, but cannot give clear title to the property.

Melvin said he plans to push for legislative changes. “Personally, what I’d like to see is a little more verification before a property is able to be deeded to another person. You just can’t go to a clerk of court and deed a property to yourself.” 

The deeds reach from Norcross, to Snellville, to Augusta, and even include a $13 million shopping center in Buckhead.

Dekalb police say that these “sovereigns” were caught trying to change the locks on a $1Million foreclosed home on Windsor Parkway in Brookhaven. Sandy Springs police say they caught one of the members of the group living in a $2 million unfinished home on Tara Trail in Fulton County. “I’m shocked,” said home builder Mark Phillips. “This house is certainly not finished. It’s not even a livable house.”

A home is considered “short” if it is valued below what is owed on its mortgage.   If an owner/seller does not have the cash to cover the shortage, a sale of the property can still close providing the mortgage company is willing to negotiate a “Short Sale”.  Short sale scenarios are quite common, but successful negotiations to actually close them are not.

Nationally, 3% of all mortgages are in foreclosure and an additional 8% are 30 days or more in arrears (past due). This means that 1 out of 9 homeowners are late on their mortgage by at least 30 days. Unfortunately, 80% of these homeowners will not take action in order to prevent their home from going into foreclosure and will lose their homes. 

As a Realtor, my primary goal is to help people keep their homes. But, if a sale cannot be avoided, I want to help owners sell their home as quickly and smoothly as possible.

I want sellers to know there are options AVAILABLE NOW to help them avoid foreclosure and spare their credit.

If you are living in the Atlanta area and think you may lose your home to foreclosure, call me. I am a Certfied Distressed Property Expert (CDPE) and may be able to help.

It is estimated that up to 90% of Atlanta’s foreclosed homes were never listed for sale! These homeowners, living in an about-to-be-foreclosed home, have not explored something called a “short sale”. If they qualified for a short sale with their bank, they would not have suffered through the foreclosure process and would not have quietly let their homes be auctioned “on the steps” (of the courthouse).

Stop Atlanta foreclosure!

A short sale may be possible, in lieu of a foreclosure. Although a short sale will harm your credit for 2-3 years, it will not have the devastating, long-term effect (9-12 years) that a foreclosure will have on your credit. And a foreclosure will not stop at your credit report; many employers will not hire people with a foreclosure on their record.

Stop Atlanta foreclosures! Call me if you need help exploring a short sale in Atlanta. And stop Atlanta foreclosures!

Many real estate agents will recommend that a seller obtain inspections on their home prior to listing the home for sale.  “Why should I get an inspection? Once we know what needs to be repaired we will have to fix it.”  Well, that is one way to look at it. There are other things to think about.   

Second, if you, as the seller, accepted a low offer and then have to negotiate repairs mid-stream, it can be costly and discouraging.  If you, as the buyer, offered a high price and then find out mid-stream the seller does not want to negotiate the cost of repairs, the deal can become frustrating very quickly.  A well-maintained home can prevent these issues and the stress of the contract is reduced.

So what happens when you are looking at a foreclosed property for sale?  Short sales, REOs, “bank owned” and ”corporate owned” properties rarely have inspections available for the buyer to review.  As a buyer, many agents will say you are “on your own” to obtain inspections.  Distressed homes are sold “AS-IS”.  This means that the seller does not intend to make any repairs and therefore the buyer should make the offer subject to the property’s current condition.

Inspections can be costly.  Once a buyer has written checks for a home inspection ($300-$500), roof inspection ($125-$150), chimney inspection ($125-$150) or pest inspection ($150-$175), it is hard to turn back on the deal.  If you cancel the contract due to repairs, you are out the inspection money.  If you move forward with the contract, you may be able to have your agent negotiate a credit; however, most distressed properties’ contract addenda have redundant paragraphs indicating the buyer agrees to an “AS IS” condition.

As a buyer, you might ask, “Do I need all these inspections?”.  Only if you are sure a foreclosed home presents the right deal at the right time.  Remember, most private sellers (not bank owned or-corporate-owned) will negotiate repairs and sometimes (particularly in a “buyer’s market”), they are willing to share the cost of inspections. The foreclosure has to be a very good deal for this to all work out well.

Third, a home inspector can help shed the light on suspicious areas requiring further investigation by specific professionals.  For example, damp crawl spaces with effervescense can imply a foundation inspection or a mold test is needed.  Missing roof tiles or damaged shingles can indicate the need for a roof inspection.  Cracks noted in the chimney suggest a complete chimney inspection would be a good idea. I always recommend my clients be there for inspections.  You can ask questions and learn a great deal.

Finally, your real estate agent has looked at a lot of houses and should have a good eye for suspicious items.  I am not an inspector but I can certainly point out areas that stick out as potential issues.  I always recommend, at a minimum, a home inspection and pest inspection on any home I represent.  In my opinion $300 -$500 is well worth a client’s peace of mind.

If you would like to discuss strategies to minimize your inspection costs or would like recommendations for inspectors and/or repair professionals, contact me. Expanding your knowledge is the best investment on any home purchase.