September 27th, 2021 2:45 PM by Richard Sardella MLO.100007700/NMLS 233568
Becoming the detective; How to find and purchase abandoned homes
If you were around for the real estate bubble in the recession/early 2000s, you may remember driving through neighborhoods with so many abandoned homes, there were tumbleweeds drifting down the streets. But how do you find them now that real estate is at a premium?
Realtor’s Angela Colley says you won’t find them by looking for “for sale” signs. But abandoned properties that are unclaimed by their owners are potential low-cost purchases that may actually be attractive to prospective home buyers. “An abandoned property is usually a property whose original owner is no longer in possession of the home,” says Colley. “Due to the owner’s financial difficulties, the house is run-down and in need of repair. If the law in your area allows you to claim this type of home, it might be worth investigating.”
Not all these properties are in dire shape, however. Some turn out to be in remarkably good condition, with the owners merely trying to unload the property before foreclosure. “This could provide the right buyer with an opportunity to purchase the abandoned property or unclaimed home at a discount—and possibly a significant return on investment if you later flip it,” says Colley.
She advises first to review your financial situation. “Remember, there will be additional expenses over and above the original sale price of the property. A pre-qualification from your bank or lender will help you estimate what mortgage amount you qualify for. Many banks also require pre-approval letters, so you can make quick decisions on the property you wish to purchase.”
She goes on to say that most abandoned homes are on their way to foreclosure, but the bank is not yet involved. So you have to put on your super-sleuth hat to find them. Look for homes whose listings contain certain phrases that may indicate an abandoned property, such as “immediate possession,” “must sell,” “below market value,” or “under appraisal.”
Enlisting the help of a Realtor may help tremendously, as agents have valuable knowledge of abandoned properties in the area. They can often provide you with a selection of homes about to be foreclosed on by the bank. “Some properties may look abandoned, but are not listed for sale. You might also check into the laws regarding unclaimed property and whether there is a statute of limitations on its return,” says Colley.
Next steps? If you run across an interesting unclaimed property like this, visit your county clerk’s office for information about the homeowners, the home’s current appraised value, liens, or tax issues. Then try tracking down the owners and asking them to sell their property. If the property has had liens or tax problems, the owners might be more willing to sell.
If all else is assumed (you have found a potential home, have the cash, and/or have been pre-approved for the purchase), you will want to figure in the costs that will be needed to get the home into good condition. Colley recommends getting a thorough maintenance inspection performed on the property, and note what needs to be fixed and how much it will cost. “Claiming a property like this also involves adding in the cost of the appraisal fee, pest and lead inspection fees, title insurance, closing costs, and other legal fees,” she says.
Then do a final crunch to the numbers before you consider offering a bid to the owner. “A real estate agent can also accompany you to the house and point out the extra expenses you will incur after the purchase of this property,” says Colley. “The agent can also help you figure out how high your bid should be. Look for the right opportunities, and you will find the home that is just right for your budget.”
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Higher
Mortgage rates are moving slightly higher today. The MBS market worsened by -35 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) The Fed, 2) Domestic News and 3) Geopolitical
1) The Fed: The President of the Boston Federal Reserve, Eric Rosengren is stepping down as of Thursday. He was scheduled to retire in 7 months anyway but is moving that forward for health reasons. But that is just the start of this week's Fed deluge. We hear from Fed Chair Powell, twice this week. We will be paying very close attention to comments on the economy and any further details or speculation on when the first reduction in MBS purchases will be.
09/27 Charles Evans and John Williams
09/28 Jerome Powell, Michelle Bowman, Charles Evans, James Bullard and Raphael Bostic
09/29 Jerome Powell, John Williams
09/30 John Williams, Patrick Harper and James Bullard
10/01 Patrick Harper
2) Domestic News: We have a very busy week for economic data. The bond market will focus on manufacturing and inflation. On the Manufacturing front we have Durable Goods Orders, Richmond Fed, Chicago PMI and ISM Manufacturing. On the Inflation front, we get the Fed's key measure of inflation, PCE on Friday.
3) Geopolitical: Germany is trying to form a new government as Merkel's party has lost some ground with this weekend's election. Domestically, we have a looming government shutdown on Friday morning with several "kick the can" proposals making their way through the Senate. We also have the original $550B (almost $1T when applying previously approved but unused funds) Infrastructure Bill that actually passed in the Senate....this Bill will EXPIRE on Friday and will need to be passed in the House. The House has vowed NOT to pass it UNLESS everyone agrees to their monster $3.5T plan at the same time. Plenty of drama to go around.
Treasury Dump: We have one last round of dumping our debt into the marketplace before the debt ceiling kicks in, here is this week's schedule:
09/27 2 year and 5 year note auctions
09/28 7 year note auction
This Week's Potential Volatility: Neutral
This morning we're seeing a small selloff after positive durable goods news. Volatility is moderate so far as markets settle in for the rest of the week.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.