Distressed properties. Bidding wars. REOs, BPOs, 203(k)s.
When it comes to buying a short sale or foreclosed home, the lingo alone can be enough to make a person’s head spin.
But learning the tricks of the trade can have real advantages – like becoming a homeowner for less than you might spend on a used car.
On Saturday, Bethel New Life will host a free seminar “How to Buy and Finance Short Sale and Foreclosed Homes.”
The workshop, which will include a tour of several foreclosed homes and advice from a bank lender, realtor and federal housing administration consultant, is designed to teach people the basics in a hot new area of real estate: distressed properties.
“We realized this was an issue in our neighborhood, and this was the main way a lot of individuals are going to be able to purchase homes,” said Allison Schuler, a Bethel New Life housing counselor. “There’s a growing number of foreclosures in the neighborhood . . . Austin and West Garfield Park have been hit incredibly hard.”
But one person’s loss is another one’s gain.
The real estate Web site Trulia lists more than 18,000 foreclosed properties currently on the market in Chicago – more than 200 in the Austin 60644 zip code alone.
And some of those are incredible bargains, said Marki Lemons-Ryhal, a Realtor with Keller Williams Realty and one of Saturday’s seminar presenters.
Lemons-Ryhal’s listings show more than 30 properties for sale in Austin for under $20,000: a four-bedroom home near Huron and LeClaire listed for $15,000; a three-bedroom townhouse at 100 N. Lotus going for $7,000; a vacant lot at 4830 W. Hubbard selling for less than $2,500.
These price tags could be tempting for even the most hesitant home buyer – though shoppers should know there could be plenty of paperwork and renovations involved, Lemons said.
A short sale occurs when a homeowner sells his or her house for less than what is owed on the mortgage. A home generally ends up in short sale when a homeowner can no longer afford his mortgage payments, and the lender agrees it would be more fruitful to sell the home at a loss rather than press the owner to come up with the money.
Usually, a homeowner sells his home through short sale to avoid going into foreclosure – which occurs when the lender takes possession of the house, removing the homeowner from the picture.
Because the lender – often times a big corporation – has to give these sales its nod of approval, there can be a lot of players involved, Lemons-Ryhal said. The process can take up to six months, and if many buyers show interest a bidding war can ensue, leading the house to sell for more than the listing price.
Then there are improvement costs. Short sales and foreclosed homes are often “fixer-uppers,” Lemons-Ryhal said – hence the term “distressed properties.” Often times they’ve been vandalized, or lenders have gutted the home of anything that could be re-used, from water heaters to kitchen sinks to light fixtures.
That means buyers should expect to put at least $30,000 into the home for the basics – new kitchens and baths, furnaces and carpeting, she said.
If a property is not livable, it doesn’t qualify for a standard loan, she said. But homeowners who plan to rehab a home can qualify for a government 203(k) loan, backed by the U.S. Department of Housing and Urban Development, which will be one of the topics discussed Saturday.
Bethel New Life’s Schuler, who has worked as a mortgage counselor for people losing their homes before she began helping those buying them, said if people do have to lose their homes, buying short sales and foreclosed properties are a great way to revitalize the community.
“It helps our neighborhood,” Schuler said. “There are so many abandoned properties. Getting people in those properties, getting homeowners there, really builds up the area.”
Saturday’s seminar will be held from 10 a.m. to 1 p.m. at Bethel New Life, 4006 W. Lake St., 2nd floor. For more information, contact Allison Schuler at (773) 826-8430, ext. 230, or aschuler@bethelnewlife.org.
Allison Schuler is correct in suggesting that the FHA 203k loan can revitalize neighborhoods and reinvigorate entire communities because homes are improved which increase real estate values and creates more pride of ownership, contractors are working, suppliers are selling, manufacturers are making, and the list goes on.
The 203k is best used with a Certified 203k Contractor. There are numerous Certified 203k Contractors already in the Chicago area as well in 24 other states in thousands of cities across the US. Go to the 203k Contractor Directory at http://203kContractors.com.