Opportunity in Hammond – Foreclosed, Well-Appointed Townhomes

I came across this complex today with 20+ units left for sale that had all been foreclosed by the lender some time ago.  When large scale developments go under, they represent great buying opportunities for buyers because the only thing better than a discounted price on foreclosed property is when there is a large volume of them to sell.   After working with some buyers on a similar situation in Highland Hideaway here in Baton Rouge, I encourage anyone who is interested in purchasing in Hammond to give me a call to discuss this opportunity.

The link below will give you all the details:  Location, amenities, floor plans, prices for each unit and which units are still available as of this post.

Cross Creek Townhomes Master Flyer

Screen Shot 2015-11-02 at 3.06.44 PM

This could be a great opportunity for parents of children at or going to Southeastern.

David Madaffari
The Grassroots Team @ Keller Williams Realty – First Choice
Office: 225.744.0044
C: 225.772.3283 (DAVE)
E: David@DavidMadaffari.com
37325 Market Place Dr. Ste D
Prairieville, LA 70769

How to Buy a HUD Home, Part 3 – Tips and Examples

Now that you have an understanding of how to negotiate a HUD home and are aware of their inspection practices, I wanted to finish this series with just some tips from my experience that could also help you along the way and maybe save you even more money along the way.

  • List Price Vs As-Is Price – When viewing a HUD home on their website at www.HUDhomestore.com you will notice that they will show two prices: List Price and As-Is price. The List Price is exactly that – what they are currently asking for the property. However it is the As-Is price that can help you determine when a good deal is near. The As-Is price is the appraisal that HUD received when they acquired the property. When the List price is below the As-Is price, then you know the property has good value potential because it has been on the market for awhile and/or needs work.
  • Appraisal – When financing a HUD home, use that As-Is price to your advantage. By acquiring HUD’s appraisal after having your contract accepted (which they usually give you) you can save yourself $300-$400 from the lender’s appraisal. It may take some convincing of the underwriter to use it, and it usually depends on what date the appraisal was completed on.
  • Closing Costs – You can always ask HUD to pay for closing costs during the bidding process but it is not for specific items. For example, if you wanted $3000 of your costs plus a $250 flood elevation certificate, you would ask for $3,250 and pay for the certificate yourself.

Most importantly, choosing a Realtor experienced in working with HUD properties is paramount. I have navigated many different HUD transactions with unique challenges to each of them. The common component is that every single one of them CLOSED on time. If you’re interested in a HUD home, call me and let’s get started!

Sincerely,

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

How to Buy a HUD Home, Part 2 – Inspections

In our last entry, I talked about some tips and tricks from experience on how to negotiate a HUD home and land a great price. Today, I will discuss the inspection process as it is a little different than a typical inspection.

Before bidding on any HUD home, you should have reviewed the Property Condition Report (PCR) and the Seller Disclosure addendum. The PCR is the result of HUD’s own inspection but it is not very thorough. To determine the viability of the electrical systems and items they hook up a generator to the home and try to power the different systems. To test the plumbing, they run compressed air through the main water line into the house and test whether it will hold pressure at 30 PSI and if it does not they will determine that the plumbing “has issues.” But so far in all of my transactions, the reason for not maintaining pressure has just been because a faucet wasn’t turned off all the way.

Sample PCR
Sample HUD Seller’s Disclosure Addendum

HUD’s process to do your own inspections can be tedious and stressful if you need the utilities turned on. While an inspection period is typically 10 days, HUD gives you only 3 days for you to have the utilities turned on. To do so, you have to get written approval through the Asset Management Company responsible for the home, and that can take 2-3 days by itself. This process could be a non-refundable $50-$150 JUST to turn the utilities on and subsequently turned off.

Because all HUD homes are sold “AS IS” the inspections are for your own information only and HUD will not do any repairs. The lack of repairs and condition of the property is the trade-off for better deals that usually have equity built right into them. If you are willing to roll up your sleeves and are not afraid of unforeseen issues, HUD homes can be very good investments either as your primary home or as a rental or flip.

In the final installment, I will provide some anecdotes on particular deals and how I resolved issues as well as any “odds and ends” that can help you navigate the world of HUD homes.

Sincerely,

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

How to Buy a HUD Home, Part 1 – Negotiation

Buying a home through HUD can be a very exasperating experience, even for a well-versed Realtor. Because HUD is a government agency (Housing and Urban Development) you can imagine there is a decent amount of bureaucracy beyond simply bidding and providing funds like a normal transaction. After completing 6 of these deals this year and a 7th under contract right now, I thought I’d give some tips to both buyers and agents alike on how to negotiate a HUD home deal.

  1. Bidding and winning is easy – it’s the PAPERWORK after an accepted bid that can be trying. When making your bid, make sure EVERYTHING is the way you want it to be on the contract/deed before submitting. If even one letter is different on the final contract paperwork, they will cancel the deal and make you start all over again. HUD is a stickler for minutiae.

 

  1. Bid low, ALWAYS – This seems like common sense, but I mean aggressively low. What you want is for HUD to send you a “Bid Counter Notice” email. In that email, HUD will actually state what their minimum net after concessions is! This allows you to calculate to the penny how much you need to bid in order to meet their minimum. For example, when HUD told us they wanted to net $132,800 on a property, I calculated that after HUD’s 6% commission our exact offer would have to be $141,276.60. No need to pay more than necessary!

 

    1. Always submit offer to be held as a back-up offer – This goes with the item above, because what can happen is even the minimum net HUD sets on a property will be too high for any bidders. By allowing them to keep your offer as a back-up, it will automatically be resubmitted every day or so AND when they change the price/minimum net. This saves you time because you will get the new minimum net each time they change it – WITHOUT having to watch the property and bid every time. I had one go on for 3 months as they kept lowering the price all the way to our original bid. Patience IS a virtue.

 

    1. Make a list and check it 14 times – When winning a bid, HUD gives you 48 hours to have the entire contract package sent overnight to them. That’s $20 each time you mail something. So do your very best to make sure you followed the instructions EXACTLY as they specified. Even if you are 99% confident, you may still get an email stating the package is incomplete. Some items can then be emailed to them, but be prepared to overnight materials as needed.

 

    1. Closing is as quick as you want it. Once you get a contract fully executed, closing a deal is pretty quick. Send your contract package to your preferred title company and you could be closing in a week (of course for financed sales it could be longer). The point is that the biggest hurdle has been crossed.

I have found that HUD typically gives better deals than a typical bank does on their foreclosures because they price their homes more realistically to the condition of the home. In our next post I will discuss HUD’s inspection process as it is also quite different from a typical inspection

David Madaffari
225-772-3283

REO Property Sales 2014 – East Baton Rouge

Today let’s look at the Baton Rouge REO property sales bought with CASH.  As I stated yesterday, 2013’s average discount for these properties was 88% using cash.  That proved to be a magic number for my investor clients as all of our deals fit right at that number.  So was 2014 any different?

The average List to Sold price ratio was 89% in 2014.  A slight uptick from 2013, but still a great number to keep handy when thinking about what your investment should be.   The average days on the market is also only 76 days, which means these properties are being snatched up a high rate.

After the last three days worth of data, my advice to investors and homebuyers is to work with what the banks are giving us.  Since we know that the list prices tend to be at or near market value, we can reasonably expect them to go no lower than 88% of their asking price when paying cash.   Buyers using financing should also try this tactic as well – after all, they prefer to sell to owner-occupants.

I hope this series has helped educate those looking to make offers on properties like these.  While it does happen, offering 50%-60% below market value is not typically an effective way to win bids in a hot foreclosure market.

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

Cash is King – REO Property Sales 2014

Yesterday we saw that all distressed and REO property sales in Ascension combined for a 97% average list/sold price ratio when considering all types of financing.  When we think about that, that’s pretty much a normal market for non-distressed property.  “But aren’t foreclosures and short sales supposed be deals for investing?”  Yes, but knowing HOW to buy is just as important as WHAT to buy.

Simply put: Cash is KING.

Looking at the cash sale numbers you’ll see what I mean.  Check out the percentages now for all 58 cash purchases:

2014

2013

In 2014, the average discount you could expect was 87% from the original list price; in 2013 it was 86%.  Looking at the bottom line of each graphic, the total volume of lis/sold prices was 86% in 2014, 8 points higher than the total volume of 2013.  The conclusion? There is more competition for these properties.

So while banks are putting their properties on the market at fair market value,  the ability to pay cash is the best leverage you can have to get the right price.  Offering at 86%-88% of list price represents where you can expect the highest rate of negotiating success.

Tomorrow we’ll do all East Baton Rouge cash sales.  In 2013 the average was 88% – how did 2014 fare?

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

REO Properties – 2014 Sales numbers

In today’s REO Properties update, we look at the numbers for all Ascension Parish distressed sales in 2014. These are for ALL financing types, not just cash only sales:

2014 Ascension parish REO Sales

Compared to 2013:

The main numbers to look at are the Avg Selling Price to List price (SP/LP) ratio.  For all sales, foreclosed homes sold for 97% of the bank’s list price at the time of sale in 2014, up 1% from 2013.  The implication here is that Baton Rouge is a hot foreclosure market not just for investors but for all buyers.  Banks know this, so it is more time-consuming to find the deals.  We have seen more financed foreclosed sales from owner-occupants in 2014 than in 2013 too, which means investors have faced competition for the same property they enjoyed almost free reign on from 2011-2013.

Tomorrow we’ll look at how just the CASH sales for Ascension parish REOs changed from 2013 to 2014, a figure investors should use to determine what their bid prices should be for 2015.

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated