Q: I need to know if it is wise to invest in foreclosed homes. What are the steps I need to take and what to watch out for? — S.B.
A: You need a lot more than I can tell you here. For one thing, do you realize you must make a cash deposit when you’re the successful bidder, and pay the rest almost immediately? You’d probably need to have a line of credit set up ahead of time.
Then, you can’t insist on viewing the inside of the property you’re bidding on, so you might end up buying real problems.
Buying foreclosures is no job for amateurs, no matter what they say on TV shows. If you really want to try, start by reading everything you can find in the library on the subject, and retain a real estate lawyer who can guide you through your local procedures.
Even houses in bad
shape need to be sold
Q: I am in my 80s. I am moving to an assisted living apartment, and I need to sell my house. It’s in bad shape; in fact the insurance company wrote that if I didn’t fix some things, they would not renew my insurance. I don’t want the fuss of repairs and I can’t afford it. Is it safe to contact that company that says they buy bad houses for cash? — S.W.
A: It won’t cost anything, or place you under any obligation, to call three different real estate firms that are active in your neighborhood (look at “For Sale” signs). Ask them to send someone over to give you advice. You may sell for more if you place your home on the market in the normal way, in the local multiple listing system. There are always investors ready to look at a place that’s advertised as a “fixer-upper.”
You have nothing to lose by trying a sale in the open market. If that doesn’t work, you can then try a company that advertises buying problem properties. But do check with your own attorney before signing anything.
Homeowner retains ownership during reverse mortgage
Q: I recall you wrote an article regarding reversed mortgage. Both my husband and I are over 62. We are still working because we have two mortgages on our house, due to some hard times.
Signing over your house is scary, so I don’t want some fast-talking salesperson convincing me, and then I leave my family with a mess after we are gone — such as the market value dropping and my family having to pay off the balance of the house. — J.R.
A: You don’t sign your house over with a reverse mortgage. You remain the owner, and receive regular checks that build up a debt against the house, with interest. No payments are due until you move out or die.
If the house isn’t worth enough then to pay off the total debt, FHA insurance takes care of the rest. At least it does with the most popular plan, HUD’s Home Equity Conversion Mortgage.
But you must have enough equity to borrow against. I don’t know whether you could borrow enough to clear your present mortgages. Payments are based on your life expectancy, so the amount you can receive isn’t all that much if you start at a relatively early age.
Multiple offers can
Q: When a seller gets multiple offers on their property, can they counter more than one at a time? We were in this situation as potential buyers. They actually countered two offers at the same time (one buyer dropped out). Both the listing agent and our buyer’s broker said this was OK. — R.
A: It wasn’t OK. Those sellers were just lucky one buyer dropped out. What a mess it would have been if both counters were accepted and they found themselves legally obligated to sell the same house to two different buyers.
Of course, I haven’t seen the documents. Perhaps one counter contained a phrase saying the sale would take effect only if the other fell through or something of that sort. I hope so.
Real estate investors
concerned about taxes
Q: My friend and I are flipping our first house in the spring and we’re concerned about the taxes. Will it help to file this transaction under a partnership and report the shared profit on our individual taxes? We want to avoid the biggest tax hit possible. — O.N.N.
A: As real estate investors, you should have had your own CPA from the start, to help analyze your investment ahead of time, set up your bookkeeping, and structure the whole transaction to best advantage. By all means, get yourselves a good accountant now. That’s the person to answer your tax questions.
Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at firstname.lastname@example.org.