How to avoid foreclosure with a successful real estate transaction
Day after day I look at the foreclosures in Greater Las Vegas and see one home buyer after the other lose their nest egg along with their one shot at homeownership.
Why is this happening? Well, I will tell you; the reason is that most people look at buying their Las Vegas home as a singular act and not a process. They think that, looking for and locating a home for sale in Las Vegas which they believed they could barely afford (evidently NOT). Then signing contracts is all it takes to own a home.
While the new home builders and mortgage companies hire teams of lawyers to write their contracts in ways that protect them. Home buyers don’t bother to read the contracts and sign them without reading them first. Why? Because these contracts are in small font, single-spaced, long and much of the time written in lawyer-glish, they are brain teasers and repulsive looking, don’t you think that this is by design, and people still fall for it.
Trying to help home buyers in Greater Las Vegas
I decided to do what I can by publishing my website Las Vegas Homes Condos and luxury high-rise condos where I try to teach and avail the necessary tools for prospective home, condo or investment real estate buyers to research their area of interest. What I am trying to do is to divorce people from looking at buying or selling real estate as a single act and start looking at it as a process. I will try to discuss one step per blog entry.
Advantages of getting underwritten approved
Step 1: Any major decision in life should start with some kind of self-examination. In real estate, you need to carefully examine your financial situation, and this is before you look at a single property. The best way to do this is by being underwritten approved. Getting underwritten approved is arranging to finance before actually buying a residential property. And you have to do everything that is necessary to finance or refinance your home, except you do it with no time pressure, no listing agent and seller pressure to finance the deal on time.
You are not in love with your new home which is in escrow and have no worries about what happens if the mortgage broker does not come through. Getting underwritten approved helps you verify how much you can borrow and with what terms, thus helping you avoid pitfalls which result in unneeded foreclosures and greatly shortens the time to finance your loan.
The other advantage is that in any market, cash is king and being approved is like having cash. Imagine a seller who is under pressure and has the following two offers. Let’s say the asking price is $300,000.
Underwritten approved help Las Vegas home or condo buyers to compete with cash deals
1: Customer one offers 280,000, contingent on financing and applicable inspections, buyer’s approval of CC&RS, etc. The minimum contingency for financing a home from scratch should be about a month. Let’s say that the customer needs a one-week margin of error and say the financing contingency is 5 weeks and if all goes well the closing date is to be 45 days from the acceptance of the offer.
2: Customer two offers $268,000. Customer two is underwritten approved (the only contingency from their lender is that the property appraises) because we enlightened him /her, and they have us for agents so we can get all the inspections done and the results back within a week.
If the seller already has the CC&RS, It takes the title company about 4-5 days to get us the preliminary title report. There is no reason to not close within a week to 10 days. The only things the seller has to sweat about are the inspection results, appraisal and the preliminary title report.
The seller has to decide which offer to take. On one hand, $12,000 is a lot of money and hard to let go, on the other hand, this is a pre-approved buyer. If the seller takes the first buyer’s offer and the loan doesn’t go through, the seller has lost 35 days and the second buyer. How many homes or foreclosures will come on the market with more desperate sellers than him/her? What are the chances that he can find another buyer shortly after she/he lists it again?
As you can see, this is not such an easy decision. If I was the seller, I would counter the second buyer for $275,000, but that is just me. What would you do? At any rate, the pre-approved customer has a big advantage which could turn into thousands of dollars in savings. Customer two did not do anything that customer number one didn’t have to ultimately do; he/she just did it in the right order.
Another thing the prospective home buyers have to keep in mind is the tradeoff between buying your dream home, which you can barely afford and have to possibly get a second job to keep, and a home which you can easily afford but is not your dream home. One does not enjoy a mansion if creditors are ringing the phone off the hook.