Love Sacramento Metro Homes

I will walk you through with the keys to your home.

Home Buyers

How Will Recession Affect My Home Purchase?

by

It’s well known that the housing market is heavily influenced by the economy — especially local economies. When the economy is strong, people have more money for large purchases and investments in real estate. When things are tighter, though, a lot of prospective homeowners may start to ask whether they’re really ready to take on such a potentially large debt.

If you’ve been thinking of buying a home, you might be wondering about this yourself. How will economic problems, or even a recession, affect your home purchase? Will the local housing market all but grind to a halt? While it’s good to keep questions in mind so that you aren’t taken by surprise, the chance of a recession or other economic downturn having a profound effect on your home purchase is relatively low.

What Is a Recession?

First things first: just what is a recession? It’s a term that’s been tossed around a lot in the last decade or so, but there usually isn’t a whole lot of explanation provided with it. Essentially, a recession is a downturn in the economy that lasts for at least six months. Typically during a recession you’ll see both trade and industry take a hit, and the gross domestic product (the value of the goods and services produced over a period of time, usually called the GDP) fall for at least two quarters in a row.

A recession can last for quite a while and can result in a significant slump in the economy that takes months or even years to recover from. An example of this would be the Great Recession which lasted from 2007 to 2009; its fallout lasted for years in some places and caused a number of significant problems for several sectors of the economy.

The Economy and the Housing Market

The economy and the housing market are pretty strongly connected. When the economy is in a slump, this can drive the housing market down. While this generally applies at the national level, this is especially true at the local level. When business is booming and the economy is doing well, the housing market usually gets a boost as well. This can run the other way, too; problems in the housing market can drag the economy down with it, while a strong housing market can help to lift up an otherwise shaky economy. Issues with the housing market contributed to the Great Recession and led to economic problems in other countries around the world.

Will the Housing Market Collapse?

Just because there is a link between the housing market and the economy at large doesn’t mean that a recession will bring the housing market down, however. A downturn in the economy might slow housing sales in some areas, especially early on as both buyers and sellers wait to see whether the economic turmoil is going to last long-term. In most cases, though, this slowdown will only be temporary and will not affect all parts of the country equally. In some cases, it can even result in unmatched opportunities for buyers who are willing to act.

Inform Your Decisions

Any time there’s economic uncertainty, it’s always a good idea to consult professionals who will help you find options to protect your investment and avoid paying more than you have to for a home. 

3 Ways to Buy a Foreclosure

by

Buying a foreclosure is a smart move. There’s no better way to get a rock-bottom price for a new home unless your favorite uncle leaves one to you or you’re being absolutely swindled. You can buy a home in pre-foreclosure, at a foreclosure auction, or from the mortgage lender. But even if you are able to take advantage of the opportunity, buying a foreclosure requires some extra effort, research and patience.

First of all, what is foreclosure? It’s a situation where the bank, a mortgage company or other lien holder takes a property from the owner to satisfy a debt. The bank or lender takes ownership of the property and usually sells it immediately to pay off the debt. The owners lose all rights to the property, including any and all of the investment they’ve put into it. Foreclosure tanks your credit report and is usually the result of whoever owned the property being in a very bad financial situation. So, if you’re dealing with the people being kicked out of their own house, try to be nice. This is probably one of the worst times in their lives.

However, if you’re dealing with the lender, the foreclosed property is probably one of many on the books, so you may be dealing with an officer who knows nothing about the property and doesn’t consider selling it a high priority. This may drive you crazy, but just remember, aggressiveness and patience are the keys to getting through this.

Here are the 3 situations you can buy a foreclosure as explained by Zillow:

Stage 1: Pre-foreclosure

At this point, the property owner has been given legal notice that the foreclosure process is about to begin. If the owner can’t cure the default and get the loan back into good standing, the only way to avoid foreclosure is to sell the property before the mortgage holder takes it away.

Buying a property in pre-foreclosure involves approaching the owner — usually before the property is listed for sale — and offering to buy it outright. The right buyer at the right time can salvage a terrible situation, giving the owner something to show for his equity and saving his credit score from that foreclosure hit. Time, and a smooth transaction, are of the essence. Read more about buying a pre-foreclosure property.

Stage 2: Foreclosure auction

If the owner can’t manage to hang on to the property, it will probably go up for sale in a foreclosure auction next. Successful bidders usually have to pay in cash at the time of purchase, and there’s not much time or opportunity to research the property beforehand.

A foreclosure auction offers some tempting bargains — but the buyer assumes all risk of anything going wrong with the title, condition or any other aspect of the property. It’s a big bet to make, and not for the faint of heart. Read more about buying at a foreclosure auction.

Stage 3: Bank-owned property or real estate owned (REO)

In contrast to the urgency of the earlier two stages, patience is essential for buying lender-owned properties. Once the mortgage holder takes ownership of the property, their eventual goal is to sell it to make back the unpaid loan amount.

Eventual is the key word here. Between clearing the title, performing necessary repairs, following the complexities of state-to-state foreclosure regulations and dealing with the many other foreclosed properties on their slate, lenders can move maddeningly slowly from a buyer’s perspective. If you’re in a hurry to buy, this might not be for you.”

Also, unless you’re an expert in real estate law and transactions, it’s a good idea to contact the counsel of a real estate agent familiar with foreclosures. It’s not the kind of purchase you want to mess around with!