5 things You Must Know Before You Buy a Foreclosure in Lansing, Michigan

Foreclosures can be very tempting. They are quite often the lowest priced homes in the neighborhood and here in the Greater Lansing real estate market they still make up a fair portion of sales, even if the numbers of foreclosures have been decreasing in recent months. As a home buyer, it makes sense to consider purchasing a foreclosure, but here are a few things you must know.

1) Condition. While the condition of foreclosures varies widely, they are most often in poor condition relative to the other nearby homes. If someone was struggling to make a mortgage payment they probably didn’t have extra money for home maintenance either. Sometimes we even see malicious destruction of foreclosure property. For all of these reasons, a home inspection is particularly critical before purchasing a foreclosure.

2) Bank Addendum. You need to be aware that most likely when you write an offer on a foreclosure, the actual offer will never even be seen by the bank. Most banks negotiate deals on a computer system and do not sign anything until the details are hammered out. Then, you will receive a bank addendum. This is a purchase contract from the bank, written by their lawyers and thus very much written in their favor. It will say things like, “If you don’t close by the contract date there will be a late fee. If we don’t close by the contract date we will extend the date.” Frustrating and annoying…yes, but if the deal is good enough often still worth it.

3) AS-IS. Bank owned properties are (most often) sold in their “as-is” present condition with no representations or warranties. This means that their will be no disclosure about past issues with the property and after you sign on the line all issues are yours.

4) Nuisance Fees. These are fees placed on the property for work done by the municipality. For example, if no one is mowing the grass the City may come in a mow it but place a special “lawn mowing” fee on the tax bill. You need to double-check and make sure these have all been paid as some title companies will not pay claims for these types of fees that pop up later.

5) Non Homestead Taxes. In Michigan if you do not live in a property you pay a higher property tax rate. Since the bank does not occupy the house they are paying this higher tax rate. While you will qualify for the lower tax rate if you intend to occupy the house, you lender may have to base the estimated taxes for your mortgage payment on the current higher rate. Check with you lender for details.

FREE LIST OF FORECLOSURE PROPERTY IN GREATER LANSING AREA

Foreclosure Moratorium: Good or Bad for Lansing Real Estate?

The financial industry has been buzzing lately with news that mortgage giants such as PNC and Bank of America and several others have been fudging foreclosure paperwork. As such, there have been calls from attorney generals in all 50 states to put a moratorium on foreclosures until the mess can be sorted out.

At first glance a freeze on foreclosures seems like a great thing. Struggling homeowners are giving a delay and a chance to catch up late payments or perhaps even try for a loan modification. The short-term implications for the housing market in Greater Lansing and the country are great too, less supply from foreclosures means supply and demand are put back in harmony and prices stabilize.

But then I look next door at the giant white house whose paint has begun to chip and birds have begun to nest on the porch and I am reminded that Bank of America is not the best next door neighbor. A moratorium in foreclosures would mean that this and the hundreds of thousands of other homes that are sitting vacant would continue to deteriorate as these large institutions sort out their paperwork mess (The photo at the start of this post is from a foreclosure in Haslett that sat so long after the power was turned off that the sump pump went off and flooded the basement – a common story around Greater Lansing and certainly the entire country)

An article that ran in the associated press states, “The debacle injects yet more uncertainty into a frail recovery that is still trying to find its strength.” A moratorium does not get rid of but just delays foreclosures and at some point they will be released to the market, thus once again flooding the supply and caused prices to dip further.

The same article in the associated press also quotes Mark Zandi, chief economist at Moody’s Analytics, saying that a housing recovery would be under way by the third quarter of next year before this latest hurdle. Now he believes the foreclosure scandal could prolong the housing depression for at least another few years. At the end of the day, real estate is still a very local industry but nation forces can and do affect Lansing real estate as well and we, just like the rest of the country, still have a large supply of foreclosures that need to work their way through the system.