NEIGHBORHOOD WATCH: Tarrant County, Texas, Record Foreclosures May Benefit Homebuyers

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The inventory of foreclosed property on the market in Tarrant County is up 25 percent to 30 percent from five years ago
By Teresa McUsic

Fort Worth Star-Telegram, Texas

RISMEDIA, June 4- (KRT) – Record home foreclosures in Tarrant County could be a boon for homebuyers and investors hunting for bargains.

The inventory of foreclosed property on the market in Tarrant County is up 25 percent to 30 percent from five years ago, said Dale Erwin, president-elect of the Greater Fort Worth Association of Realtors.

“There are more that are move-in ready,” Erwin said of the foreclosure pickings. “The number of HUD foreclosures is up over the past year, and most of them are in decent shape.”

The homes, often lost by laid-off workers or people who lost heavily in the stock market, offer prospective buyers a growing opportunity but also pose a number of risks.

Homes are often available at deep discounts but often need cosmetic or more serious repairs. And unlike other sellers, owners of foreclosed homes — often banks or mortgage companies — are not required to list known defects.

So it’s buyer beware.

The number of purchases is expected to grow. Industry observers such as Erwin expect the market to expand in the next 12 to 14 months.

A check of www.foreclosures.com, a leading Web site of foreclosed real estate, shows 677 properties, mostly residential, on the market by lenders and government agencies in Tarrant County.

One segment of the market — houses that need extensive repair work — can save buyers between $7,500 and $15,000 after repairs are completed, Erwin said.

But real estate professionals say most foreclosures aren’t the bargain they once were, for a variety of reasons.

For one, most lenders and government agencies with foreclosed property now use a listing real estate agent. Those properties are also included on the multiple listing service, or MLS, said RaDonna Wint with Ebby Halliday of Dallas-Fort Worth.

Many lenders are also doing repair work themselves before placing the property on the market, she said.

As a result, buyers often don’t know that a property had been foreclosed upon, unless they use special listings.

Foreclosed property is also priced at fair market value, a concept designed by the Resolution Trust Corp. in the early ’90s when it owned a lot of real estate from the failure of hundreds of savings and loans.

“The RTC set up rules and guidelines for selling property that helped the market stop the depressed rate that we were experiencing,” Wint said.

Although foreclosed properties are often priced as much as 50 percent below nearby homes, most of the markdown will be eaten up in repairs, Wint said.

Failing to account for those repairs in a foreclosed property is one of the biggest mistakes buyers make, said Greg Sullivan, vice president and co-founder of Foreclosures.com.

“Leave enough room in your budget after your down payment to repair it,” Sullivan advised. “A typical foreclosure needs some cosmetic work to get it up to neighborhood standards.”

Investors are capitalizing on the market as well.

Daniel Gentry, owner of Up Close Inspections, recently put about $5,000 into a foreclosed property that he found through the online service and plans to sell.

In addition to painting the house he bought inside and out, Gentry added new appliances, bathroom vanities and doors.

“It looks like new,” said Gentry, who has the house listed at $85,000. He declined to give the address so potential buyers wouldn’t know that it was a foreclosure.

Gentry, the owner of Up Close Inspections, advises home buyers to look specifically for problems in the foundation and roof when surveying a foreclosed property.

Termites are another issue that can cost the new homeowner $1,000 to $1,500 to fix, Gentry said.

Erwin said every buyer absolutely must hire a home inspector before buying a foreclosed property.

“Owners of foreclosed property are exempt from filling out disclosure notices,” he said. “An inspector will look at all the major components of a house, including appliances and air conditioners.”

Use a separate termite inspector if your regular inspector is not licensed for pest control, he said.

Wint recommends getting pre-qualified for financing before buying a foreclosed property, whether you end up using that lender or not.

“A pre-qualification letter speaks loudly to any seller,” she said.

In many cases, the lender that owns the property will also offer to finance the sale, Wint said. She estimates that 70 percent of all foreclosed properties are now seller-financed. However, HUD does not finance properties.

“Seller financing has become very popular,” she said. “Their interest rates are usually competitive, and home buyers can often get some fees waived by the lender, like appraisal and service fees.”

Wint also recommends patience.

“On a foreclosure, your response is not as quick,” she said. “They have guidelines they have to follow, and they’re only in their offices from 8 to 5, Monday through Friday. On evenings and weekends you don’t have access to present the offer to them.”

If you use a real estate agent, find one with experience in the foreclosure market, Sullivan said. To bid on a HUD home, a buyer must have a real estate broker. Real estate brokers also will provide market analysis of the surrounding area for free to help homebuyers get the best deals.

? 2004, Fort Worth Star-Telegram, Texas. Distributed by Knight Ridder/Tribune Business News.

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Monday, March 15, 2010