Have you considered a HUD home? Maybe a bank owned property or short sale? Paul Balzotti, Associate Broker and REO Specialist with John L. Scott Real Estate, explains HUD homes, bank owned property, and short sales, with hosts and Realtors Tracy and Kathy Nelson.
Complete transcription (May 29, 2015):
eye4homes :: Eye4Homes TV presents Buying Your Dream Home Today, with Kathy Nelson, and Tracy Nelson. And now Kathy and Tracy. Happy Friday and welcome to the show. I’m Kathy. And I’m Tracy, and we are a husband and wife real estate broker team with John L. Scott in Redmond Washington. And you’re watching Buying Your Dream Home Today. A weekly webcast that happens every Friday at noon. These shows are focused on getting you the information that you need in order to go out and buy your dream home with confidence. And today’s topic is HUD homes. You don’t know how much you are missing this opportunity to look into HUD homes. To help us understand a little bit about HUD homes and REO properties, today we have with us Paul Balzotti. He’s an associate broker and REO specialist with John L. Scott in Redmond Washington. No, in Bellingham. Oh, I’m sorry. Bellingham, Whatcom County. Yeah Bellingham Washington. We,re in Redmond. Yeah, we’re in Redmond. Welcome Paul. Thank you for coming on the show today.
Paul :: Hello. Yes. Bellingham, Washington. Right.
eye4homes :: Sorry about that. How is the weather in Bellingham?
Paul :: It’s beautiful. It’s sunny. It’s perfect up here today.
eye4homes :: It’s gorgeous here too. It’s always this way in the Northwest. Isn’t it?
Paul :: Yeah. Absolutely. Lately it has been.
eye4homes :: Why don’t you tell us a little bit about yourself.
Paul :: Sure. So again, I’m Paul Balzotti. I’m up here in Bellingham. I grew up with a family of realtors down in Seattle, and came up here to go to college and then ended up staying up here. And I’ve been in real estate in Bellingham for a little over 12 years. And then I’ve been doing a lot of for foreclosure properties and short sales. I’ve kind of started to specialize more in that over the last six or seven years.
eye4homes :: So you’ve been around.
Paul :: Yes. 12 plus years. I started young.
eye4homes :: And what got you into this? I mean you kind of split your time between REO’s and regular… What got you into this?
Paul :: Well it’s just kind of where the market was going, right. So when the market started to slow down in 2007, 2008, I just went where the market was. So I had a lot of sellers that all said needed to short sell their homes. So I jumped into learning about short sales, and I was doing short sales before most people knew what a short sale was. And then I got an account with Fannie Mae and got certified with HUD to help sell properties like that as well.
eye4homes :: We’re just looking at your website here. You’ve got a lot of great information on it. You do, but also smart move for you to do that.
Paul :: Yeah. Sure. Absolutely.
eye4homes :: Tracy, do you want to ask the first question? Topic one today – HUD homes. What is a HUD home? Why might a HUD home be a great opportunity?
Paul :: Okay, so HUD homes are, that is just the Department of Housing and Urban Development, and that department of the government, it’s their foreclosed homes that have went back to them that then they’re reselling. With HUD homes its only a portion of the bank owned properties that are on the market, but what makes them unique is it’s truly like a bidding process on their website and you bid on these homes. They’re being sold as is of course, which is the way most REO properties are. But what makes them even more unique is unlike a lot of other foreclosed homes that are owned Fannie Mae or Freddie Mac or some of the big banks, they are completely hands-off. So you come to these properties and they might not have power, they might now have water, if they have a well that might not be connected or turned on, and you’re bidding on these properties as is, and you have a 10 day period to do all your inspections you need to pay to turn utilities on.
eye4homes :: You have to get this done in 10 days? You do?
Paul :: Well you have a 10 day inspection period, so even though you are bidding on them as is,…
eye4homes :: Yeah.
Paul :: …you typically do still have a window to get out of the deal.
eye4homes :: Oh, okay.
Paul :: Yeah you don’t have to close in 10 days. In fact a lot of these houses you can still finance, just with typical financing if the condition allows for it. Well see that’s a good point.
eye4homes :: A lot of people don’t know that too.
Paul :: Yeah, and so you can finance a HUD home or a lot of REO properties, especially if the condition is decent enough. It could need new carpet and paint, but if all the utilities are functioning, and the roof is in good condition, and things like that, you can finance it, and then even if it’s in rough shape sometimes there are loans for that as well. But with HUD in particular it’s a little bit more work than your typical bank owned home because, again, you’re putting out money to inspect these properties, to learn about about them, and take them as is. But there’s good opportunities there because a lot of them are sold at a discount.
eye4homes :: The longer the home sits, say some of them have been on the market for a year is that a good thing?
Paul :: What, the bank owned properties?
eye4homes :: Yeah.
Paul :: Absolutely because people think that the bank, whether it be Fannie Mae, Freddie Mac, Bank of America, or HUD, the Housing and Urban Development, when they get these properties back they think, oh, they must just want to get these off their books, and they just want to get, let me just write them a low offer right now.
eye4homes :: Yeah.
Paul :: They’re just like any other seller where when they get these properties back their first instinct is try to get as much money for the property as possible, so when they come on a new listing they often times are coming on based on an appraisal that they got, and they’re going to be trying to get as much as they can, and the longer they sit on the market the more they’re just going to be out to lower the price, lower the price, until it sells.
eye4homes :: So they’ll keep doing the lowering the price until it sells.
Paul :: Absolutely.
eye4homes :: That is a good point too.
Paul :: So patience is a virtue with REO properties, absolutely, because it’s not like a seller where they might just decide, oh, I’m going to take it back off the market, they’re going to keep dropping it until it goes.
eye4homes :: I have a question about so if people start bidding on this house, could there be multiple offers and you wouldn’t know it if you were putting your your offer in?
Paul :: Yes, and let me distinguish HUD homes, this is another thing that is different about HUD homes compared to other bank owned properties.
eye4homes :: Alright, let’s do that first.
Paul :: So I do a lot of Fannie Mae properties and with Fannie Mae, they’re much bigger, there’s many more bank owned properties owned by Fannie Mae. And if a buyer sees a bank owned property on the market, if it’s owned by Fannie Mae or Freddie Mac, if you have a realtor your working with and you submit an offer, the listing agent who is dealing with the property will let you know if there’s multiple offers. You’ll have that information, and you’ll have the opportunity to raise your offer. You’ll have an opportunity to resubmit your highest and best. With most bank owned properties, if you get in a multiple offer situation you will have an opportunity to know where you’re at, but with HUD it’s different. With HUD you’ve been on the property on line and it is, you have no idea what’s going on so when you submit it online and your buyers agent submits it, you have no idea ten offers or if there’s zero.
eye4homes :: Wow.
Paul :: Yeah. So HUD is definitely a little bit trickier to navigate through because of that.
eye4homes :: You’ve got to really want that house.
Paul :: Yes. Really what that means is that if you’re motivated to buy the HUD home, it really is in your best interest to put your best foot forward.
eye4homes :: Right away too, right?
Paul :: Absolutely, because you’re not going to get a second chance if it’s a hot one, if it’s a good deal.
eye4homes :: Interesting. So is short sales, is this a different topic? Why would we consider buying a short sale home?
Paul :: Okay, so short sale is a very different type of property. A short sale is when the home owner still owns the property, and they may or may not be in pre-foreclosure, but all a short sale indicates is that the seller owes more on the property then they can sell it for. So an example would be, let’s say a seller owes 400,000 on a property, and it’s listed for 375,000, that 25,000, or gap, that’s the short sale. And when that short sale goes on the market you write that offer, it’s a totally different process because once you submit an offer on a short sale you have to wait for the sellers lender, who they own the money to, to decide if they’re going to accept the discounted payoff. And it can take anywhere from, it could happen in a month, but it could take seven, eight, nine, months…
eye4homes :: Really.
Paul :: …so with a short sale a can be a long process.
eye4homes :: Now why would people want to do that? I mean poor, you know, the seller’s really want to sell this too I assume, so how would you get the buyer to be motivated on something like that? The buyer has got to be able to handle that time frame.
Paul :: Right. And so I would say that 50% or more of the buyers don’t look at short sales, and so that is a factor. If you’re in a situation where you’re moving from one house to another, you just sold your house and you need to move…
eye4homes :: Yes.
Paul :: …you’re not going to want to look at a short sale because you cannot dictate the closing date. Another scenario is, let’s say you’re relocating into the area and you want to move directly into the home, or your lease is up and your renting a home, you do not want to look at a short sale if your time is constrained. But when you do want to look at a short sale is let’s say that you’re in no rush to buy. You could by now, or you could buy in six, seven, eight, nine months. If you have that luxury as far as your time frame goes, there could be really an opportunity then, because if you love this property, and it’s a good price, you might be in a rental that you’re month to month on, or you might be in a home that you could sell later, you don’t need to sell to buy, whatever situation is if it’s not requiring you to move within a month or two a short sale could be a good opportunity. And the many reason why someone might look at a short sale is, especially when the inventory is low like it is down there right now, or even up here, when the inventory is low and your options are limited, you can find, it opens up your parameters of homes you can look at, and it also can be a good opportunity because short sales typically sell for about five to ten percent below-market, so you usually do end up getting a better deal because there’s less, there’s a smaller buyer pool for that type of property, so you know prices are based on supply and demand, so with less buyers considering that house, usually they have to drop the price a little bit to get people to even want to deal with it.
eye4homes :: That’s another great reason is that in this market now, where there are multiple bids, or multiple offers and things like that, where if you go to a short sale you’re going to be like the only one probably trying for that one.
Paul :: Perhaps, perhaps, so not only that, let me say one more thing about short sales, is, don’t think that oh I can get a screaming deal on this house. There’s a real balance with short sales because if the price seems too good to be true it might be. Because when it’s listed that’s not the bank setting the price, that’s the seller setting the price or the listing agent, and so if you see a short sale, you know if you have time to go for it, it could be a great opportunity for you, but just the buyers have to realize that if the price is too low you might wait two, or three, or four months, for a response from the bank, they’re going to get it appraised, and if the price is 50 grand below what it should be, or 100 grand below what it should be…
eye4homes :: Forget it.
Paul :: …they’re going to reject the offer and everyone’s going to have wasted their time. So really the sweet spot with short sales and the realtors that have gotten really good at them, they’ll slightly discount the price and try to get a reasonable offer. And if you’re willing to write a reasonable offer because you really like the house, you’ll definitely get a little bit of a discount, but usually if the price is too low, that’s usually how these short sales fall apart.
eye4homes :: Gotcha. Good point.
Paul :: Because it has to make sense for the bank to take the discount, otherwise why would they bother to do it.
eye4homes :: Yeah, why would they.
Paul :: They’re still a deal.
eye4homes :: There’s a question earlier – To purchase a HUD home do you need to come up with cash?
Paul :: Most the time you wanna have, you wanna have some money no matter what, because you’re going to be paying…
eye4homes :: You’re going to be turning on the systems…
Paul :: …yeah, you need some cash, you need some cash just to get going, you need to put a decent deposit down. As far as the financing goes, if the HUD home happens to be in pretty decent condition then there is some no down programs. There’s a state bond program and there’s USDA program if you’re outside the city limits in some areas, that if you qualify, if your income qualifies for some of these zero down programs, if the house is in good enough condition, then yeah, you might be able to do a zero down on a HUD home.
eye4homes :: That’s awesome. I didn’t know that.
Paul :: You’ve got to look at the house.
eye4homes :: Yeah, the USDA loan, I didn’t know you could do that for a home like that.
Paul :: If the house is, it’s got to be in good enough condition, so you’re going to have to see each one individually and see where it’s at.
eye4homes :: Okay. Good point. Finding a bank owned and short sale homes, are there websites? Do we need a real estate agent? Give us a little bit of information on that.
Paul :: Yeah, so, one thing I want to warn people is when you Google these things, don’t pay for these websites that say foreclosure dot com, I don’t want to say any website in particular, but there’s a lot of websites out there claiming to offer you information on foreclosures, and a lot of it is really useless information and they’re just trying to get you to subscribe, or trying to get you to just sign you up to get you to sell you as a lead to realtors. And so it’s not smart really to go about it that way. Use a realtor. All the bank owned homes that want to be sold, all of them that are listed, and all the short sales, will be listed on the MLS. If you want to look for yourself there’s three really good website resources for bank owned homes that are direct and official. There’s HomePath.com which is all the Fannie Mae homes for sale. So HomePath.com. There is with Freddie Mac there’s HomeSteps.com. And then the third one for HUD like we were talking about, the official HUD website would be HUDHomeStore.com. HUDHomeStore.com.
eye4homes :: All one word, HUDHomeStore.
Paul :: HUDHomeStore. Those three websites will take you directly to the listings. You can sign up and actually get alerts when often times before these even come on the market.
eye4homes :: And that’s really nice too.
Paul :: Yeah. Yeah, but then otherwise use a website that is linked to the MLS, like JohnLScott.com. JohnLScott.com is linked to the MLS, as these forclosures come on the market, as the short sales come on the market, you can go to JohnLScott.com, it will show you all the listings listed that are active for sale.
eye4homes :: Excellent. Is it, are they on Zillow and everybody else as well? That’s a good point. Are they on Zillow?
Paul :: Well Zillow is going to have a lot of them, but the only thing I would warn about Zillow is, is there is a lot of… Zillow is just collecting a lot of information, and it’s not all accurate because they don’t have a direct link with our multiple listing service…
eye4homes :: That’s true.
Paul :: Yeah. …and a lot of times people will call me and say oh I saw this pre-foreclosure on Zillow for a hundred thousand, let’s go look at it, and it’s just Zillow listing some information about, you know, what some people owe, that the house is going to foreclose. It’s just, there’s a lot of random information on there that is not accurate or is not relevant, you know, to buy the property, and if you’re truly looking at wanting to search for homes that are active for sale you want to again use a site like JohnLScott.com, or another company website.
eye4homes :: And get a real estate agent as well.
Paul :: Oh yeah, I mean it’s really it’s just a no brainer to be working with someone. I know it sounds bias of course from us, but it really is, just to navigate through this process.
eye4homes :: Yeah. Yes, definitely. So what is the process? This last topic today, we don’t have too much more time available but the last topic is the purchase process. How is it different? What can a buyer expect?
Paul :: Well you are buying these homes primarily as is, even with the short sales, there’s not a lot of motivation from the seller to do a lot of work, so your taking the condition as is. You typically do get an inspection contingency still with most of these properties, but you’re buying it as is. Most of them are finance-able if the condition allows for it, and I would say with a bank owned home you can take, it will take an extra week or two on average, so instead of maybe closing in five weeks it might take six, seven, eight weeks.
eye4homes :: It’s not bad though.
Paul :: No it’s not bad. And then so bank owned homes can close almost as quickly as a regular sale. And then with short sales, like we talked about, that takes more patience. You’re looking at anywhere from a month to a year.
eye4homes :: Do they have their own inspectors when you have inspections?
Paul :: With a bank owned home?
eye4homes :: Yes.
Paul :: Some of the banks have done their own inspections and some of them have not, but regardless you’re going to want to get your own inspector.
eye4homes :: Of course.
Paul :: Yeah, because you’re buying it as is so…
eye4homes :: Yes. That’s true.
Paul :: …and you really want to investigate the property as much as you can before you put in your offer…
eye4homes :: Yes.
Paul :: …because it’s hard to go back after you’ve done, after you’ve done your inspection you’re going to have surprises and it’s hard to get the bank to lower it once your under contract, so.
eye4homes :: And you can pull out of it too when you find out that there’s a horrible… Can you?
Paul :: Yeah, well you usually can, but of course you’re going to have to look at the contact you are signing. So every contact is different. Most of the banks, HUD, Fannie Mae, Freddie Mac, usually do allow for an inspection period, but you definitely want to check what you’re signing before you agree.
eye4homes :: Good point there too. And you can submit some of these offers right through the websites too, right?
Paul :: Yeah, but almost all of the bank websites require that you use a buyers agent actually to submit an offer.
eye4homes :: Okay.
Paul :: So with HomePath and HomeSteps, in particular, you need to have a buyers agent to submit these offers.
eye4homes :: Thanks. That’s good for us. Good info. Yes. Good info. Very good info. Paul, can you give us a little more information on yourself, where we can find you, how everybody can get a hold of you.
Paul :: Yeah. If you’re looking at Whatcom, or even down through Skagit counties, so Bellingham, Ferndale, Birch Bay, Blane, down to Mount Vernon, you can find me at PaulBalzotti.com or 360.920.5901.
eye4homes :: He has some great videos too on this subject. Lots of good information. Yes So check that out. Thank you, Paul, for joining us. Yeah, thank you Paul. So much good info.
Paul :: Alright. Great show. Thank you.
eye4homes :: Bye bye. So now we know a little bit more about how we go about looking at HUD homes, short sales, bank owned. If you have any questions look up our website which is eye4NWHomes.com. Or you can call us at 206.299.2301 That does it for today. It does, and have a great weekend. Bye bye.
