The Ugly Truth About Foreclosed Homes

For anyone who has ever been looking for a home within a tight budget, you may have had the opportunity to consider a home that went through the foreclosure process.

The length of a foreclosure process varies by state. In Pittsburgh and the surrounding areas, a lender must use the judicial foreclosure process because that is Pennsylvania law. The judicial process in Pennsylvania reportedly takes 90 days.

Purchasing a foreclosed home isn’t always a bad decision. You can often find diamonds in the rough at a low price. If the home is in the pre-foreclosure stage, you could get it through a short sale. If a bank is motivated to sell the property quickly, that could be a good negotiation tool for you. It is also a plus that you won’t be responsible for any liens or back taxes from the previous owner since the home’s title is cleared.

Dangers of Purchasing Foreclosed Homes

Although foreclosed homes are sometimes great deals, there are some potential pitfalls that you should be cognizant of.

Occupants

When dealing with a foreclosure, the occupant is often still in the home throughout the foreclosure process. How would you feel if you were losing your home because you couldn’t afford the payments? Some people would take it with grace, but that’s unfortunately not always the case. There are many instances where the occupant damages the home out of spite and hurt feelings. For example, they may leave holes in the walls, destroy appliances, let their pets urinate and defecate on the floors, etc. If you ask a real estate agent, I’m sure they could tell you some horror stories.

Repairs

The bottom line is that you don’t know what condition the home will be left in. If the property is at auction, you won’t even get to see the interior until you’ve already paid in full. Even if you are able to see the property’s interior prior to the sale, you may not be able to request repairs before buying the home. What you see is what you get. If the property is in bad shape or not up to code in specific ways, it may limit the possibility of some loans, such as an FHA loan. Although this varies on a case-by-case basis.

Competition

With the recent surge in real estate investors who flip property for profit, you may find yourself competing with other potential buyers for the same property. This is especially true at an auction. Before going in, set a hard budget for yourself and don’t pay more than you would earn from the property in the end. To give yourself an edge, have the required funds available to pay a foreclosed property’s outstanding mortgage balance to the lender.

For all the information you’ll need about risks and potential benefits of purchasing a foreclosed home, consult a trusted local real estate agent.

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Jason Cohen (Pittsburgh) originally posted this content at JasonCohenPittsburgh.com.

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4 Tips for Making Your Lease Protect You

As a landlord, you began investing in real estate to make money, but, if you’re not careful, you may end up paying out more in expenses than you’re making. The lease can be much more than a rental agreement. It should be used to help you protect yourself against mounting upkeep costs that should be the burden of your tenant.

Include a Guest Clause

The largest cause of property damage is people. The more people you have occupying a unit, the greater the wear and tear on the apartment. For this reason, it’s important to have a clause that designates just how many people can live in the unit. You can and should also add a clause limiting the number of guests that can stay overnight in the unit. As a part of that guest clause, include a clause that states that the tenant is responsible for any damage or other liabilities caused by guests of that tenant.

Put a Cap on Utilities

If you’re paying for the utilities, be sure to include a clause in the lease about the tenant’s privileges. The best way to handle this situation is to designate a number, such as $50 for gas, and state that the tenant is responsible for paying overages. If the tenant knows he’s responsible for paying the difference, he’ll be much more concerned with conserving resources.

Include Property Inspections

While most leases do have a “right to entry” clause, you might want to consider specifying routine inspections. This is the best way to protect yourself as the property owner. By making a routine inspection occasionally, you can ensure there are no serious damages to the property, unregistered tenants, or unapproved pets. This is your property and you have the right to ensure it’s being cared for in a proper way.

Specify Restrictions

This means going into detail in the lease on how the property is to be used. If you don’t want tenants using the fireplace, state that in the lease. Also point out that using utilities in a way other than intended is prohibited. This way, if their son throws a toy down the toilet and that creates a costly plumbing repair bill, the tenant will be held responsible for paying it. This is added protection against damages caused by the tenant.

If there’s anything that concerns you in renting out your property, you should make a point to mention that in the lease. This is your opportunity to let your tenants know what is and isn’t acceptable. By providing detailed clauses in your lease, you can ensure your property will be well tended and you’ll be spared the costs of paying for damages.

*Originally posed on JasonCohenPittsburgh.net

Should You Buy or Build?

What does success and achieving the American Dream look like to you? For many, the answer would be owning a home – with or without the stereotypical white picket fence. Owning a house implies permanence and financial in a way that even long-term renting never could; it shows that a person has the financial ability and will to set down the roots that will allow them to provide a long-term home for themselves and their family. But for some, buying someone else’s house isn’t enough; no property looks quite right or feels quite like home. They decide to build their new property from the ground up, and bring the house they dream of into reality. But how feasible is this plan? Should you build – or would it be better to buy? Let’s take a look at the facts.

According to statistics provided by The United States Federal Reserve, the average sale price of a home sold in the first quarter of 2018 stood at $375,000 – a hefty sum, given that the Bureau of Labor Statistics puts the median wage for American workers as of 2017 at  $44,564, and the average household income at just $73,298. To add yet another obstacle, the average American household is knee-deep in debt; the BLS further estimates that on average, households are responsible for repaying about $137,00.

Taken together, these financial barriers make it difficult – but not impossible! – for families to buy or build the home of their dreams. Prospective homeowners should consider the following points before they enter into the market:  

Do you have the resources to build?

Americans that earn more than roughly $400,000 to $600,000 per year, possess relatively small debts, and have substantial nest eggs could reasonably build a home without too much financial risk.

Do you plan on settling down in an area for longer than a decade?

The longer one plans on living in an area, the more easily one can make one’s mind up regarding this tough situation. If there are any chances that one could move in the remainder of their working lives, renting is likely the best option available.

Odds are, you wouldn’t want to go to the time and trouble of building a home from the ground up if you foresaw yourself moving within five years. If you have an occupation that requires you to travel or move often, renting would by far be your best option. However, if you intend on staying in one area for years and want to live in one home for over a decade, building your dream home could be a great option. That said, if you plan on moving to a bigger home in a few years, buying might be your best bet.

Cost comparison
Realtor indicates that the median home purchase price hovers around $223,000, whereas building one from scratch is roughly $289,415. Building could be cheaper in some cases, though buying is almost always the more affordable option.

*Originally posted on JasonCohenPittsburgh.org

Jason Cohen Pittsburgh - Best Practices for Landlords

Best Practices for Landlords

No landlord wants to keep a flaky client. Every investment property owner counts on their tenants to pay their rent in full and on time – otherwise, they have no way of making a profit off of owning and renting out the building. A landlord’s choice of tenant matters; no property owner wants to risk bringing on a tenant that will trash place and skip out on rent. Likewise, they can’t afford to lose responsible and reliable tenants as a result of poor communication or subpar landlord-tenant relationships. In order to find and maintain responsible and reliable tenant, landlords must take stock of their own actions and strategies to establish a productive rapport with those living in their investment properties. In this piece, Jason Cohen Pittsburgh provides a few best practices for landlords who want to cultivate mutually-beneficial, long-term relationships with responsible tenants.

Creating the Lease

Standard lease forms are readily available and cover rent, security deposit fees and legal rights. From there, add pet restriction policies, late payment fees, maintenance responsibilities and expected behavior. A detailed lease explaining a landlord’s expectations and requirements reduces the likelihood of misunderstandings in the future.

Be Welcoming

New tenants are often new to the area. As such, landlords might consider creating a printed map that provides directions to frequently visited locations that may include grocery stores, medical clinics, pharmacies, restaurants and perhaps nearby attractions. Leave a welcome card in the residence to start the relationship on a positive note.

Friendly but Professional

Make a good first impression by dressing appropriately. By appearing clean and properly put together, you convey that you expect your tenants to maintain their residence. Follow the guidelines clearly established in the lease to prevent misunderstandings. Go over the lease with them before they move. You can always amend trivial matters along the way if you choose. If a disagreement should arise, it is important that the landlord always remain calm and professional.

Availability

In the event that a problem occurs, tenants must be able to contact the landlord. Supply one or more phone numbers and perhaps an email address. Emails also reduce the number of after hour calls while providing documentation of an issue. Consider tenants as customers. In order to keep customers, property owners must respond as quickly as possible when contacted. When a problem arises, set a time to visit and inspect the problem. Remedy the problem or have the repair completed as quickly as possible.

Respect Their Privacy

Tenants have the right to privacy. Some states require that landlords provide notice before entering the property. Landlords should also schedule visits to business hours or at a time that is convenient for the tenant.

*Originally posted on JasonCohenPittsburgh.net