Recently I have noticed that there are a lot of people out there overpaying for property and I can help but to ask myself why. The reason that I have come up with is lack of education that is given to prospective buyers. As a buyer, you rely on your realtor to protect you. In Webster’s dictionary it defines
word client as:1: one that is under protection of another: DEPENDENT 2 a: a person who engages professional advice or services of another b: customer c: a person served by or utilizing services of a social agency
As buyers, we look to professionals such as lawyers, realtors, title companies, appraisers, and banking officers to look after our best interest because we trust that they are looking out for our own well being as their client. Now clearly we feel that is their job, their responsibility to look after us, don’t you agree?
Well, under some state laws buyers are considered buyer beware states. What does this mean to you? Well, it is simple – Let Buyer Beware. In other words, your realtor cannot tell you that you are paying too much for a property. If they did, they put their job at risk. So in this report we will discuss steps you can take to insure that you are not paying too much for your property. We start by explaining appraisal process.
Appraisals Explained
Now before you get a loan, your lender will require an appraisal on property. This is simply to check value of home to make sure that lender is protected with money that they lend you. The lender will send sales contract to appraiser to get appraisal done. Here is what appraiser will do: they will look for sales that are in your neighborhood that are similar in size and style. Then they will give their opinion on what homes are worth. Now, an appraiser can look for homes that have sold for less, for more, or about what you are paying. They will look for homes that support your price on sales contract. After all, they want loan to go through so that they can get paid, loan officer is pushing for loan to go through so they can get paid.
So where does this leave you?
Just for a moment, imagine that you are in market for a house. You have been looking, then you find one that is what you want. The seller is asking $100,000, you tell your realtor that you are going to offer $95,000. But in actuality homes in area that are similar to one you are buying are selling for $85,000, but you are not aware since you are relying on your realtor for protection. Now you buy home at $95,000 feeling good about your purchase. Now, in one year, imagine you lost your job and was forced to relocate and sell property. If homes in area have been selling for $85,000, guess what? You now owe more than what your property is worth. For average home in America, there is a 4-6 month time that it takes to sell property and sellers typically get 95% of value of home.
This is not a make-believe scenario. Just last week I had someone to call me wanting me to purchase their home. They had bought it only 1 year ago for $38,000. They were 4 months behind on their house payment. The house was falling apart and needed serious repairs. So, I check comps to see what has sold in area and homes that did not need any repairs were selling for $20-$30K. She paid $38K for one that needed serious work! She overpaid by at least $20K. Now, in 1 year home is not suddenly going to be in need of all these repairs. If she had done her homework she would have not overpaid.
Now bank is threatening to foreclose, here is what will happen if they foreclose: The bank will hire an attorney to foreclose, thus running 3 - 4 ads in newspaper to auction of house. In most cases bank will take home back. Now, everyone knows that there are people looking for foreclosed property that they can pick up cheap- right? Now if bank takes an amount less than what was owed, then you (the homeowner) are still responsible for remaining debt.
The bank will then seek for a deficiency judgment. If they get a judgment, they can then possibly garnish your wages and judgment will attach to anything you own for up to 10 years. After that they can re-file for another 10 years.
