For buyers with cash to spend, now may be the right time to own a piece of Cape Coral. The cost, though, is tough to swallow for homeowners who are barely holding on to a mortgage that eats away at their budget. Cape Coral is part of a nationwide trend where the number of foreclosures and short sales are common and sales are sluggish.
The first step for homeowners who are sliding backward, unable to make full or partial payments, is to pick up the phone, Joseph Beauvais said.
Beauvais is a Cape Coral Realtor and owner of Sunny Spot Realty, and works as a buyer’s agent. He does not list property for sale, but works exclusively with buyers to find the best deal.
“The first thing to do is try to negotiate with the lender,” Beauvais said. “There are other avenues.”
Renegotiating the loan to a fixed rate for a 30- or 40-year loan may help lower payments enough for the homeowner to make the payments. If that doesn’t work, sellers can list the house for less than the amount they paid. The result is a short sale, but the process takes a level of commitment and negotiation with the lender that requires time.
“You have to be careful with a short sale,” Beauvais warned.
Not all lenders will approve a buyer’s offer to pay less for the house than the current mortgage. Both buyers and sellers have an economic stake in a short sale. Sellers may be required to pay back a tax lien they took on an equity line of credit.
Buyers who don’t do their homework may end up with additional costs that they hadn’t counted on. For example, if a buyer in Cape Coral purchases a house that is not on city utilities, the reality of a future bill of several thousand dollars for the utility expansion project may come as a shock. Buyers need to ask questions about the property they want to purchase.
Homes that end up as foreclosures offer another set of potential problems. Some have sat empty for months, with no one to keep up the maintenance on the structure or the yard. By the time the house winds its way through the foreclosure process and into the hands of a Realtor, it can have real problems, problems that don’t show up in a regular Realtor listing.
“Agents have to make sure it’s up to code,” Beauvais said.
Beauvais had a client who was interested in a house that had city utilities listed as part of the attractive selling points.
“This area doesn’t have water and sewer,” Beauvais said.
Beauvais went to the home and discovered that the house is still on a septic system. When he looked up the address for the utilities expansion project, he found out that the property isn’t due for city utilities until 2012.
“If a buyer didn’t use a buyer’s agent, they may not find that out at the closing,” he said.
Beauvais also cautioned buyers about getting emotionally involved in the purchase of a foreclosed home.
“Don’t get into a buying frenzy,” he said. “That house could have liens, code violations and future assessments. If you don’t know that, when you close on the house – without title insurance, you could be liable for it.”
Buying a foreclosed or short sale home is not for the faint of heart, according to Rob Sharpe. Sharpe is a senior loan officer with Tomasso Mortgage in Cape Coral and has helped homeowners purchase homes at bargain-basement prices. He advises customers to exercise patience when dealing with the current market.
“It can take a long, long time to close,” Sharpe said.
Months, in fact. One home still in the short sale process that began in July has yet to close.
“Less than 2 percent of short sales are closing,” he said. “Lenders are reluctant to take a hit; take a reduced price.”
That means a potential buyer puts in an offer, then has to wait until the bank accepts or rejects the offer. If the bank rejects the offer, the lender involved does not put forth a counter offer. The buyer does not know if their offer was near the amount the bank wanted for the property or if the offer will be rejected again. In a traditional sale buyers and sellers can make an offer, then counter offer until meeting a middle ground. Banks do not engage in the back-and-forth negotiation process.
“A foreclosure is better than a short sale because the lender knows what he’s out,” Sharpe said. “He knows the property is depreciating daily. It’s more definitive with a foreclosure.”
Banks also want to expedite the process quicker on a foreclosed home because they want to recoup the loss and move on, Sharpe said.
“They want to get nonperforming assets off their books,” he said.
Scott DiGregorio works as a mortgage expert with Fort Myers-based First Capital Lending Corporation. DiGregorio said that while the foreclosure crisis has hit many families in the pocket book, it has helped other families in unexpected ways.
“My typical client is a first-time homebuyer who never thought they could afford a home,” DiGregorio said.
Now, it’s not uncommon for DiGregorio to find a home for a client that has a mortgage payment, including taxes and insurance, of less than $1,000 per month.
Most of the homes his clients end up in are someone else’s foreclosure.
“They’re mostly foreclosures because that’s what’s out there,” he said.
DiGregorio said that he believes that there is potential for more buyers to come forward.
“I think there are a lot of people out there who could buy a house who aren’t because they’re intimidated,” he said.
DiGregorio said he encourages buyers to work with an agent who knows the potential pitfalls along the way.
“You don’t pay a buyer’s agent,” he said. “They really help you dodge the bullets of what’s out there.”
The good news for homeowners who have lost their homes to a foreclosure is that they can start again. The Federal Housing Administration (FHA) allows foreclosed homeowners to apply for a new loan after a period of two to three years if they have re-established credit. Other types of loans may require a longer waiting period, but will consider another loan in the future.
Despite the rough patches in the road, Beauvais isn’t discouraging buyers from taking a chance on an foreclosed or short sale home.
“But there are some good deals if you do your homework. I’m not talking, stay away. Just be cautious.”
