Many home buyers and real estate investors have been prompted by steadily increasing interest rates to be more aggressive in their hunt for bargain homes. Competition for the best-priced and most attractive homes has only increased in most real estate markets and because of that intensity, foreclosures are drawing more and more interest from prospective home buyers and investors.

While foreclosures certainly offer some financial benefits, there are also risks involved, as you might expect. Not every foreclosure is the same and while the interest in them is growing, you need to be aware of what to look for when evaluating whether or not a foreclosure opportunist is right for you. Here are some things to look for.

Pre-Foreclosures

Pre-foreclosure properties can offer an attractive investment or home purchase opportunity to those willing to work for it. There exists a period of time in between when a home owner is notified that their loan is in default and when the bank actually seizes the home to put it on the market to recoup expenses. During that period of time, it is possible to purchase the home and satisfy financing requirements on it.

There are two negatives at play when going the pre-foreclosure rate and both discourage a majority of the potential investors that contemplate the pre-foreclosure route. One is the extremely brief period of time available to complete a deal. The period of time is regulated by individual states and usually consists of a couple months.

The other discouraging aspect is the necessity to deal with a home owner that is probably embarrassed by the foreclosure and may not even be aware that such information is made public. Knocking on a door or picking up a phone to contact someone that may not even be aware of pre-foreclosure purchases can be a difficult thing to do.

The Risky World Of Auctions

The best advice for those pondering auctions as a way to get in on foreclosed property is to simple not get involved at all. The risks are immense when dealing with a bank-run auction as you will most likely not have seen the house, have no way to protect yourself against title problems should they exist and must pay in cash.

That collection of traits discourages most investors and rightfully so. There is simply too much uncertainty when dealing with auctions to know for sure that the low sticker price is necessarily worth the hassle of going through title clean up issues and scraping together the cash for a purchase.

Foreclosed Homes

As the final step on a bank’s path of foreclosure, the home is put up for sale on the real estate market, though often for at least close to its market value. Because a home has traveled through a variety of steps and banks are in no hurry to lose money on any loan, savings are often slim on foreclosed properties that make it to this step.

However, there are certainly positives. Most likely there will be at least some kind of discount off of the market price of a property, albeit slim and deals are much easier to put together. Real estate transactions more closely follow the format of common real estate transactions and offer similar protections.

So, as you go through the process of deciding to get involved with foreclosed property, make an effort to decide which step of the process you want to target. There are opportunities all along the path of foreclosed properties, but each step has its own pros and cons that must be weighed against potential benefits. Having a clear plan will save you headaches later as you complete the purchase.

Published by Joe and Colleen Lane, Realtors®. The Lane Real Estate Team services Tri City Wa Real Estate, Kennewick Wa Real Estate, Pasco Wa Real Estate, Richland Wa Real Estate, and surrounding Southeastern Washington Communities. Here is more information : www.joelane.com/

There are few more emotive issues than the estimated value of your own property.

Anyone who has been or is intending to remortgage in the foreseeable future will be aware that an independent valuation will need to be completed in most cases. In the current property market, this can be a harrowing and eye opening experience. It has become increasingly evident that property valuers have been taking a very lean view of the UK property market and this has significant implications for seller, purchasers, remortgagers and, most importantly, mortgage brokers and IFAs.

According to London-based data services company Hometrack, which delivers a good indication of a property’s value, house prices fell for 18 consecutive months up to December last year, when the average house price in the UK climbed just 0.1 per cent.

For most areas, last year provided the poorest house price growth – if any – in more than a decade. There is no doubt that 18 months of average values falling, or at the very least the speed of growth falling dramatically, have diminished homeowner equity levels and dented consumer confidence. Hometrack’s national average house price in December was measured at £160,900, down 1.6 per cent from £163,474 in December 2004.

Glut

From a seller’s perspective, the messages are simple: supply outweighs demand and it is a buyer’s market. In the first quarter of last year, the number of properties available soared by more than 30 per cent.

During last year, the length of time it took to sell a house grew by more than 20 per cent to eight weeks. In 2004, it took and average of 6.5 weeks from listing to confirmed sale. Importantly, the sale price as a percentage of asking price was down to 93.5 per cent last year, endorsing the point that buyers exercised significant bargaining leverage over sellers and negotiated large discounts.

In real terms, a seller who lists his property for sale at last year’s national average of £160,900 will, on average, achieve an agreed sale price or £150,441 and have to wait on an agonising two months to seal the deal.

Even at this price it is a bridge too far for most first-time buyers looking to get their toe in the property market. But there is some light at the end of the tunnel. First time buyers accounted for 11 per cent of total buyers in the third quarter of last year, according to the National Association of Estate Agents. This was up from 7.7 per cent in August. Brokers should be mindful of the important market sector in their marketing plans, and a further interest rate cut in the first quarter of 2006 could really kick start the property market.

Remortgage

From a remortgage perspective, the implications are significant and a conservative valuation can conspire to make the professional mortgage broker or IFA look a bit silly.

Brokers and lenders witnessed and unprecedented level of down valuations last year – where the property valuation is significantly less than the customer’s initial estimate. Most lenders require a valuation to be completed on remortgage applications, particularly where the loan-to-value ration is more than 70 per cent. The major issue facing mortgage brokers is taking a customer’s estimate of their perceived property value on face value, as invariably it will be on the high side. This is where the fun begins.

Let us visit the sale process of a typical mortgage broker. You spend a good few hours completing a fact find, issuing an independent disclosure document and building the confidence of your client in your ability as a professionally-qualified, Certificate in Mortgage Advice and Practice-endorsed, FSA-registered adviser.

You tell your client that you have more than 4000 mortgage products to choose from and you will find him one that fits his need exactly. A key cornerstone of the selection is the LTV ratio and this is based on the customer’s estimate of his property’s value.

This estimate will be based on a few things: knowledge of other properties that have sold recently in his street or neighbourhood, the press and a large dose of gut feel.

Clearly many clients will have an over-inflated view of what their property is truly worth; it is an emotive issue and one that can really bite the adviser. Imagine then you have taken all the details required on the fact find, you have sourced a deal, it is tight on equity – but based on what you know and have been told, the deal fits.

The valuation rains on your parade as it comes in much lower than expected – lower than the customer’s rose-tinted estimate, lower than the flowery estimate given by the local real estate agent.

Now meet the independent valuer. Independent valuers are a cautious lot, and the subject of much cursing and blaspheming.

From a mortgage broker perspective, however, remember one thing. As far as a customer is concerned, you sent that valuer to value their property, you are the focal point of their mortgage transaction – indeed you are the expert. So when the valuation comes back well below expectations it is you, the broker, that will be left to deal with the problem.

This can create several problems. First, the deal that you diligently sourced from your 4000 choices may no longer fit the lender profile. Second, you need to explain to the client that his net asset position is not as good as he had thought. Third, you will be left to resurrect a new deal without much credibility left.

Some may think it is possible to get a valuer to change his mind. This happens about as often as the moon is blue. In fact, it happens about as often as often as a valuer gives a higher valuation than a customer’s estimate.

Remember a valuer will need to substantiate his figure with comparable – and recent – local sales, which is usually tough to argue with.

Even arranging finance for a new build can be fraught with danger. One such case recently saw a mortgage arranged for a new build. The customer had negotiated a discount from the builder’s original asking price and, by definition, set a market price for the new property.

Imagine explaining to the customer that the deal he had got on his property was not as good as he thought because a licensed valuation down graded the new purchase by £15,000. This resulted in the deal not fitting the lender criteria and a distressed customer at loggerheads with the builder. The builder was happy to back out of the deal and sell the property to another customer, happy in the knowledge that the chances of the same valuer turning up were remote. The consequence was a very unhappy customer and a very traumatic process for all involved, including the mortgage broker.

So what do we do in these downward trend times? Hometrack estimates that property prices this year will rise just 1 per cent, citing affordability as the major barrier to entry for buyers. Halifax is a little more optimistic, predicting a 3 per cent rise. Either way, the head days of double digit growth of past years are gone. It really is a challenge as a professional mortgage broker to tread the tightrope between realistic property valuations and a disappointment.

POSITIVE

There are, however, positive signs on the horizon for the property market. First-time buyer activity has increased, usually a precursor for renewed vigour in the property market.

Estate agents have reported their first drops in available housing stock for nearly six months, another sign that activity is starting to move the right way.

Interest rates are stable, and the much vaunted interest rate cut to stimulate a slowing economy has not happened – yet. Inflation and unemployment levels will need to be kept in check to facilitate a cut in rates. All of these things may happen or continue to happen; they may not.

In the interim, mortgage brokers need to deal with the reality of a bear property market. At point of sale, be armed with the facts and be ready to re-adjust your customer’s estimate of his property value. Check property websites before your sales call and get a feel for local area conditions and trends.

Not only will you be armed with the facts, you may just save yourself and your customer a lot of heartache. Additionally, it is not a bad idea to get to know your local valuers; you will find the same names keep coming up.

When push comes to shove and you need to explain the salient points of a valuation, or worse still a down valuation to a client, you had better know what you are talking about. Saving the deal could rest on it.

Finally, at point of sale, cover yourself. Explain to the client that you are basing your product recommendation on his estimate of property value and that it is subject to qualification from a licensed valuer.

Remember property values are an emotive topic – so know your area, do your homework and you will reap that rewards with much less hassle.

John Smith writes useful, informative articles on the mortgage, loan and propety markets

Getting your hands on good real estate in California for a good value these days is difficult. Although prices are low due to a sluggish market and consequently low property values, the uncertain future of the market makes it really hard to invest in anything that isn’t a sure bet. But while surefire deals may be hard to find on the open market, in the world of California foreclosure homes there are some great opportunities for valuable investment.

Buying California foreclosure homes differs somewhat from buying on the open market through an agent, but anyone can learn the process and ultimately, pay much less for a home than you ever would through an agent. Since California foreclosure homes are sold as repossessions, the lenders in charge of them often undersell properties simply for enough to recover the debt they are owed. This translates to savings that often lie anywhere from 10 to 50% below the market value of the property. Buying for such low prices means more than a discount however. In today’s market, it means instant equity, in a market where appreciation and investment value are virtually non existent.

California foreclosure homes are currently at incredible highs as well. With the highest inventory in the country, California has more than 55,000 properties currently in the foreclosure market. Buyers in all locations are having no trouble finding apartments, houses and commercial properties for extremely low prices. The flooded market is bringing down auction and sale prices across the board.

If you’re interested in taking advantage, try a free search for California foreclosure homes on a site like ForeclosureDeals.com. They can help you locate the listings you w ant, but they can also help you learn how to buy smart, and get the best deals out there.

Philip Smith has been educating buyers on the finer points of California Foreclosure Homes purchase at ForeclosureDeals.com for over nine years. Click here to visit and read more advice on buying discount real estate.