by Mary Bryan Fields

Deficiency Judgment

The lender may seek a deficiency judgment against the debtor when a property sells at public auction for less than the loan amount secured by the property. If the lender prevails, the judgment obtained will apply to all of the debtors’ remaining real and personal property.

REO Properties

REO (Real Estate Owned) are properties that were purchased by the lender at the foreclosure sale. When a third-party purchases an REO property, the lender is the seller. Because lenders are in the business of financing property, not owning and managing a portfolio, REO properties are generally listed at very competitive prices for a quick sale.

REO properties are sold “as is,” with all faults and as suitable for the buyer’s intended use. The seller will generally not negotiate repairs to the property. When a debtor is not financially able to make his note payments, he likely has not been maintaining the property. Therefore, costly deferred maintenance items may have accumulated, which will require attention from the new owner. In addition, the lender does not usually provide a seller’s disclosure, which is not required in Georgia. Should the lender provide such a disclosure, the lender, not having occupied the property, may not be fully aware of adverse conditions. Lastly, the lender will not warranty the condition of the property. Should the buyer take possession and discover a hidden adverse condition, he will not be able to pursue the lender to rectify the problem.

A thorough inspection of the property by a team of professionals, including, but not limited to, home inspectors, termite inspectors, heating and air conditioning experts, and surveyors, will help protect the REO buyer from adverse conditions. However, in spite of a thorough inspection, unknown or unforeseen conditions may be discovered after completion of the sale.

Title to an REO property is conveyed by a Limited or Special Warranty Deed, rather than by a General Warranty Deed. The grantor warrants the title only against defects occurring during the grantor’s ownership and not against any defects existing before that time. Buyers of REO properties should thoroughly examine the public land records pertaining to the property to identify any title defects.

Foreclosures, REO properties and real estate in general offer one of the best values around! Purchasing real estate at today’s prices provides an opportunity to rebuild lost wealth through appreciation as shrinking inventories poise prices to rise. According to Alan Zibel, writing for the Associated Press in an article published in the Brunswick News on November 24, 2009, “Homes sales nationwide are now up nearly 37% from their bottom in January, although they are still 16% below the peak in autumn 2005. At the current sales pace, there is only a 7-month supply of homes on the market and in some areas there are bidding wars.”

For a limited time, buyers will continue to enjoy the best real estate opportunities in a decade:

(1) Interest Rates Below 5%: Competition for money, including the Federal government’s extraordinary deficit spending, will likely drive interest rates up, and soon. But, for a limited time, rates are affordably low. If you are waiting for prices to drop, stop waiting. A 10% decrease in price is required to offset a 1% increase in interest rates. Increasing prices and increasing interest rates are much more likely.

(2) A Pricing “Do-Over”: On certain properties, today’s pricing is on par with pricing from early 2000. During 2005-06, many of our purchasers opined, “If we had only bought in 2002, look how much we would have made on this property!” Our view is that 2002 has come again, as will 2005-06. If you are smart enough to enter the market now, you can have a “do-over!”

(3) Selection: The choices are plentiful in most price ranges. However, since limited new inventory is being added to the marketplace, these choices will diminish with each passing week.

(4) Demand Backlog: People have deferred important real estate decisions for almost three years, particularly the baby-boomers who plan to retire “south.” Improving market conditions will release this pent-up demand, which will absorb more of the available inventory. Prices will likely rise as demand increases and supply decreases.

(5) Tax Advantages: The federal government continues its support of the housing recovery by expanding the tax credit to more buyers and more expensive properties.

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