President Barack Obama recently announced a plan that would provide some 1 million homeowners with an opportunity to refinance their mortgages in an effort to stave off foreclosure. For many homeowners, the news couldn’t have come at a better time, especially in light of new statistics that indicate a glut of foreclosed homes will hit the market next year.
RealtyTrac, a group that monitors the foreclosure market, speculates that as many as 1 million foreclosure actions that were slated for 2011 will be bumped to 2012. The reason for the holdup is due in part to the dismal housing market as well as persistent foreclosure abuses on the part of the country’s largest banks.
- Experts predict a glut of foreclosed homes in 2012.
- Cities try new tactics to fill vacant properties.
- A title search and an experienced attorney are key to buying a foreclosed home.
Combating the Housing Crisis
As of September 2011, there were nearly 1.5 million foreclosure homes throughout the country. The states that are seeing the most foreclosure activity overall are California, Florida and Michigan. Meanwhile, the top foreclosure cities are Las Vegas, Chicago and Phoenix respectively.
If an additional million foreclosure homes flood the market in 2012, it could be a long road ahead for home sellers. Data analytics firm CoreLogic recently concluded a study that shows that more than 23,000 foreclosures in 2006 sat unsold for more than four years. Considering the housing downturn didn’t rattle the industry until 2008, there is potential for an even larger percentage of the 2012 foreclosures to remain vacant for even longer.
In an effort to combat the housing crisis, some local governments are trying to come up with innovative solutions to fill vacant homes. In October, Atlanta Mayor Kasim Reed proposed turning foreclosures into inexpensive housing for police and firefighters that live in the city. Reed says that he is currently in talks with an unnamed major bank to provide an affordable means to provide housing to first responders. Other cities, such as Detroit, have enacted similar initiatives.
Top Tips for Buying Foreclosures
The depressed housing market isn’t all bad. Those looking to buy property on the cheap are more likely to find good deals and deep discounts if the predicted glut comes to fruition. But buying a foreclosure isn’t without its pitfalls. New York real estate attorney Jennifer Polovetsky has some advice for would-be homebuyers.
"Do a thorough title search, and get a good title company to conduct the search and provide you with title insurance," Polovetsky says. "A title search will tell you if there are any liens on the property, all mortgages on the property and any other objections that you will want to know about before purchasing the property."
When searching for a title company to conduct the title search, Polovetsky recommends homebuyers go with an agency that is owned or managed by attorneys who are experienced in title insurance law.
In addition, Polovetsky recommends that consumers pay a premium for a licensed engineer to conduct a home inspection.
"Some home inspectors may miss something that an engineer wouldn’t," she says. "I always suggest to pay a little extra because at the end of the day you’re not worried just about plumbing, but also the structural soundness of the property."
If the home inspector fails to cite a problem, a homebuyer will have a better chance at winning a claim against an engineer than someone who is merely a licensed home inspector, according to Polovetsky. That’s because courts hold engineers to a higher standard because of their advanced credentials.
Homebuyers should also get a new lot survey to ensure the property’s boundaries are accurate.
"When you buy a foreclosure, you’re getting the property for less money, so you might as well spend the money up front to make sure that if this is the home you are going to live in that everything is right," Polovetsky says.
Finally, homebuyers should not underestimate the advantage of hiring a real estate attorney to help them throughout the purchasing process.
"There are attorneys who work mainly on foreclosures and short sales," Polovetsky says. "Find someone who focuses on this kind of work."
Keith Ecker co-authors the Lawyers.com blog.
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