Want to Build a Home: Bring Cash!

Want to build a home? Better bring cash!



We have been working on information for a client concerning a construction loan. If you have not tried to acquire a construction loan in a while you are in for a rude awakening.



For a lot and home totaling approximately $420,000 we found out the following:
•The lot has to be purchased usually for cash.
•There is no longer temp to perm loans
•Therefore two closings occur
•Requires 30% down payment
•Takes 30-45 days to close
•Buyer and bank determine draws
•Monthly interest payments are made on the draws as they compound on a daily average balance (will amount to approximately $12000)
•Need to have 10% in reserves for possible overages
•Once the home is completed the bank will proceed with making a loan on the house. Problems have occurred when the home does not appraise due to price per square footage being higher then resale properties. Some folks have had to put down additional monies down due to low appraisals.
•In order for the builder to be approved by any bank the builder needs to provide: builder's license, proof of liability insurance, and letters of reference.



We had numerous discussions with banks big and small in the Atlanta area. A lot of the institutions were no longer interested in doing construction loans. Their reasons were the same: As long as resale prices remain low, and foreclosures continue to appear, it will be difficult to get a solid appraisal on a new home.

If you are an individual debating whether to build or buy a resale do your research

If you dont want to hear answer

Feedback is an important tool in the marketing and sale of a home. The Wells Team places a lot of importance in feedback as we work with our clients. We work hard to get feedback from other agents while we are very forthcoming with feedback on homes that we show buyers.

Recently we were showing higher priced Lake Lanier properties. ($450,000 to $650,000). My partner had a request to give feedback on one such property. Her answers were honest and professional based on her buyers opinion.


Comments included:
•Hand prints, from finger paint, on the garage doors
•Kitchen Counter tops with a lot of clutter


Not horrible comments but enough to have our buyer lose interest in the home. Not just any home but a lake home priced in the mid $500,000 price range.


The selling agent was very upset with the comments taking them very personally.


It is a buyers market. They expect a lot, continue to have a lot of choices, and have foreclosures as options.


Bottom line: Don't ask the question if you don't want to hear the answer.

Foreclosure Relief from The Federal Government

The US Attorney General has announced a plan to help homeowners, who are underwater on their mortgages, get relief.

Before you start doing “the wave” there are a couple of items you need to know:
• Your loan must be owned by one of five banks: Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and Ally Financial
• You will need to be delinquent on your payments, threat of foreclosure, and mortgage is more than the home’s current value

If you qualify then this program will reduce the amount of principal on your mortgage. Numbers range from $15,000 to $20,000 in principal reduction.

Overall Freddie Mac, Fannie Mae, own approximately 46% of the nation’s mortgages (including mine!). This means that the plan will be offered to a small amount of homeowners.

In my opinion: In my neighborhood (an hour north of Atlanta) I have seen multiple foreclosures in the past few years. Matter of fact there are another four that are available at this time. The reasons for these foreclosures were varied: Loss of a job, builders losing their companies, divorces, and one neighbor convicted for federal mail fraud! While their home were in short sale, and then ultimately advertised for foreclosure, I looked at the debt acquired on their homes. The numbers, in some cases, were astonishing! Multiple mortgages in excess of 110% of the purchase of the home. One homeowner had over $1 million dollar in loans on his home (the home sold in foreclosure for approximately $390,000). My take on my local foreclosure market is this: The majority of folks I knew had a lot of debt in the good times and was always on the edge. No program would help them stay in their home. It appears that the quicker we can clean out the foreclosures in my neighborhood then the quicker we can return to some sense of a normal real estate market. $20,000 reductions on my neighbor’s loan principal will not

They Took the Doors

This market continues to amaze us. It forces people into irrational behavior. Take the case of the latest home to go into foreclosure in my neighborhood. The home had been for sale approximately two years. A custom built home with upgraded appliances, light fixtures, and a pair of handmade antique front doors.

Needless to say the home was advertised for foreclosure at the beginning of December. Our team put a short sale offer on the home two weeks before it was to go into foreclosure. At that point the "owners" had taken the appliances, and changed out the light fixtures. We pressed ahead with the short sale offer despite the changes they had made.

Then they came back to us and said that they were taking the doors! What do you mean they are taking the doors! The same doors that they had advertised for two years as part of the home had suddenly become a "wedding present". The sellers had now laid claim to the doors.

After some tense negotiations the sellers agreed to leave the doors with the home. However after all that work the lender declined our short sale offer. The home was then foreclosed on the following. It happened on a Tuesday. I bet you will never guess what happened Tuesday night? Yes you guessed it. The doors disappeared. They were replaced by two standard metal doors.

My question to all of you is this: When you build, or buy a home, do you buy the doors, light fixtures, and appliances for cash and place them in the house or are they paid for by the mortgage? I will bet that all of the items are part of the mortgage. If the lender paid for all of these items then why do sellers feel it is their right to take these items out of the home?

Has this housing market killed our integrity?

When Do I File the Deed?

After six years I still learn something new everyday!

I have a client who is buying a home from a seller who purchased the home on the courthouse steps. The seller, with his investment group, paid cash for the property.

As we finalized the agreement with the seller we did negotiate with one disadvantage. We did not know what the seller paid for the home. Why? Because the seller had not filed the deed with the county!

After we finalized the agreement I brought up this point with the seller. The seller waited to file the deed because he did not want any potential buyers to know how much he paid for the home.

This seller has purchased numerous foreclosure homes in the North Atlanta area. After he purchases a home he does what he feels is needed to ready the home for sale. Obviously repairs and upgrades cost money and are taken in account when he prices the home.

The problem in the past is that potential buyers look up the home on the tax records, see what the seller paid for the home, and offer a slightly higher amount. There is no regard for repairs or upgrades made to the home. In many cases he has been offered $5000 to $10,000 more than what he paid for a property!

So this seller holds the deed as long as he can.

Of course once our deal is finalized the deed needs to be filed. If it is not filed the lender will not approve the deal and the lawyer cannot do a credible title search.

An interesting strategy in this crazy market!

Trying to Change the Closing Date

Your buyer is anxious to move up the closing. The lender says that they are ready, the buyer is ready, BUT: This is a short sale or a foreclosure!

What does that mean?

It means that the lender has to approve the HUD 48 hours prior to closing. It means having the HUD perfect. It means waiting for the title to arrive, via courier, to the attorney.

When The Wells Team works with a buyer or seller in this situation we become a second set of attorneys. We check on the status of financing, liens, paperwork from the selling institution, paperwork from the buyer's lender, review of bank addendums, inspections, appraisals, surveys and much more.

Bottom line: There are a lot of moving parts that go into a closing. Foreclosures and/or Short Sales make them that more complicated.

The Wells Team prides themselves on keeping up with their clients closing to the point that we also need law degrees!

When you buy or sell a property, especially a short sale or foreclosure, keep in constant contact with your real estate agent. Also realize that there a lot of moving parts to a closing. Trying to change the date can be done but only if everything comes together perfectly.

The key to a successful closing is keeping to a closing date, keeping in constant contact with your realtor, the closing attorney,and your lender.

A lot of work but well worth it at the end!

Do you really want a foreclosure?

We have been busy the last week with multiple buyers looking for the "deal"!

This group of buyers are looking in two upper end neighborhoods that include golf and boating.

We took these potential buyers into foreclosures, short sales, and traditional resales.

Here is what we found:

•Some clients want a home because it says foreclosure or short sale regardless
•Some of our clients looked at foreclosure homes with "resale criteria". They did not like the floor plan, color of paint, carpet, or overall condition
•Some of our clients looked at the foreclosures differently once they actually enter the home. The home looked a lot different than it did on the Internet


Here are some questions that we ask our clients:

•Are you ready to tackle a foreclosure in terms of time, sweat equity, and cash?
•Does it make more sense to pay a higher price for the "move in quality" resale or pay cash later for repairs and remodeling that you want to do on a foreclosure?
I bring up these points because we have some move in ready resales that are within $40,000 of some foreclosure property.

Last week we saw 30 year fixed rate mortgages at 4%. $40,000 more in the price of a home equates to approximately $190.96 per month.

Foreclosure or resale, a question worth pondering.

Barb and I have sold approximately 20 foreclosures and short sales. If we can help you please let us know.