The housing market crash resulted in a surge in foreclosures and bank owned properties, especially in the Miami market. Foreclosures and REO properties are typically considered distressed properties because of deferred maintenance. If you're thinking of buying one of these properties, you should know that these distressed properties will likely need some work, and will seldom be move in ready. Homeowners in foreclosure often neglect essential upkeep, or worse, may even vandalize/strip their properties down vhen they learn that the bank is coming in to take over.
According to RealtyTrac, about twenty-five percent of all residential sales for the fourth quarter of 2010 were either REO (real estate owned) or short sales. On average, these homes sold for roughly forty percent less than comparable (non-distressed) homes. The undesirable conditions of these properties make most buyers walk. Given the current depressed economic climate, most homeowners are not eager or able to complete high-end remodeling projects. However, through an energy efficient mortgage (EEM; aka energy improvement mortgage) program, remodeling and renovating can be very affordable, requiring minimal, if any, out of pocket costs. And with the help of an energy efficient mortgage, these distressed properties can be transformed into ideal green homes.
Distressed properties may require simple sustainable projects, like replacing older features or upgrading basic systems to take advantage of energy efficient improvements, or more involved projects such as complete kitchen renovation. Maybe the place needs a new roof, new flooring, or has an electric system that is not up to code. EEMs allow the homebuyer to obtain financing to purchase a house in need of such repairs or modernizations, and incorporate the additional funds needed for the rehabilitation into the mortgage. EEMs allow for renovations and sustainable improvements up to $45,000, which, when rolled into the mortgage would result in a payment increase in the ballpark of $270.* That's much easier to swing than fronting $45K!!! This program is perfect for those who are first time home buyers, or for those with limited cash for a down payment/closing costs/renovation expenses.
So, if you want to get a great deal on a house but don't have the money that may be needed to renovate a foreclosed/REO property, think twice before you pass on buying a distressed property. An EEM may be just the solution for you!
*based on a 6% interest rate, 30 year amortization schedule
Certified in Energy Improvement Mortgages
FHA 203k
Specializing in distressed properties offering borrowers an opportunity rehabilitate the cost of energy-efficient "green" improvements.