RTC Foreclosure Properties Not All Bargains Under Current Rules
QUESTION: I have read much in the newspaper about the foreclosure listings of the Resolution Trust Corp.
But I have been unable to find out the details because our local library does not have the books that contain their listings. Please let me know how I can find out about their listings. Do you think these are bargain properties?
ANSWER: You can purchase the inventory books of RTC listings by calling (800) 431-0600. The land book costs $10, the commercial property book is $10, the single-family house book is $15, and the multifamily apartment book is $15. RTC will accept your Visa or MasterCard.
But don’t get too excited. By law, RTC is required to sell its foreclosed properties for at least 95% of appraised market value.
However, if a property doesn’t sell within six months, RTC will reappraise it. RTC properties are offered “as is,” without disclosure of defects. Yet RTC demands full market value for their properties.
To make matters worse, RTC wants a 25% down payment, will only finance 75% of the sales price, and allows no contingencies, such as for a professional structural inspection.
RTC, which has regional offices in Atlanta, Kansas City, Denver and Dallas, promises to reply to purchase offers within 30 days. Most sellers accept or reject offers much quicker.
Many RTC properties are listed with local real estate brokers who can show them to you. But frankly, I doubt that you will find many bargains at the RTC until the RTC bureaucrats become more aggressive by offering better prices and competitive, attractive financing.
How to Sell Home, Buy Rentals Without Tax
Q: Please tell me how I can sell my house, in which I have a large profit, and then acquire an apartment building where I will live in the manager’s apartment. My tax adviser says it can’t be done, but you seem to help everyone else, so I hope you can help me.
A: That’s easy. To make a tax-deferred IRC 1031 exchange, both “like kind” properties must be held for investment or use in a trade or business. Since your personal residence doesn’t qualify, you can make it qualify by moving out and renting it to tenants.
Although the tax law doesn’t require any minimum rental period, most tax advisers recommend at least six to 12 months before making the tax-deferred exchange for a larger “like kind” property. Please consult your tax adviser for details.
Quitclaim Deeds May Ease Sale by Four
Q: Four of us own a property that we agreed to sell. The inexperienced lawyer handling the closing says we will have to have the deed sent to all four owners, who live in distant cities, for their notarized signatures. Is there some quicker and easier way?
A: Yes. Each co-owner can execute a quitclaim deed. Each quitclaim deed need only be signed by one owner and notarized. There will be four pieces of paper, but it should be much quicker than mailing one deed around the country to get signatures of the four owners.
FHA No Longer Makes Loans to Investors
Q: Several years ago, I obtained a very desirable FHA mortgage when I bought a four-plex. Now I want to buy another nearby four-plex. When I went back to the same lender, he said FHA no longer makes loans to investors. Please tell me this isn’t true.
A: The bad news is true. FHA has discontinued making mortgage loans to investors. Unfortunately, FHA losses on loans to investors have been much higher than on FHA home loans to owner-occupants.
Unfortunately, a few investors who defaulted have caused all investors to lose the opportunity to borrow on attractive FHA loan terms. However, you can still assume existing, older FHA and VA assumable mortgages, even if you will not be occupying the property.
Fixer-Upper Houses Are the Best Buys Q: I an puzzled about the stagnant market for homes in our town today. As a part-time real estate agent (yes, I know what you think about part-timers), I have been trying to figure out whether my husband and I should by a fixer-upper house and work on its renovation while we live in it, or do you think we should forget about making money on a house and buy one that is already in good shape?
A: Due to many economic factors, such as rising mortgage interest rates, the market value of homes in most towns is not appreciating rapidly. The result is the best way to make a profit from home ownership is to buy a fixer-upper house to renovate and force its value up by adding value. In my opinion, the best bargains are the fixer-upper houses because people are willing to pay the price for them.
Why a Direct Trade Usually Not Successful
Q: I am having difficulty making a tax-deferred exchange of my six-unit apartment building, in which I have about $100,000 equity, for a larger building. Every time I make a written exchange offer, the seller of the larger building I want to acquire rejects it and doesn’t even make a counteroffer. Any ideas?
A: I encountered the same problem when I tried to do my first tax-deferred exchange of trading my triplex for a larger apartment building. Then I met a sharp realtor, who told me the key to exchange success is to first find a cash buyer for my triplex.
Once a buyer was found, it was easy to trade my small property for a larger apartment building, but subject to its cash-out sale, immediately after my tax-defered trade up was completed. The same formula will probably work for you, too.
Questions and comments may be sent to the Real Estate Editor, Los Angeles Times, Times Mirror Square, Los Angeles 90053.