I was attending our Legislative Meetings in Washington, D.C.this month. I had been contemplating a very beneficial idea for those end-users who want to purchase a foreclosure to be able to reside in the home.
There is a major dilemma, however, confronting those eligible first-time individual and family purchasers seeking grant money from local, state and federal programs. Who benefits the most from foreclosures, investors or end-users?
Currently it is the investor. Unfortunately, investors offer nothing to the community other than raising prices, after they fix and flip the home and put it back on the market to be resold once again, or adding one more available rental to the local market, thereby reducing the availability of homes for sale.
The end-user who wants to purchase will build roots in the community, growing and expanding their family, and connect, grow and increases their new friendships and long- term relationships.
But there are issues that have never been addressed when it comes to grant money for down payments and closing costs.
Most important is that the money doesn’t have to be paid back if the buyer lives in the home for at least 10 years or whatever the requirement is within that locality. There are also income limitations normally created for lower-income individuals and families.
Based on how foreclosures are handled, those first-time buyers eligible for grant money can be prevented from purchasing and becoming homeowners.
Unfortunately, foreclosures are winterized as the normal process, no matter what the time of the year or where they are located. Water, gas and electric are shut off to avoid any issues.
This is performed to prevent the further potential of broken pipes during the colder winter months or any other problems that might arise. I believe under normal circumstances, pipes have no issues, once winterized, but I cannot attest that this is what always occurs.
Even if there are issues, the real estate owned and controlled by the lender could fix whatever is wrong with the utilities after the foreclosure is finalized but prior to putting the home back on the market.
The current situation doesn’t allow first-time purchasers receiving grant money to provide offers, because an inspection cannot be performed on foreclosures due to the utilities being previously turned off.
More important, if they are eligible for grant money up to $50,000, it can only be approved with a full inspection including checking the functionality of the gas, electric and water services. To qualify, you cannot have owned a home for the past three years or currently own any investment properties.
My proposal would allow the buyer(s) to purchase and become homeowners. The buyer(s) would put up, let’s say $550 or whatever amount that would be required by the new law, to de-winterize the home so a full inspection could be performed.
However, broken pipes or dangerous situations would be the responsibility of the bank to repair, prior to winterizing. The next step would allow the grant money purchaser, who has put up the required money to have the home de-winterized, to have a full inspection done. The home would be winterized again the same day.
Even if the buyer decides not to go ahead with the sale, at least the home utilities are again shut off, preventing any possible damage.
Moreover, if there is other physical damage to the home, possible government assistance could be provided to those eligible purchasers, with a 302 FHA rehabilitation loan with a low interest rate that could be piggybacked with the conventional or FHA loan.
Having a program such as this would allow more individuals and families to secure homeownership and begin to build their future wealth.
Homeownership is the most valuable asset for most people and the No. 1 way that the majority grows their wealth over their lifetime.
Changing the foreclosure laws and assisting more people in leaving the lifelong treadmill of renting and reducing one’s wealth will allow more to become owners. They will put more money back into our economy than tenants do by being proactive in maintaining their homes that will require the expenditure of money over the long run.
One’s standard of living will increase with homeownership. I believe this will also benefit whatever is left of our middle class to hopefully enhance and increase that segment of our population. This will further grow our economy as the middle class represents 70% of our economy, which is made up of consumer spending.
The government will benefit by receiving more taxes by having more homeowners who tend to put more money back into our economy than renters.
Having legislators change and update our foreclosure laws will greatly benefit all parties and will assuredly be a win/win situation not only for the consumer but for our government.
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