Word for the Day ... Frustration!

I know, I know, I know ... optimism is the key word in real estate. The market is always great to buy and sell real estate; but, when dealing with banks on short sales, frustration is what happens.

The largest problem every real estate agent encounters in their day to day business is the lack of control we have over all the factors and people involved in a transaction. If it's a local escrow company or mortgage company that you work with on a regular basis and you know they do their job ... and they occasionally mess up, you can yell and scream and remind them of how much work you send their way, and they'll promise to never do it again and everyone's happy. (Or at least you're happier that you were allowed to vent your frustration.)

Now comes the wonderful world of short sales and, when we thought we had a least a little control, we now have none, zip, zilch, nada. I've had short sales in contract for six months or more, and still no decisions from the underlying lenders. They have so many people and systems in the loop, I've lost track. First you submit it, it gets logged in and you wait for it to be assigned to a negotiator. That can take weeks. Then you finally get your negotiator and they have to have you update all the paperwork because by now everything is months old. So you do all that and, should they forget to mention one item they need or you didn't quite fill something out correctly ... do they call you to tell you? NO! You call them weekly to start, (it becomes daily toward the end) leave a message and wait for a return call. Or you e-mail them weekly to start and get a reply? Not very often. And, when you finally get in touch it's, oh, so sorry, we need another bank statement or hardship letter or HUD statement. Aaarrrrggggghhhh.

Now you finally get a "preliminary" approval ... if your Seller will pay a little money or if your Buyer will raise the price, etc., etc. because another agent or appraiser went out and gave them a Broker Price Opinion or appraisal that doesn't match the numbers. So, it's back to the Buyers and Sellers to see if we can meet their requirements ... more addendums to a contract that is probably so out of date now it's growing whiskers. And, now that you return the addendums to the bank, you get to stand in line again so the "Investor" can review the contract and decide if it's up to their standards.

And, what about the Buyers who have been hanging in there prior to the April 30th deadline to close by June 30th so they can get their tax credit? If you don't have Final Approval from the bank by now and already ordered an appraisal, they are no doubt out of luck. Unless, by some miracle, congress decides to take pity on the poor home buyers who are stuck in this goo and extend the closing deadline.

My heart bleeds for the Buyers and Sellers stuck in this mess. It seems to me, if the banks would streamline their approval process and make decisions sooner, maybe they wouldn't be so backed up that they can't get on top of their paperwork. Just an opinion from a lowly old Real Estate Broker that's been around a long, long, long, long time.

First Quarter Numbers Are Published!

And I do believe we've bounced, finally! The NWMLS reported on April 5, 2010, that the Member Brokers have reported a 51% jump in pending home sales over the same month a year ago. While entry-level home sales have been driving the market, March showed that 91 residences in the NWMLS area sold for $1 million or more; compared to only 40 homes in this price range for the same period last year.

NWMLS Brokers also reported a year-over-year increase in the number of new listings added to the inventory, up 26.7% over a year ago. However, even though listings are up, so are sales, which takes DOWN the inventory approximately 2.8% from a year ago. That's good news for Sellers.

Closed sales also outpaced year-ago totals by a wide margin, a 47% increase over last year. And, even with sales being up, prices are still down somewhat, about 2% system side; however, prices have increased 1.8% since January of 2010.

Home Buyers are still experiencing some frustration, however, in actually getting offers accepted. Homes that are priced well (basically short sales and banked owned real estate) frequently have more than one Buyer interested and therefore the best offer wins. And, we are still experiencing long waiting periods for Bank Approvals on shorts sales, too. Buyers are still reluctant to offer over list price to make the deals work. And, with the Home Buyer incentive going away at the end of this month, sales may take a small dip.

If you'd still like to take advantage of the Home Buyer Tax Credit, you only have until April 30, 2010, to have a signed around accepted contract. You still have until June 30, 2010, to get it closed, but the window of opportunity is closing fast. Please call us if you'd like more information or assistance with a purchase or putting your home on the market.

Statistics for this article taken from NWMLS News Release of April 5, 2010.

Short Sales ... the good, the bad and the ugly

Face it folks ... we're in the short sale market and there's little we can do about it except live with it. So, here's a short sale primer for Buyers and Sellers.

THE GOOD: For Sellers it's a chance to get out from under crushing payments on a house that is worth less than you owe on it and to move on with your lives. For Buyers it's a chance to make a good deal on a house and quit paying rent. Also, you may get $8,000 or $6,500 credit on your taxes provided you can close on this house before June 30, 2010.

THE BAD: For Sellers, you are going to be out of a house and out of the house purchasing market for a while because your credit is going to take a hit. For Buyers, it takes patience ... lots of patience. There may be several offers on this house and Banks reserve the right to look at all offers (in most instances) and yours may not be the offer accepted. This you may not find out until months down the road, precious time that is wasted on waiting for a bank to make up its collective mind.

THE UGLY: For Sellers it's all the time wasted trying to work with a bank to get this accomplished, and then they make unrealistic requirements on closing the deal. And, you may end up having to sign a note to the bank for unpaid debt or the bank may decide to go after you in court for the deficiency amount. For Buyers it's the not knowing IF and WHEN you may get this house, whether or not your Lender's appraisal agrees with the underlying lender's appraisal (which throws you back into negotiations) and the fear of not closing in time to get your tax credit.

Just a few of the ramifications I've run into recently. As always, get a professional's advice before proceeding with any type of sale on your property and I can't stress enough that, should you decide to short sale your property or buy a short sale property, get an Agent who is knowledgeable and experienced with them. Then, let the games begin.

As always, please call us if we can ever help with your real estate needs.

LOAN MODIFICATION OR SHORT SALE ... What's best for me?

And, as in most things and as I tell my children ... it Depends! What is your ultimate goal?

IF you are finding yourself in financial straits and feel the need to tighten your expenditures, these are something to consider. It is now no longer necessary for you to be behind in your mortgage payments to get some assistance, but it does depend on your long term goals. The fact of the matter is, if you purchased a home within the last 8-10 years with a minimum down loan, you are probably upside down in equity position. (Anyone who purchased a new car knows that feeling.) The good news is ... you're not alone. A huge segment of the population in general are in the same boat (or house as the case may be). So what to do?

Loan Modification IF you plan to remain in your house for the next 8-10 years or more, have no desire to move up or out and just wish to keep a roof over your head, this may be for you. And, you don't need professional assistance to get it done. Just make the phone call and the packet of information will arrive on your doorstep. But, warning, depending on your Loan Servicer, it takes patience. It may happen quickly or take months, but it does involve lots of paperwork and proving that you need help. And the end result may not be to your satisfaction either. Be aware that Lenders are not reducing the amount of the debt you owe; so, when you're finished with the process, you still owe as much on the house as your did originally and you're still upside down when it comes to equity position. What Lenders are doing is reducing the interest rate on your loan to lower your payments or extending your loan over a greater length of time. So, when it comes time to finally sell that house, you may still be in a short sale situation and/or have to come to the closing table with money to make it work.

Short Sale IF you have the need, desire or situation that requires that you sell the property, then the short sale is your answer. With this you'll need professional assistance from a knowledgeable Real Estate Agent, Lawyer and/or accountant to help you. Here you'll need to list your home for the current market value, find a patient qualified Buyer and trust your professional to assist you through the maize of paperwork required to complete the transaction. Again, this may surprise us all and only take a month to get approval, but experience has shown us it will probably take up to 6 months and often more. And, there's never any guarantee that your Lender will approve the short sale. One more caution, a short sale WILL effect your credit score negatively, so keep that in mind when making your decision.

As in all things relating to contracts, seek professional assistance to protect your rights. Please don't hesitate to call us if we can ever be of assistance.

Loan Modifications ... Your Bank May Come to You

It appears some banks may start becoming more human and humane. In an effort to stem the tide of vacant homes and struggling homeowners, a few of the banks are stepping forward to try to pre-empt the mortgage meltdown. We are seeing Asset Management Companies (companies hired by banks to manage their "at risk" mortgages and homes) hire Real Estate Agents to try to get in touch with their Borrowers. There's a whole new side of the Real Estate Business out there where agents are actually trying to assist people to stay in their homes.

Orders are sent out from these Asset Management Companies to real estate agents to get in touch with the Borrowers who have missed payments or are at risk of losing their homes. Agents are being a friendly face from the banks to give advice to Homeowners on what their options are and to deliver Loan Modification Applications, pick up and return the paperwork to the banks, or counsel and educate Homeowners on Modifications, Short Sales, Deed in Lieus and Foreclosures.

So, the next time you see a Real Estate Agent at your door, they may not be there to try to get you to list your property so they can make a sale and commission. They may be sent by your bank to help you stay in your home. Please welcome them in see if we can't work together to fix this current real estate market one house at a time.

THE SHORT SALE SAGA(S) … it’s a whole new world out there!

I’ve been handling short sales for years in this business, but never have they been more prevalent than in this market. Every listing I have now is currently scheduled for a short sale; and, with all my years in the business, I’m learning something new every day.

One short sale required a book of paperwork, both from the Seller and from me, was delivered to the Lender a couple months ago and requires “60 days for review”; and you can bet they’re not going to make a decision until the 60th day … one day away from the auction, I might add. So, Buyer is in limbo until a decision is made.

Another short sale required a purchase and sale agreement, an authorization letter and a HUD 1 Statement. That’s it! They ordered an interior Broker’s Price Opinion the next day and we received approval within 5 days! And, they’ve even offered to RAISE the commission and PAY the Seller $2,500.00 if we can meet a closing deadline. Needless to say, both agents and Seller are very cooperative to get this one done.

Third property listed just the other day and authorization letter sent off to two Lenders the next day. Two days later, received a phone call from first Lender representative wanting to “chat” with me about how it’s going and to “keep active in the process”. (NOTE: Most lenders don’t want to talk to you until you have a valid purchase and sale agreement.) This Lender even suggested a $5,000 price drop and “has worked with second Lender frequently and will work out the arrangements with second when offer received”. (NOTE: Usually it’s the agents working their little hearts out to get first and second Lender to cooperate.)

Long story short … everything in the Mortgage Market is in flux. Some have realized they are going to take a hit and just want to make it less painful. Others seem to want to drag out the misery as long as possible. As an agent working short sales … flexibility is the key.

Is There Any Good News in the Housing Market?

As a matter of fact, there is! The Economic Recovery has been painful, but there are signs that we may, actually, be recovering. It's still a long road to the top, but it's my opinion we've started to climb.

The stock market is looking better, even with the GM Bankruptcy problem. The April Pending Homes Sales showed a 3.2% improvement over a year ago, now up to 6.7%. Mortgage rates are starting to creep up to over 5% ... but give me a break! I remember when mortgage rates at 8% were considered a great deal, and that wasn't very long ago; and it was just a year ago when we were looking at 6.09%. Some other statistics show April Personal Income was up with wages and salaries inceasing for the first time in 8 months; however, consumers are still holding tight to their money, but that isn't necessarily a bad thing. Everyone needs to know they can hold enough in reserve to pay the bills for next month.

In my opinion, this is a great time to buy real estate. For investors, it's the first time in a long time where they can put minimum down and still make their investments cash flow. For first time homebuyers, they can be assured of an $8,000 tax credit provided they close before November 30th. (Note: "First time" means they haven't owned or bought a primary residence within the last 3 years.) And prices are really, really low. Find yourself some short sales and suffer the waiting period ... it's worth it in the long run because banks are now looking at taking offers on what the current market value is worth, not what is owed on the property. I even spoke to a lender yesterday that wasn't requiring a big "short sale packet" that includes mounds of paperwork showing why the Seller can't afford the house any more; but were willing to look at just an offer to purchase, a net proceeds statement and current market analysis. Yea! What a boon!

So, if you've been fence sitting waiting for the bottom to arrive, time to leap off that fence and into the market. There may never be another one like it for years to come!

ARE WE THERE YET?

This real estate market reminds me of those road trips we took as a family when the children were young ... always impatient and asking, "Are we there yet?" That's the question on all agents' and clients' minds ... have we hit the bottom of the market and when do we start up again?

And the best answer is ... maybe. After every downturn there is an upturn and we're more than ready for that. According to the most recent numbers, the median sales price increased nationwide in March for the second month in a row, the biggest monthly jump since June 2005. The months' supply edged up to 9.8 from 9.7 but the raw inventory actually declined for all types of homes. The Federal Housing Finance Agency also reported that home prices rose 0.7% in February, the second month in a row that prices rose putting them up 1.7% for the last two months. Again, the biggest gain since 2005. And, March New Home Sales came in at 356,000 annual rate, a small decline from February but better than expected. And, according to the same source, inventory levels continue falling, down to 46.0% from their mid-2006 peak and at the lowest level since 2002.

So, what do the numbers mean? It shows, in my opinion, that we're "bouncing along the bottom" of this housing market and I believe we're looking toward a slow recovery starting this summer. Short Sales and REO sales are now dominating the market but there are still real "Sellers" out there that need to move and have some equity positions so they can sell without having to negotiate with the bank.

As for Buyers who've been waiting for the best deals ... they are out there NOW. My serious suggestion is to get off the fence and get in the game. Interest rates may never be lower and housing prices are unbelievable. Gentlemen and Ladies ... start your engines!

WHAT'S THE DIFFERENCE?

Foreclosure, Deed in Lieu, Short Sale ... what's the difference and what's the impact on your life and credit score?

Foreclosure is where an owner's right to their property is legally terminated, usually because of default in loan payments. Property is purchased back by the bank at a public auction held on the courthouse steps (or a sheriff's sale in some cases). The bank will usually start the bidding at the auction at the amount currently owed on the property in most cases and anyone who bids over that amount may then purchase the property. They must have financing in place and put up a security deposit and close within a specified period of time. Most states will then zero out any deficiency balance owed by the owner. A Foreclosure is usually the most devastating on a person's credit record and will negatively impact it as much as 280 points plus it will remain on the record for a longer period of time thereby crippling a person's chances of buying anything in the near future.

Deed in Lieu is where an owner can avoid the foreclosure by voluntarily surrendering their property back to the bank by signing over the deed for satisfaction of the debt. This allows the bank to take possession sooner than is possible through a foreclosure action and saves the bank the foreclosure costs. We've seen many cases of this recently where owners simply put their keys in the mailboxes and walk away; however, they must legally do this by signing off the deed and going through a paperwork process. This has less impact on the credit rating but will still cause some negative results.

Short Sale is where the owner is able to sell the home prior to the foreclosure action at an amount of money that is less than owed. There must be a negotiation with the lien holder(s) to agree to take a payoff which is less than owed and must be completed prior to the auction date on the property. Lenders, especially in this market, seem to be more agreeable to accepting a Short Sale as property values have decreased throughout the country and frequently the property is certainly worth less than owed. Snagging a Buyer that is willing to pay over value on the property at a foreclosure auction is not a frequent occurrance, so it is in the best interests of the Lender to negotiate rather than incur the foreclosure expenses. Again, this will have a negative impact on a person's credit rating but not as bad as the formal forclosure. Many real estate agents and escrow companies are well versed in how to proceed with a short sale and are willing to help as Lenders will always agree to include a commission as part of the process.

If you'd like more information on these topics, please don't hesitate to call or e-mail us.

Tax Relief on Short Sales and Foreclosures

For the Homeowners who are experiencing a "Short Sale" or Foreclosure proceedure where the proceeds from the sale are less than the amount owed, here's some tax relief benefits for you. In the past, the forgiven debt (the amount owed on the property less the amount for which the property was purchased) had to be treated as taxable income on your tax return. But, now through 2012, that forgiven debt will NOT be taxed as income. There is a limit of up to $2 Million of forgiven debt on a principal residence. You do not have to put the amount on your tax form, even if you receive an IRS Form 1099 from the Lender.

Tax credits are actually some of the best form of tax relief for they are direct dollar-for-dollar reduction of your tax liability. And, for first-time homebuyers taking advantage of the $8,000 tax credit for purchasing (see previous blog), if the credit is larger than your tax liability, you will receive a refund! As always, check with your tax professional for further information.