Archive | October, 2009

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Strong September Home Sales Expected

Posted on 22 October 2009 by Carl Martens

With homebuyers rushing to complete their home purchase before the first time home buyer tax credit expires, a report Friday is expected to show strong September sales.

Home resales are expected to show an almost 5 percent increase to a seasonally adjusted annual rate of 5.35 million, up from 5.1 million in August, according to economists polled by Thomson Reuters. If the report meets forecasts it would be the best month for home sales in more than two years.

The National Association of Realtors’ report is scheduled for 10 a.m. EDT.

First time homebuyers and investors both are taking advantage of the low mortgage rates, short sales, foreclosures, and overall discounted homes.  The buyers are also eligible to take advantage of the tax credit of 10 percent of the sales price, up to $8,000 so long as the sale closes by November 30, 2009.

With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.

One potential roadblock, however, emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent.

At a hearing before a House subcommittee Thursday, J. Russell George, the Treasury Department’s inspector general for taxes, questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old, his office said.

While the program has widespread support in Congress, there are growing concerns about the costs. The cause, said Sen. Jack Reed, D-R.I., “is a worthy one.” But “I hope we can find ways to pay for it.”

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Defining Negative Equity

Posted on 15 October 2009 by Carl Martens

I found a great article on ajc.com titled, Does negative equity cause foreclosures? The article points out that it is zero money down, not subprime loans that led to the mortgage meltdown.

What I liked most about the article was its explanation of negative equity.

A huge percentage of all buyers have negative equity up front and don’t know it because they define “equity” as the market value of a home less its mortgage debt. If a sample home was bought for $500,000 and has a $455,000 mortgage (91 percent) then with such thinking it would appear that the owner has equity worth $45,000.

In theory this sounds about right but in reality it costs money to sell a home, say 8 percent for marketing costs and closing or $40,000 in this case, assuming the property can be re-sold for $500,000.

The mythical equity number shrinks even further when you look at real-life marketplace conditions. NAR says “the national median existing-home price for all housing types was $173,000 in May 2009, down 16.8 percent from a year earlier.”

Let’s try that equity calculation again: $500,000 less 16.8 percent = $416,000. $416,000 minus 8 percent = $382,720.

This is what we are seeing today.  The above is a simple example of how short sales and foreclosures come to be.  Of course, in a market like today when there are more sellers than buyers home values decrease which just makes the equation that much worse.

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Facing Foreclosure? A Short Sale Could Be the Solution.

Posted on 10 October 2009 by Carl Martens

The national mortgage crisis is affecting millions of Americans and more and more people are facing foreclosure, but a growing number of Americans are choosing to short-sale their homes to avoid foreclosure.

A short sale occurs when a lender agrees to allow a homeowner to sell the home for less than the mortgage owed on it. The lender either absorbs the difference or requires a borrower to pay it back in a lump sum judgment or payment plan.

This allows homeowners to walk away from their houses without going into foreclosure and seriously damaging their credit.

In 2007 there were 2.2 million new foreclosure filings in America, up nearly 80 percent compared with the previous year. The average foreclosure cost lenders $40,000, and the last thing banks and lenders want is more houses to sell.

For many, a short sale is now looking like the last best option. Though it still diminishes one’s credit rating, the short sale is often vastly preferable to other options.

Real Estate Contributor and “Wall Street Journal” reporter Wendy Bounds shared the details on what you need to know about short selling your home on “Good Morning America” today.

Prove inability to make payments

The first thing you need to do is prove to the lender that you can’t make payments at the adjustable level. That will require some filing of paper work, some documentation showing that your income has gone down.

Find a willing buyer

The second thing is to find a buyer who is willing to buy the home at a discount rate. To do that you have to get a knowledgeable real estate agent or attorney involved, maybe someone who specializes in short sales. That’s important because pricing is incredibly important in the search to find the right buyer.

Get lender to approve sale

Lastly, you need to get the lender to approve the sale once you do find a buyer. That’s why it’s important to work with the lender as much as possible. That’s going to make it that much easier for you in the long run.

If you can’t complete a short sale

If the homeowner isn’t able to complete a short sale, the next option is either foreclosure or handing over the deed to the bank in lieu of foreclosure. Those options are worse for your credit than a short sale — that’s why it’s so important to get the pricing right. Work closely with an agent who specializes in this kind of thing and work closely with your lender so you’ll know what to expect.

Your home is your most important asset

Your house is the most important asset that you will own. Be smart and get everything in line, realize when the situation is deteriorating, write a compelling letter to the lender. That way, you’ll be able to get people to pay some attention to you. Pay attention to your home and don’t be in denial about the reality of this market.

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10 Step Guide to Buying a Short Sale

Posted on 05 October 2009 by Carl Martens

Foreclosures have been relatively common over the past few years, however short sales are becoming increasingly more common and we wanted to put together this guide to help you with purchasing a short sale.

  1. Identify potential short-sales – The best way to do this is to link up with a Realtor that is a Certified Distressed Property Expert (CDPE), they will be able to help you locate pre-foreclosures in your area.  You’ll want to identify how much is owed on the home in relation to its approximate value.  Avoid those homes with a lot of equity in the home as the lender will likely prefer to foreclose and resell closer to the market price.
  2. View the property – Inspect the property and determine how much money it will cost to repair or renovate it.
  3. Do your research – What’s the property worth?  What do other similar homes in the surrounding area sell for?  You make your money when you purchase property, not when you sell it so this is a very key step.
  4. Find all liens and mortgages – Learn about possible liens on the property and which lender is the primary lien holder.
  5. Figure out the financing – You will want to be pre-approved and qualified for a loan prior to submitting an offer.  It might take long to hear back from the lender once an offer is submitted, but once approved the lender will want to move quickly…sometimes in as few as 20 days.
  6. Contact the lender – You will need the homeowner to complete and sign (notarized) an authorization letter, which gives the lender permission to discuss the mortgage situation with you.  Once you have this signed, you or your CDPE agent should speak with the loss mitigation department or the resource recovery department.
  7. Complete the lender’s short sale application – most lenders require that you fill out their corporate documents specific to a short sale.
  8. Assemble the proposal – The proposal consists of a package of materials including the application, authorization letter, the purchase and sale contract, a hardship letter, a statement of the property’s value, detail of the costs and liabilities, and a settlement statement.
  9. Negotiate – As with most real estate transactions, it is likely the lender will reject your offer and come back with a counteroffer.  Be ready to negotiate and determine what the maximum amount you’re willing to spend so that if you walk away from it you don’t regret it knowing that it was more than you were willing to spend.
  10. Seal the deal – Once all three parties have reached an agreement – you, the seller, and lender – then get everything officially recorded.  Setup a closing, get financing all under way, fulfill any special stipulations per the contract and close…the property is now yours!

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U.S. Treasury Coming Out With New Rules For Short Sales

Posted on 04 October 2009 by Carl Martens

The U.S. Treasury is expected to issue rules soon aimed at streamlining the short sale process.  The Treasury Dept. will offer subsidies, $1,000 to the mortgage servicer and $1,500 to home sellers to encourage short sales. The fees, he notes, are designed to incentivize the servicer for the extra work and get the seller to leave the house quickly and in good condition.

Of course, servicers and sellers aren’t the real reason short sales take so long and often fall apart. The problem lies with the lenders or mortgage investors who, justifiably, don’t want to take the kind of loss on the sale that is often necessary to sell a house in today’s market.

The number of bank-owned homes is shrinking and the majority of homes begin sold today are those that are in distress and homeowners are trying to get out from under a mountain of mortgage debt.  Moving forward short sales are likely to be a big factor in real estate for years to come.

Short sales were about 12% of all sales in August, versus 18% for bank-owned homes, according to the National Association of Realtors. But that ratio has changed since earlier this year. At their peak in March, bank-owned sales were 31% of the market vs. 18% for short sales. “We’ve gone through the subprime foreclosures,” says Thomas Popik, director of research at survey firm Campbell Communications. “The next wave is short sales by people who lost their jobs.”

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Pending Home Sales Rise for 7th Straight Month

Posted on 02 October 2009 by Carl Martens

atlanta-home-sales-risingPending home sales rose rose 6.4 percent from July to August, to the highest level in more than two years, the National Association of Realtors reported.

August marked the seventh straight month of increases in NAR’s pending home sales index.

There are lots of great deals out there! Find your dream home now, search Atlanta homes for sale.

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