Mar. 30, 2009 - Making an Offer on a Short Sale |
Making an Offer on a Short Sale?
Before you make an offer, it pays to know a little about the seller's situation.
To avoid a foreclosure, some homeowners try to sell the property for less than the amount that is owed the mortgage company.
You're a good candidate for a short-sale purchase if:
You're very patient. It could take two, three or even four months to get a short sale approved and ready to close. (If you need to move in by a certain date, a short sale may not be for you.)
Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set.
You don’t have any contingencies. Lenders like clean contracts or no-contingency. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.
Your Flexible. In exchange for approving a short sale, the lender may want to change the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
If you have the time, patience, and personally to see it through, a short sale can be a win-win for you and the sellers.
Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA. |
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Feb. 22, 2009 - The Home-Staging Cheat Sheet |
Below you will find a reprint of an article that ran in the National Association of Realtors, Realtor magazine in July, 2008 that is worth taking a look at.
The Home-Staging Cheat Sheet
6 easy ways to make your property more appealing to buyers
Faced with a massive glut of unsold homes, many would-be sellers are struggling to make their properties stand out in today's downtrodden real estate market. But while the economic head winds are beyond property owners' control, author Barb Schwarz says they can dramatically improve their chances of making a sale by devoting attention to an often-overlooked corner of real estate marketing: home staging.
Schwarz, the CEO of StagedHomes.com, was a pioneer in home staging back in the early 1970s and has used the techniques to sell properties ever since. "The goal [of home staging] is for the buyer to mentally move in," Schwarz says. "If they cannot mentally feel and see themselves living here, you've lost them." Schwarz offers six simple tips to help home sellers better position themselves in a sluggish market.
Get them inside. The first thing a prospective buyer notices about a home is not the living room but the front yard. "A lot of people think staging is the inside only," Schwarz says. "[But] we've got to stage the outside to get them inside." So cut the grass, trim the hedges, rake those leaves, sweep the sidewalks, and power-wash the driveway. And make sure you don't have too many potted plants scattered around the property. "Nothing dead," Schwarz says. "You'd be amazed how many people have dead plants in their yards."
Pretend you're camping. Schwarz says a cluttered room will appear too small to buyers. "Clutter eats equity," she says. Schwarz tells homeowners to go through each room of the house and divide their belongings into two piles: "keep" and "give up." Items in the "keep" pile will be used to stage the room, while those in the "give up" pile should be stored elsewhere. "Pretend you are camping," she says. "When you go camping, you are not taking all those books, right?"
The decluttered rooms may appear bare to the seller, but the buyer won't think so. "We are not selling your things.... We are selling the space," Schwarz says. "And buyers cannot visualize when there is too much [stuff] in the room." Decluttering a home's outdoor spaces is important, too, she says.
Balance hard and soft surfaces. When staging a particular room, it's essential to have a good balance of hard surfaces, such as a coffee-table top, and soft surfaces, like a carpet, Schwarz says. For example, a room with a cushy, 7-foot-long sofa, a love seat, and four La-Z-Boy recliners has too many soft surfaces and not enough hard surfaces. "The room is sinking," she says. "It's all too heavy." Instead, consider getting rid of the La-Z-Boys and the love seat, replacing them with two wingback chairs. "If you have hardwood floors but no rugs, it's too hard," Schwarz says. "So you want to add a rug."
Work in ones or threes. Schwarz recommends arranging items on top of hard surfaces in ones or threes.
You would place three items—say, a lamp, a plant, and a book—on top of a larger hard surface, like an end table. "You take away the plant and the book, it's too bare," she says. "[But if] you put 10 things on it, it's overdone." The three items should be closely grouped together in a triangle shape. "I draw a triangle for my clients," Schwarz says. "I say, 'Here is the end table—let's superimpose a triangle on top of it.' " For hard surfaces with less area, however, a single item will do.
Decide from the doorway. Since would-be buyers will get their first impression of each room from the doorway, homeowners should use that perspective to judge their staging work. "Do your work, go back to the doorway. Do some more, go back to the doorway," Schwarz says. That way, you'll be better able to ensure that each room appeals to buyers.
Make your place "Q-Tip clean." A properly staged home should be immaculate—"Q-Tip clean," as Schwarz puts it. "I mean Q-Tips getting dead flies out of your windowsill [and] going around the bottom of your toilet on the floor," she says. The purpose of ensuring the house is spotless is more than simply making it presentable. If a home is unkempt, a buyer will wonder what other, less visible problems may come with the property, Schwarz says. "They'll say, 'Gosh, if they live like this, what don't they take care of that I can't see?'"
Posted July 3, 2008 |
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Feb. 20, 2009 - Credit And Buying A Home |
CREDIT
Your Credit Report
What does your personal credit report say about you? When applying for a home loan, the last thing you need are surprises. That’s why anyone who is considering buying a home should obtain, and if necessary, correct, their personal credit report.
Understandably, a mortgage lender wants to know your track record of paying your debts. To find out, the loan officer will order a mortgage credit report from a bureau that collects information from retailers, banks, finance companies, mortgage lenders and other public sources on all consumers who use any type of credit.
You have the right to inspect a summary of your credit report, challenge any inaccuracies and request that the credit agencies make corrections.
You can purchase a special consumer version of your report by contacting one of the major credit bureaus covering your area.
Upon receiving your credit report, carefully review the explanation of codes used to rate your payment history for each account and scrutinize each entry. Credit bureaus, which handle millions of consumer records, are notorious for including erroneous information. The good news is they are required by law to promptly substantiate or correct any discrepancies.
If you discover any errors in your report, immediately follow the bureau’s procedures to correct them. If your credit report still has a negative tone or contains a series of late payments that may have occurred due to extenuating circumstances, you have the right to submit an explanatory statement that can be made part of your permanent record.
It is important that prospective lenders know that you care about your credit history.
Credit requirements can vary from lender to lender and loan program to loan program. I will not attempt to describe each and every scenario but explain general credit requirements found in most underwriting guidelines.
Lenders view credit as the willingness and ability to repay a debt. It does not mean having every credit card imaginable and keeping up with the monthly payments. It does not mean one cannot obtain credit without first having it. It means that if one has an obligation (car payment, credit card, rent, utilities), one pays it when due and has the means to do so.
Credit is one of several factors lenders use when determining how much of a loan to issue. Are you a good risk or a bad risk? What’s the difference between good and bad?
Good credit means paying on time over a period of time. If you just got a credit card at a department store and charged a pair of socks and paid them off the minute you got your first bill then that’s good … but it’s not all the lender wants to see. A lender needs a track record of your ability and willingness.
One month, or six months for that matter, is not enough to convince a lender that you have both qualities of ability and willingness. In fact, for most major lenders one to two years is a good evaluation period. So relax and take it easy. Do not force the issue. Remember, the lender is thinking about accepting your promise to pay them back once a month, every month, for the next thirty years!
Willingness means you have accepted the responsibility of paying back your obligation and you do it on time, every time. Ability means you have the money to do so. That’s why people who have LOTS of credit cards sometimes can’t get a mortgage because too much of their money already goes to credit cards or automobiles (even though they’ve always paid on time). Remember that ability to pay is just as important as willingness.
Bad credit means at one time or another the individual has experienced repeated late payments, charge-offs, collection accounts, liens, foreclosure or bankruptcy, but that doesn’t necessarily mean you can’t get a mortgage. There are lenders who will loan on properties based more on the value of the home and the amount of down payment and interest rate. Lenders who issue these mortgages are sometimes called ‘equity’ lenders or ‘hard money’ lenders.
Bankruptcy. A Chapter 7 means that your debts were wiped clean and fully discharged. You don’t owe anyone anymore. This stays on your credit report up to 10 years. BUT that doesn’t mean you have to wait that long to get a mortgage. Contrary to popular belief, some lenders will loan to people who have had a bankruptcy with as short a period as ONE year ago. Yes, that’s right, one. And these aren’t hard money loans either.
Don’t file a bankruptcy because you exhausted your savings and maxed out your credit cards to go to the Bahamas. A lender will want to know why you filed for bankruptcy. Illness in the family? Loss of job? Divorce? Be prepared to explain your filing and document your case. Show medical bills. Tax Returns. Death certificates. If you can provide a good explanation as to why you were forced to file, you can get a mortgage. Before you file any type of bankruptcy, get legal advice!
Another type of bankruptcy filing is Chapter 13, sometimes called the “wage earners” plan. In this filing, all your bills are lumped together (by the court) and you make arrangements to pay everyone back on a monthly basis per court order usually through payroll deductions or other mandatory repayment programs. This plan shows a good faith attempt to repay your creditors instead of discharging them completely. However, a lender may still want to see the Chapter 13 fully discharged (all parties paid in full) before issuing a mortgage. In this instance your repayment period can last two, three or more years and you may have to wait one more year before getting a good mortgage.
Most secondary markets require credit to be established after a bankruptcy. Get a secured credit card. Go to your bank, credit union, or wherever and ask for a secured card. You will be asked to place a certain amount of money in a pledged savings account to act as collateral for credit issuance. For example, if you want a $500 limit credit card the lender may ask for $600 security deposit, sometimes less depending on your and your lender’s status. You can charge on the card just like any other and make payments like any other
If you have a bankruptcy, run, don’t walk, to your local lender who offers secured cards. This is an easy way to reestablish credit. And again be patient. The most recent year or two before applying for a mortgage is what the lender will review with more scrutiny than the previous five or ten.
What about LATE PAYMENTS? A few late payments over the past couple of years shouldn’t stop you but be prepared to explain them. Lost in the mail, out of town, abducted by aliens, whatever, just make sure it’s what really happened. Again late payments won’t stop you from getting a mortgage just be prepared to have a darned good excuse or compensate in other risk areas (more down, etc.). Late payments on a previous mortgage may also be more harmful than late payments on a car loan.
Lenders will swallow lates a little easier if they happened around the same period of time. Like the winter you were laid off or when you were sick and couldn’t work. You could then show you had the willingness but not the ability because you were unable to bring home enough money to pay off your monthly obligations. But then you got well, went back to work and made everything smooth again.
What about a collection account? If it’s yours, pay it off. If you dispute it, get it settled now.
Joe Drescher and RE/MAX Crossroads are not engaged in rendering anything other than real estate sales services. If legal advice or expert tax assistance is required, the services of a competent professional should be sought. |
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Feb. 19, 2009 - What is a Short Sale? |
What is a Short Sale?
A short sale happens when the lender is shorted on a mortgage, meaning the lender accepts less than the total amount that is due. If your mortgage payoff is $150,000, but your home is worth, say, $125,000, you are $25,000 short, not including costs to close the sale such as real estate commissions, recording fees or title and escrow charges.
Sometimes, to avoid going through the costs of foreclosure, a lender will sanction a short sale by letting a buyer purchase the home for less than the mortgage balance.
Here are sample steps of a short sale:
Seller signs a listing agreement with a real estate agent subject to selling as a short sale with third-party approval.
The agent finds a buyer who makes an offer for less than the amount of the mortgage.
Seller accepts the buyer's purchase offer.
Seller's lender accepts the buyer's purchase offer.
Transaction closes when the buyer delivers the funds, the lender releases the lien and the seller delivers the deed.
Typical Qualifications for a Short Sale
Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale.
The Home's Market Value Has Dropped.
Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender
The Mortgage is in or Near Default Status.
It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.
The Seller Has Fallen on Hard Times.
The seller must submit a letter of hardship that explains why the seller cannot pay the difference due upon sale, including why the seller has or will stop making the monthly payments.
A few examples that do NOT constitute a hardship are:
Bad purchase decisions. Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.
Unhappy with the neighbors. Even if every home on your block has turned into pot growing houses, that will not qualify as a hardship.
Buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family.
Pregnancy. Increasing the size of your family or starting a family is not considered a hardship.
Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.
Examples of hardship are:
Unemployment
Divorce
Medical emergency / sudden illness
Bankruptcy
Death
The Seller Has No Assets
The lender will probably want to see a copy of the seller's tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall.
For example, if the seller has cash in a savings account, owns other real estate, stocks, bonds or even IRA accounts, the lender may determine that the seller has assets.
Every Lender Has Their Own Requirements
Short Sale Consequences
A short sale is dependent on a buyer making an offer to purchase. If you do not receive an offer, you will not qualify for a short sale. Therefore, even if you meet all the other criteria, it is possible that no one will buy the short sale. It is also dependent on the lender accepting the buyer's offer. If the lender rejects the offer, a short sale will not take place.
Tax Consequences
If the lender agrees to the short sale, the lender may possess the right to issue you a 1099 for the shorted difference, due to a provision in the IRS code about debt forgiveness. You should speak to a real estate lawyer and a tax accountant to better understand the latest changes and to determine if there will be any short sale tax consequences.
Blemished Credit Report
A short sale may show up on your credit report. Short sales may affect credit ratings. While the damage to your credit report may not seem as significantly bad as a foreclosure to you, creditors may not make the distinction.
Always seek legal counsel before attempting to pursue a short sale.
A real estate agent cannot give you legal advice.
Be Prepare for Lender Demands
A lender may not agree to a short sale unless the seller has no equity and is unable to repay the difference between your sales price and the existing loans. Sellers need to provide a hardship letter to the lender. Sellers may also owe taxes on the amount of debt that is forgiven.
Remember, in a short sale, the seller receives no money because the lender is losing money.
Purchase & Sale Agreement to Lender
Once the seller has accepted your offer, send it to the lender for approval. You do not have a deal until the lender accepts. Also, send the lender a copy of your earnest money deposit. Do not be astonished if the lender asks you to increase it.
In addition, the lender will want to see that you have your own loan available and you are preapproved. Send a preapproval letter to the lender. It will help if your agent sends a list of comparable sales that support the price you are offering to pay for the home.
How To Get Started With A Short Sale
You can contact your mortgage company and request information on a short sale or you can sign an authorization to allow me to contact your mortgage company on your behalf.
Many entities profit from short sales.
There is no seller short sale profit.
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Feb. 18, 2009 - Rent-to-Own Deals: Smart Questions to Ask... |
Rent-to-Own Deals: Smart Questions to Ask...
In a Buyer's market like we are seeing today, some sellers are willing to enter into a Rent-to-Own Deal.
Below are a few things to think about before you enter into a contract.
For Sellers:
Who will tend to the property and pay for routine maintenance?
Who pays for major repairs?
What are the costs of setting up and managing an escrow account for the portion of rent allotted to the down payment?
Will you manage the property yourself, or hire an agent?
What if the renters change their minds?
Who keeps the money in the escrow account?
If the buyers change their minds, what will be required to put the property back on the market?
For Buyers:
How much of the rent is going to the down payment?
How locked in are you if you change your mind?
What will it cost you to get out of the deal?
How long will it take to accumulate enough of a down payment that you are likely to qualify for a mortgage?
Remember, If it sounds too good to be true, there is a good chance that it is.
If I can be of any assistance in helping you buy or sell a property as a rent to own, give me a call or email. |
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Feb. 17, 2009 - FANNIE MAE SUSPENDS FORECLOSURE SALES |
With an oversupply of homes on the market driving prices down, (Supply and Demand) this may help home owners who need to sell now or in the near future.
FANNIE MAE SUSPENDS FORECLOSURE SALES PENDING ADMINISTRATION ANNOUNCEMENT
WASHINGTON, DC – Fannie Mae (FNM/NYSE) today announced it is suspending all foreclosure sales and evictions of occupied properties through March 6 in anticipation of the Administration’s national foreclosure prevention and loan modification program.
The company had previously put in place a suspension of foreclosure sales through January and had previously suspended all evictions through the end of February. In addition, the company adopted a national Real Estate Owned (REO) Rental Policy that allows renters in Fannie Mae owned foreclosed properties to remain in their homes or receive transitional financial assistance should they choose to seek new housing. |
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Feb. 16, 2009 - What Is An REO And Why Should I Buy One |
What is an REO?
REO is an acronym for real estate owned and is industry jargon for foreclosure property repossessed by banks or lenders. If a lender or bank is the highest bidder a foreclosure auction — or if no third party bids at the auction — the property reverts back to the lender and becomes an REO. REOs are owned by banks. Lenders go to great lengths to sell REOs. For banks, however, bank-owned homes are a liability.
Why should I buy a buy bank-owned REO?
One of the primary advantages of buying a bank-owned REO property is that investors are purchasing a property without liens or other encumbrances. Before lenders make REO properties available for sale, they typically expunge all liens or claims against the property. Any cloud on the title — a second or third mortgage, mechanics liens, taxes or any other liens attached by creditors — are wiped out. Besides negotiating price, many buyers of REO properties also negotiate favorable lending terms below existing market rates.
What are the advantages of buying bank-owned properties or REO homes?
For real estate investors and homebuyers, bank-owned properties and REOs offer opportunities that are not available in the pre-foreclosure and auction phase of the foreclosure process. Buying bank-owned real estate offers the foreclosure buyer many advantages:
- Buying bank-owned properties involves less risk and less competition.
- Foreclosures that are owned by banks are usually clear of any liens that may have been recorded against the property.
- Since the seller of REO homes is also the lender, you can negotiate with the bank to have them pay for all or some of the closing costs.
- Bank-owned properties are usually vacant because the banks have evicted the previous owner, saving the investor or homebuyer time, money and emotional toll involved in the eviction process.
Selling REO or foreclosures has always been a ninch market for Realtors. With the downturn in the market, many Realtors that have never completed a REO transaction are now trying to break into this area of real estate. Be Careful!
I have been selling bank foreclosures for the past 14 plus years, If you have questions on buying an REO property, please feel free to email or give me a call.
Source: National Association Of Realtors |
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Feb. 15, 2009 - It's A GREAT Time To Buy A Home! |
Ask any REALTOR® and the answer is the same….it’s a great time to buy a home in Georgia! With a wide variety of inventory and interest rates still at historical lows, now is the perfect time to purchase your dream home. Homeownership is also the key to building personal wealth. It’s a perfect time to contact a REALTOR® to discuss your needs and explore the possibilities available to you.
Reasons to Buy Now
 • It’s a buyer’s market – motivated sellers are offering a host of value-added incentives
• Homeownership is the first step toward building wealth
• Interest rates are still historically low, currently hovering around 6.25% as compared to an average of 7.75 percent in 1997 and 10.25 percent in 1987
• Homeownership may qualify you for tax deductions
• Return on investment – Georgia is a hot commodity! Our state has topped several “great places to live” lists in recent months. Among them are Forbes magazine’s Top Ten Most Affordable Places to Live Well, and five Georgia counties secured half of the slots for Progressive Farmer’s Top 10 Places with the Best Air Quality.
• Location, location, location – homes are available in a variety of price ranges throughout Georgia
• Homebuyers have more housing choices than ever before
Tips for Buyers
Use a REALTOR®
 Real estate licensees who are member of the National Association of REALTORS® are called REALTORS®. A REALTOR® will provide you with the following services:
• Offer industry expertise specific to your local market
• Analyze potential homes that match your wants and needs
• Keep you informed during the process
• Negotiate on your behalf
• Answer questions with competence and speed
Get Pre-Approved
 Pre-approval gives you the opportunity to increase bargaining and negotiating power by:
• Estimating your mortgage payment
• Setting a realistic price range you can afford
• Addressing possible qualification issues ahead of time
• Facilitate a faster transaction closing
Buying Your Home
 Your decision to buy a home should be based on answers to the following questions:
• What kind of home do I want?
• What are the comparable homes selling for?
• What about the neighborhoods, schools, crime rates, traffic, zoning, and work commutes?
• Does the home meet my price, location and amenity needs?
Negotiate
 Buyers have their share of homes from which to choose in today’s market. Negotiations among sellers and buyers (and their respective REALTORS®) have reached a new level of importance. Negotiation in a buyer’s market is not limited to price reductions. Incentives can include:
• Upgrades in the purchase of a new construction home
• Financing packages such as seller-paid closing costs
• Higher levels of service
Despite the negative press in recent months, realize that all real estate is local and what is happening in other areas in the United States does not necessarily reflect your local housing market. As a matter of fact, prices can vary from neighborhood to neighborhood. This buyer’s market will not last forever. If you’d like for information as to Why Buy Now… Ask a REALTOR® ... Ask Me!!
The above post is the Georgia Association of Realtors "Why Buy Now...Ask A REALTOR" Program. |
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Feb. 14, 2009 - Homebuyer Tax Credit |
The Homebuyer Tax Credit for 2009 is not as good as we were hoping for, but it is better than nothing. The new bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
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February 2009
FEATURE
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CREDIT AS CREATED JULY 2008
APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008
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REVISED CREDIT –
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
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Amount of Credit
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Lesser of 10 percent of cost of home or $7500
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Maximum credit amount increased to $8000
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Eligible Property
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Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.
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No change
All principal residences eligible.
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Refundable
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Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
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No change
Purchasers will continue to receive refund for unused amount when tax return is filed.
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Income Limit
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Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).
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No change
Same income limits continue to apply.
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First-time Homebuyer Only
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Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
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No change
Still available for first-time purchasers only. Three-year rule continues to apply.
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Revenue Bond Financing
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No credit allowed if home financed with state/local bond funding.
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Purchasers who utilize revenue bond financing can use credit.
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Repayment
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Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
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No repayment for purchases on or after January 1, 2009 and before December 1, 2009
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Recapture
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If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
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If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.
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Termination
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July 1, 2009
(But note program changes for 2009)
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December 1, 2009
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Effective Date
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Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.
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All revisions are effective as of January 1, 2009
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As always, it is best to check with a tax professional prior to entering into a contract to purchase a home to see how this tax credit fits your situation.
Major Modifications Italicized |
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