Short Sale Success Stories

Admit it. You saw the title of this blog and thought "no way"!

I understand that kind of thinking! Short sales are hard. I talk about that all the time on this blog. But it's time to look at some success stories. Hard doesn't mean impossible. And, it doesn't mean you should avoid a short sale like the plague.

Here are the stories of three sellers and their successful short sales.

Note: Success is defined here as the clients believe it was successful and they achieved what they wanted from the short sale.

The first story is a young couple with a house in Bealeton. They were upside down on the house and their interest rate was about to reset. They would be unable to afford the new payments. They wanted to preserve their ability to rebuild their credit and buy again in the future as their family grew. They were one of the early short sales in this area. It took time, but the short sale was approved. They had great credit before the short sale and did everything they could to maintain that afterwards. Now, nearly three years later they're once again in a position to talk to a lender about buying a home.

Another young couple owned a townhouse in Remington. They bought it just before they got married. Their growing family had made the townhouse much too small for them. They initially rented out the townhouse. But when the renter stopped paying, decided it was time to try a short sale. Not only did the short sale get approved and the deficiency forgiven. The lender in this case actually gave the sellers a small check after the sale. Even more important to this couple, their credit has been almost unaffected. I can't guarantee it'll work this way for everyone. But they saw only a 1 point reduction in their credit score.

The third short sale is a townhouse in Culpeper. The owners were transferred out of state. They initially rented the townhouse out. But the rent they received didn't begin to cover the mortgage. When the tenants moved on, they decided to try a short sale rather than go to foreclosure. Their goal was to avoid a foreclosure and it's greater damage to their credit. This one took almost a year. It featured four different buyers, six different lenders and required the patience of Job! But in the end, these sellers also succeeded.

If you are upside down on your mortgage and don't know what to do, you owe it to yourself to at least discuss the possibility of a short sale.

The Certification Racket

The real estate business and market is constantly changing and it's almost a full time job just to keep up! Fortunately, I love learning so that part of my job is fun.

But part of the real estate education business is a racket, to say the least. I stumbled across Elizabeth Newlin's take on designations this week and thoroughly enjoyed it.

Most NAR (National Association of REALTORS) designations require you to pay to take a course. That seems perfectly reasonable. Then they charge you an annual fee to keep that designation. No additional coursework is required. It's not about making sure you have up to date information. It's just a way to gather $$$s from the real estate community as far as I can tell.

I'm not sure if all that learning is going to leak out of my brain if I don't pay.

Does this mean a real estate agent with additional certifications adds no benefit? Not at all. It's at least some evidence that you have that they care about continually learning and getting better at what they do.

Real Estate Investors Going Green?

Here's an interesting blog post suggesting that real estate investors should be embracing green as a way to improve their bottom line. And they should definitely be taking the free government money to do it!

Smart idea!

Healthiest Virginia County?

There's a new study out showing, by state, how each county ranks in terms of overall health. The factors included are:

Health Behaviors

Clinical Care

Social and Economic Factors

Physical Environment

I think I might disagree with the results. But wide open spaces improve my health more than immediate access to doctors. Apparently that's not a widely held belief!

Fairfax County came in at #1. Prince William county is #10. Fauquier is #21. Rappahannock County is #46 an Culpeper County is #56.

What do you think? Personally I think Rappahannock is a heck of a lot healthier than Prince William!

Disaster Declaration for Snowstorm

A large number of counties in Virginia (and some municipalities) have been declared federal disaster areas and now qualify for government assistance to help pay for the cost of the storm. Here's the declaration from FEMA's web page:

WASHINGTON, D.C. -- The U.S. Department of Homeland Security’s Federal Emergency Management Agency (FEMA), today announced that federal disaster aid has been made available to the Commonwealth of Virginia to supplement state and local recovery efforts in the areas struck by severe winter storm and snowstorm during the period of December 18, 2009, to December 20, 2009.

Federal funding is available to the Commonwealth and eligible local governments and certain private nonprofit organizations on a cost-sharing basis for emergency work and the repair or replacement of facilities damaged by the severe winter storm and snowstorm in the counties of Albemarle, Allegheny, Amherst, Arlington, Augusta, Bath, Bedford, Botetourt, Buchanan, Caroline, Culpepper, Dickenson, Fairfax, Grayson, Greene, Hanover, Highland, Lee, Louisa, Madison, Montgomery, Nelson, Orange, Page, Prince William, Rockbridge, Russell, Scott, Spotsylvania, Stafford, and Wise and the independent cities of Alexandria, Charlottesville, Fairfax, Falls Church, Manassas, Manassas Park, Norton, Staunton, and Waynesboro.

In addition, assistance is available to the Commonwealth and eligible local governments on a cost-sharing basis for emergency protective measures, including snow assistance, for a continuous 48-hour period during or proximate to the incident period.

Federal funding is also available on a cost-sharing basis for hazard mitigation measures throughout the Commonwealth.  

The strange thing is that while Culpeper is eligible, Fauquier and Rappahannock Counties are noticably missing from this list. That means while Culpeper county citizens get help with the costs of clean up from the storm, county residents of Fauquier and Rappahannock will bear all the burden. It seems odd to say the least.

I know at the state level the governor has to request this declaration. I'm wondering if the same is true at the county level and Fauquier and Rappahannock simply didn't make that request? If anyone understands the "why" of this I'd be interested in hearing about it!

Indymac and Bank Math

You've probably heard the horror stories from families trying to get their loans modified so they can afford to stay in their homes. And a lot of us keep scratching our heads wondering why the banks aren't doing more to help with this. Why would they want the loss of either a foreclosure or a short sale on their books?

Here's the answer!

I don't know about you, but I've just about run out of outrage. And, I'm getting a little tired of hearing about bankers preaching that homeowners need to do the moral thing. Even when they try, many of them are getting shafted by the banks, and, indirectly by their government.

And people wonder why there's so much anger out there!

Buyer Beware

There was a time when people had an expectation that other people, trusted professionals, would look out for their best interests. It was probably always a mistake to blindly trust anyone simply because of their profession. Even your doctor may have mixed motivations.

And, here's fresh evidence that you should not trust your real estate agent if you're a buyer, especially if you're in North Carolina.

I was taught from the beginning that you disclose EVERYTHING! You especially disclose anything of a financial nature that even has the appearance of influencing your behavior.

You should know if one of the homes I'm showing you pays me more than the others. You should also know if one is offering me less than my fee. Then you can make a rational, informed decision.

North Carolina real estate agents who are fighting to keep their buyer clients in the dark ought to be ashamed.

Pardon The Interruption

I haven't really disappeared into thin air! The snowstorms left us without power (or running water) for six days. I had planned on using down time during the snow storm to write a bunch of blog posts.

Best laid plans....

So, watch this space. The next snow starts tomorrow and I once again hope to spend time blogging!

Hope the snow and ice are being kind to your homes! Check those gutters and roofs!

Fauquier Geography and Real Estate Prices

You know what they say: Location, location, location!

That's true just about everywhere. (I allow for the possibility that there may be some corner of the world where this rule does not apply!)

But how does it apply specifically in Fauquier County? I'm going to examine one aspect of the location question here, where are you in Fauquier County.

How much a home is worth is dependent in large part on where in Fauquier County it sits. In general, plan on spending more if you're buying in the northern part of the county, less as you head south. So the same home on a similar lot in The Plains or Marshall will cost you more than one in Remington or Bealeton. There are a number of reasons for this.

First of all, Fauquier is part of the greater Northern Virginia real estate market. Yes, it's on the fringes of that area, but a huge percentage of local residents and potential home buyers commute into Northern Virginia each and every day. For most commuters, the northern part of the county is simply more convenient. You're closer to I66, the major commuting artery in this neck of the woods. You're also close to 50, 29 and 15.

If you're commuting into either Northern VA or DC, most people consider Bealeton or Remington a longer commute. It's further to get to 66. And, heaven help you if you're commuting route includes I95!

At the northern end of the county you're also closer to access to VRE (Virginia Railway Express). That's really the only mass transit option that's anywhere near us right now.

So if reducing their daily commute is the first reason for choosing northern Fauquier County, what's the second? The countryside itself. Let's face it, southern Fauquier is flat! There's nothing wrong with that, but for scenic beauty, most people would prefer the rolling hills and mountain views more frequently found in the northern part of the county.

Part of that scenic beauty is that this is hunt country. The horses definitely add to the gorgeous scenery, in my opinion and the opinion of many home buyers. And, if you're involved in horses, you're likely to find more events in this part of the county.

A third element I'll throw in is convenience. Like it or hate it, this is a society that likes to shop. In Fauquier County, for most people, that means Warrenton is their retail center, at least locally.

So, it's your turn. Why do you live where you live in Fauquier County? What do you think would improve the livability of where you are?

How Long To Get Your Equity Back

There are a lot of homeowners locally who are deeply underwater on their mortgages. They owe more to the bank than what they could reasonably expect to sell their home for in this market. In my mind, this is the deep unresolved issue in our current housing market. I think this is a larger issue than foreclosures, long term.

The Washington Post did an article on the picture nationally. They're predicting that some markets may take a decade or more to regain the equity they had at the top of the market. And, they say some places may never see those values again.

I was particularly struck by this line in a paragraph about parts of Florida

There are going to be parts of Florida where homes shouldn't have been built [and]...that should have stayed farm land.

You could certainly say the same thing about parts of Culpeper and Fauquier county, not to mention places even further from DC and the Northern VA jobs.

The Joke That is HAFA

This was not the blog post I intended to write today but I just couldn't help myself.

I looked at the HAFA guidelines when they came out and after a quick review laughed ruefully and knew I'd never need to worry about them.

But Sarah Stelmok took the time to detail the problems with the program and whether you're a homeowner who might do a short sale or a real estate agent who works with them every day, you need to read this!

You may want to read parts 1 and 2 as well laying out the details of the program. Personally, I think part 3 tells you everything you need to know!

To Stay or Walk Away

NPR's Morning Edition today carried a story of a family in Arizona and their struggle to save their home.

They've successfully gotten a loan modification through HAMP. However, the home that they owe $300,000 is now only worth $120,000. The terms of the loan mod require an eventual balloon payment of $100,000.

The home will clearly never be worth that $300,000.

So, when this family eventually sells their home, they're now looking at a short sale. Either way, their credit is trashed.

Do they take the hit now by going into foreclosure or postpone it indefinitely?

There are no easy answers.

Government Ending Mortgage Support

It doesn't normally get the big headlines, but the Federal Reserve has been propping up the real estate market with cheap money for a couple years now.

Today's Washington Post says that's coming to an end. The Feds are going to stop keeping mortgage interest rates artificially low.

The question is, what happens next? A fixed 30 year mortgage can now be had for less than 5%. How many buyers get knocked out if that's 6%? How many if it's 7%?

Sooner or later this had to happen. The government can't and shouldn't (in my opinion) prop up this or any market forever. I hope it's done gradually and thoughtfully. And, I expect there to be some impact in fewer sales. But I don't believe interest rates will jump overnight. You'll hopefully see a gradual rise, giving people time to adjust.

The change is due to take place in two months. Does this news make you any more likely to move sooner on a home purchase in hopes of locking in lower rates? Or are you going to wait and hope that more expensive mortgages mean lower prices?

Ethics in Short Sales

Recently, five area REALTOR associations (Greater Piedmont Area Association, Dulles Area Assocation, Fredericksburg Area Assocation, Northern VA Association and Prince William Association) got together to try to find some common standards of ethics that could apply to short sales.

There are a number of areas in the short sale process where questions regarding the most ethical practice has been an issue. Some of these are how do you handle the earnest money deposit/escrow, what do we tell clients about the likely impact to their credit of a short sale vs. a foreclosure and how do we handle short sales in the Multiple Listing Service in light of our need to protect our clients' privacy.

The document the associations came up with is a good start. Short sales continue to evolve and advice you'd give a client 2 years ago is likely different than what you'd tell them today. Hopefully this document will continue to evolve as well.

No Apologies Necessary

I got a call this week from a former client about selling their home. They owe the bank more than the home is worth so this will be a short sale.

The amazing thing is that this client apologized to me for asking me to take on a short sale. Wow!

I love my clients and I love how they look out for me. It's a humbling thing.

But in this particular instance, no apology is necessary! In this market, if I didn't work on short sales, I'd have very little work! It's very rare for me to get a call to list a house that isn't a short sale. And, it's rare to work with a buyer who isn't buying either a foreclosure or a short sale.

So, please, when you call me about your short sale listing, even if it's just to pick my brain, don't apologize. If it wasn't for short sales I'd have to find something else to do for a living! (Do you remember that old song "If it weren't for bad luck I'd have no luck at all")

Think of me as Short Sales R Us!

Seriously, I'm well suited for short sales. I've been told I've got the patience of a saint and that's true. (I think it's in my genes!) Patience may well be the number one attribute any agent needs for dealing with banks in a short sale! I'm a great listener and most sellers who are going through a short sale need a good listener. And, I'm cool in a crisis, good at keeping my head when things get emotional.

So, to all the sellers who have contacted me about a short sale, thank you! And, to those of you who will call me this year, thanks to you too! Keep those phone calls coming!

2010 - A Forecast

Let's start with the look at the larger economic picture. As always, it will play a major role in what happens this year with local real estate.

While the Fed continues to keep money cheap (I closed a deal at the end of the year with interest rate under 5%) that can't last forever. If the real estate industry and economy seem to be doing well mid-year we may start to see some adjustments upwards in rates.

I expect lending to remain very, very tight. Your credit will need to be very good and/or you'll need a hefty down payment in order to buy a house this year. Because of these conditions, I expect to see more USDA Rural Development mortgages in 2010.

The jobs picture is likely to remain gloomy throughout 2010. It will be less gloomy in the greater DC area, but the angst that goes with those high unemployment numbers will remain and will continue to impact people's willingness to buy homes.

The majority of sales are likely to be short sales in 2010. There are plans in the works to make the short sale process easier and faster. I have my fingers crossed that they will work!

It's going to surprise a lot of you to hear that one of my biggest worries about 2010 is a lack of inventory! Who'd have guessed a year or two ago that that would be possible!

But Prince William County is down to only 4.5 months of inventory. That's technically a strong seller's market. Culpeper is at 7 months of inventory, a balanced market. Fauquier is at 9 months. Rappahannock has what looks like an astonishing 16 months of inventory, but things continue to work a little differently there! I expect inventory in Prince William County to stay about at current levels in 2010. Culpeper and Fauquier are likely to shrink further. Rappahannock should be down to 12 months of inventory by the end of the year.

Here's the problem with the inventory situation. Banks have additional inventory, but they're holding on to it and releasing it more slowly. They don't want any further depression of prices because that kills their bottom line. And, with the bailout from the government and the cheap money they're able to borrow from the Fed, they don't need to dump them in a hurry. So, we'll continue to see foreclosures hit the market but only in dribs and drabs.

That leaves the rest of us homeowners as potential sellers. Most homeowners have seen a tremendous amount of value wiped out on paper and aren't anxious to realize that loss by selling and locking it in. I can't say as I blame them. Of course, the underlying assumption there is that if I hold on another year, or maybe two, I'll get a lot of that value back.

Is that true? Will 2010 be the year we see a spike in home prices? We've certainly already seen some price increases in Fauquier and Prince William counties. Culpeper still shows a year over year decrease as does Rappahannock county. But yes, I think we'll see small price increases in all four counties in 2010. Just don't expect to get back to 2005 prices for a long, long time! Expect 5-8% price increases this year.

The big unknown this year in my mind is what the buyers will do. If the economy, and by economy I mean unemployment, improves significantly, I think we see a big increase of buyers and those price increases could get a lot larger. But I'm not optimistic about the jobs outlook. And, I think buyers remain relatively scarce. Look for the volume of transactions to be flat in 2010. And it wouldn't surprise me if there's actually a small decline.

I expect the DOM (Days on Market) for properties to shrink slightly simply because of the lack of inventory. Those homes priced right and in great condition will continue to sell relatively quickly.

The summary is that 2010 is going to be another year of trying to get solid ground underneath the real estate market. It will be another year of slow, painful climbing out of the ugly market we've had. There are bright spots and there's certainly the potential for happy surprises. But I'd hang on for another bumpy ride if I were you!

Rough Times in Real Estate

Most of the pain of real estate practitioners in this market is hidden away. Most of us don't talk much about the realities of doing this for a living in the worst economy in my lifetime. It's not just your average consumer losing their home to foreclosure.

But sometimes there's an amazing, honest, articulate agent with a story to tell. Matt Stigliano has a story worth listening to.

(How am I doing? Better than 2008! Not as good as a few years ago!)

Cash Wins Bidding Wars

Sunday's Washington Post had an article on how cash rich investors are the bane of first time home buyers.

The example they use is in Prince William County but it's happening throughout the region.

Cash is kind, there's very limited inventory and deals with mortgages often fall through.

If you were a seller, what would you do?

2009 Year in Review

As we head into 2010, let's start by looking backwards into 2009 and see how my predictions fared.

First of all, it's clear to me now that years from now we'll look back and see 2009 as the year when the real estate recovery really began to take hold, at least in this part of Virginia. That doesn't mean that the prospects are entirely rosy going forward, but the contrast between 2008 and 2009 are simply incredible.

Whereas the big story in 2008 was price drops, the big story this year is price increases, year over year, across the board. Whether you're talking about Culpeper, Fauquier, Prince William or Rappahannock County, prices are up year over year. Now bear in mind that's after several years of steep declines. And these increases are very modest, in the single digits. On prices, I was too pessimistic, anticipating another year of falling prices. I've never been so happy to be wrong! I predicted a price decline of 10% with that primarily coming on properties at the $400K and above price point. In reality, the only place we saw any price weakness was at the very high end of the market.

Inventory declined dramatically. I got this one partially right in that I predicted a continued decline. But it's been more rapid than I expected. Inventory in Culpeper is down 20% year over year and we're now at 11 months of inventory. Still a buyer's market there but better than a year ago.

In Fauquier County the decline was 21% but we're down to only 8 months of inventory. And in both counties, quality inventory at the lower price points is scarce and snapped up quickly.

Prince William County had an amazing decline of 37% in year over year inventory! We're now looking at only about 4 months of inventory here and it's clearly a seller's market in every way except price. But we'll get to that.

In Rappahannock County, after an unexpected inventory surge late in the year, we've started falling again. The November numbers show us pretty much flat, year over year. But preliminary December numbers show a December drop off. Some of that will be sellers deciding not to bother having their homes on the market over the holidays. But some of that inventory will not be coming back.

And now for the volumes. This is the area where I was probably the most off. I predicted 640 homes would sell in Culpeper in 2009. In fact, even with the tax incentives that number was only 595, the exact same number as in 2008.

In Fauquier I predicted that 645 homes would sell in 2009. I was conservative there, with 675 selling a significant increase from the 600 in 2008.

Prince William made me look especially inept, with only 7825 sales as opposed to my forecast of 8800. In my defense, the miserably small inventory kept a lot of would-be buyers on the sideline. That 7825 is actually a decrease over the roughly 8000 sold in 2008. It's a troubling trend.

All in all, my performance as a prognosticator was mixed. I was too optimistic in some areas, not optimistic enough in others and got it just about right in a few.

Despite my lack of perfection, I'll risk looking foolish again later this week with my 2010 predictions!

Wells Fargo - Great! BOA - Lousy!

I've always been a huge Jim Collins fan. So a recent Agent Genius blog post caught my eye.

Wells Fargo was picked by Jim as an example of great in the banking arena. Bank of America/Countrywide - not so much.

Read the blog post to find out how that's still true today, in reference to short sales.