Short sales are a pain! You're going to hear that from any real estate agent you talk to, or more likely, even stronger language.

The relationship between banks and real estate agents on short sales has gotten to the point where you could call it adversarial. And, it shouldn't be that way. We should be working together towards a common goal, finding a deal that works for everyone and getting it closed before the house goes into foreclosure.

The thing is, I don't think it needed to be this way. Both banks and real estate agents should have sat down at the beginning of this wave of short sales and worked out some things. Here are some ways the outcomes and the working relationships could have been improved.

• Each bank should have a package of it's procedures in working with real estate agents and owners on short sales.
• Banks should have a link on their main web site that provides real estate agents with everything they need to process a short sale.
• Lending institutions and real estate companies and/or associations should have set up joint seminars where agents and lenders could meet and develop working relationships.
• Banks should have easy access on their web sites to information for their customers who are contemplating going through the short sale process.

No one item here would have completely fixed the problems with the current system. But any and all of them would have helped tremendously. And, this list is just a starting point. There are lots more possibilities.

This is a broken system. A little planning up front might have saved us all a lot of grief!

As of May 1st, guidelines will change for appraisals on mortgages that want Fannie Mae or Freddie Mac's blessing. Up until now, your lender chose the appraiser when you applied for a loan. The fee was typically in the $350 range. Each lender had a list of appraisers that they had approved. And, you, as the home buyer, paid for the appraisal at settlement. In this market the seller often gave you money to pay for the appraisal.

Now, lenders will not be allowed to choose the appraiser they use. You can see the reasoning for this. There was a lot of fraud over the last few years. There were crooked lenders using crooked appraisers to "cook" the appraisals to come up with the numbers they wanted/needed. And, that's one piece of why we're in the financial mess we're in.

But no one is very happy about the medicine they'll be taking on this one. Lenders will now go to third party companies who will then assign it to an appraiser they have on their books. Because of the change, appraisers will likely get paid less. But, because another layer has been added in, the consumer will likely pay more.

And, because of the change, buyers will no longer be able to pay for the appraisal at settlement. They'll be required to pay up front. At a time when buyers are putting out cash for other things like home inspections as well, it'll make the money a little tighter. Hopefully, seller's contributions to settlement costs can still be used at settlement to reimburse the buyer for this expense.

As we begin to use the new system, no doubt we'll notice other changes. Stay tuned for more.

I just got back from a class on short sales. Things keep changing and you have to try to keep up with the latest trends.

Here's the biggest take away as far as recent changes to the short sale process go.

Banks are much less inclined to forgive the debt on a short sale. This is particularly true of the second mortgage holder. And, they're willing to hold the deal hostage at the last minute in order to get their pound of flesh.

It brings up the question of whether a short sale, deed in lieu of foreclosure or foreclosure is better for the homeowner. And, I'm going to tell you that if you're a seller wondering that you shouldn't be asking me.

If you're not talking to an attorney who can protect your interests, with this much money at stake, I think you're making a mistake.

A couple of years ago, most debt was wiped out completely on a short sale. So, if you got one done then, be very, very glad!

The other take away is how difficult these things still are. I've seen press reports that they're getting easier, banks are getting more reasonable or smarter or more efficient. Don't believe it!

On a short sale, if you go from contract to settlement in anything less than 120 days, consider yourself lucky!

If you're a buyer you're going to have to weigh your ability to wait that long against the incredible deals that are available on short sales. The truth is that most buyers are deciding short sales won't work for them. That makes the deals better for those few willing to endure the pain of the process.

There's a new roadblock on the way to getting to settlement these days.

The number of people refinancing has skyrocketed. And, as a result banks and some of the people they rely on are overwhelmed. Appraisers are overbooked. Lenders are pushing out settlement dates to be sure they can get everything through underwriting.

There are still settlements happening in 30 days, but it's getting a lot tougher.

Interest rates won't stay at this rate forever. In fact, interest rates in the mortgage markets will jump before a lot of other interest rates do. Mortgage interest rates are very sensitive to inflation worries. With all the money being pumped into the economy, I suspect this is a pretty small window of opportunity before rates start to move back up.

But for right now, if you're buying a house talk to your lender about whether 30 days is doable. And, if you're a seller, don't be surprised to see delays on the way to settlement.

Since foreclosures are such a big part of the market right now, I'm going to do a few posts on some of the issues that are likely to arise if you're buying a foreclosure.

Today I'm going to talk about settlement companies.

Once the bank has given you a verbal agreement that they've accepted your offer, you'll get an addendum (or, more likely, multiple!) One of the clauses you're going to see in that addendum concerns your choice of settlement agent.

The bank is going to want you to use their settlement attorney and there are several ways they may try to make this happen.

One is to incentivize you. The addendum will basically offer you some discount or deal if you use their settlement company. The most common one here is free title insurance. The problem with these incentives is that (as with new construction) you will very rarely actually save any money. Reports are now coming in about the padded fees for these settlement companies in order to make up for giving away the title insurance. In short, you'll be lucky if you save $50 and may actually end up paying more.

The other way a bank can try to get you to use their settlement agent is to simply say in the addendum that you, the buyer, are obligated to do so.

Let's make it clear right now, that you are not obligated and nothing a bank says in an addendum can make you obligated. A buyer in Virginia always has the right to choose their own settlement agent. And, a bank's attempt to get you to use their settlement agent without disclosing the financial relationship between them is a violation of Federal RESPA laws.

The problem becomes that many buyers desperately want the house and are afraid if they don't agree with the addendum without any changes their offer will still be rejected. I understand wanting the house. But it's my job as your agent to also make sure you're protected.

So, go ahead and sign the addendum and get the whole thing ratified. Then your real estate agent should write a notice, informing the seller (in this case, the bank) that you'll be using "X" settlement company instead.

Any clause in any contract forcing you to use their settlement agent is not enforceable. And, in all honesty, once they have a ratified contract in hand and the money is in sight, they're unlikely to balk.

By the way, the other reason you may not want to use the settlement company recommended by the bank is that the process is already slow enough! Since there are very few settlement companies working with these banks, most of them are completely overwhelmed. Good luck getting a settlement done in a timely fashion!

And, last, but not least, the settlement company is going to be doing the title search and make sure you really do own your house when you actually close. You want that done as thoroughly as possible by someone who cares about protecting your ownership interests. The bank's settlement agent would seem to have someone else's best interests at heart!

It feels like we're all moving in slow motion these days in the real estate industry. Or maybe we're just wading through deep mud that's slowing us all down!

Or choose your own mental image here.

And, there's one segment of the real estate industry that's almost single handedly responsible for the slow down...lending institutions.

With foreclosure sales making up 2/3 of Culpeper sales last month and 1/2 of those in Fauquier, a lending institution is actually the seller in most of the sales happening these days. If you add in short sales, where the lender has to approve any deal you're definitely dealing with the vast majority of transactions.

Lenders are moving very slowly on these things. On one foreclosure sale I'm working on right now it took my buyer clients about three weeks to even get a response to their offer. And there are enough stories around this to fill up a blog!

But lenders aren't the only ones slowing up the process. Listing agents who handle foreclosures are typically specialists in this area. Foreclosures are about all they do. Lenders typically offer less compensation on each individual deal in exchange for providing large volumes of transactions. And, so you get agents who are completely overwhelmed by the number of listings they have, but can't afford or won't pay to get help.

I heard one story last week about a buyer's agent bypassing the listing agent when he wasn't getting anywhere and asking the settlement company to talk to the lender directly to get things done. A week after settlement had taken place the listing agent still claimed to be unable to get an answer from the bank on outstanding issues! (This agent was completely unaware the deal had already settled!) More likely the agent wasn't even trying to get an answer as the issue had fallen through the cracks.

Documenting everything I do, every conversation I have, every fax or e-mail I send and who I talk to have become even more important than usual.

If you're trying to buy in the midst of all this, be aware that you will need a lot of patience. You may very well get a good deal buying a foreclosure or short sale. But it may require that you have the ability to wait several months to get the deal closed and get into your new house. Keep that in mind as you search for your next home.

Me? I'm getting just a little tired of slogging through all this mud. But like everything else, it's cyclical and this too shall pass!

My first post now that I'm back from vacation and I thought I'd let someone else do most of the writing.

Besides, this story is just too good (and, unfortunately too typical) not so share with you!

Lenders still don't get it!

And, why do they keep proclaiming publicly what a good job they're now doing of helping consumers work these things out?!

Hogwash!

People talk to me all the time about real estate. Obviously customer and clients do that. But people who barely know me but know I'm an agent also do that. That's a good thing! I like hearing what's on people's minds and how they're seeing the current market.

Lately I've been hearing some things that don't quite ring true. So I thought I'd set the record straight.

First of all there's the current chart topper "I know that a bank will take any offer just to get rid of a foreclosure." It's a lovely thought, but just not true. In fact, there is quite a range of policy on this among the various lenders. While, in theory, no bank wants to hold a property a day longer than they have to, each lender has its own policy as to what's an acceptable offer. That may be a percentage below the listing price or it may be based on a percentage loss they are willing to absorb. It may be a combination of factors, including how long the property has been on the market.

Unfortunately, no one hard and fast rule covers this. But be assured, I've seen banks reject lowball offers, even perfectly reasonable ones!

Here's what sellers tell me a lot these days. "I know you're probably right about the price, but I just want to try it at this higher price for a little while."

Here's the problem. Prices are declining. So, while you're sitting on an overpriced listing that no one comes to see, prices have gone down further. Now, just to catch up to the market, you need to come down further in price than where I originally suggested. All you've done is reduce your likely profit.

And, of course, real estate agents have their own misconceptions. The one you'll hear most often these days is "It's a great time to buy a house." One agent last week told me he's never stopped saying that! I'm guessing his clients who listened to him a year or two ago may not be thanking him now!

It's a great time to buy a house if you're likely to stay in it at least five years. Given current market conditions and where I think we're going, I still won't guarantee anybody will make money in five years. But I think, if you include the tax advantages, you have an excellent chance of breaking even or even a little better.

If you're likely to get transferred in a year or two, it is clearly not a good time to buy! If you're looking to flip a house for a quick profit it is definitely a very bad time to buy! If you're looking for a long term investment, say a rental income property, it's a very good time to buy.

And, as always, what you buy and where you buy make a huge difference!

In the comments on a recent blog someone asked why someone who pays cash has more negotiating leverage. I answered briefly in response, but thought it made sense to cover it in more detail in a blog post.

There are several reasons you're in a stronger negotiating position if you're buying with cash.

First of all, many deals never make it to closing. Even when there's a ratified contract, that's no guarantee that the deal settles. And, over 95% of the time, deals that fall apart do so because of issues related to the buyer's financing.

If you can remove that concern for the sellers, they are likely to take a lower offer, trading price for the certainty of a closed sale.

Another factor is time. Typically right now it's about 30 days in most cases from ratified contract to settlement. The majority of that time is spent on items required by the lender. Some of those things include getting a survey, having the property appraised, verifying credit and employment for the buyers and sending the deal through underwriting. It's possible, these days, for most lenders to close much faster, say in two weeks. But in most cases if they buyers are getting a mortgage the settlement date is probably about 30 days out.

With cash, on the other hand, settlement can happen as quickly as the buyer wants. I've seen cash settlements in less than 48 hours. Mind you, I wouldn't recommend that. I think the buyer should still do a title search and a home inspection at the very least. But it does happen.

Most sellers prefer money in their pocket sooner rather than later!

And, lastly, along with buyers getting a mortgage come several related contingencies. Contracts that involve a lender typically include a contingency to make sure that the buyer can actually qualify for a mortgage. (Certainly not a sure thing these days!) There's an appraisal contingency. If the property doesn't appraise for at least the sales price, the deal may be dead. And, depending on the type of financing, there may be other contingencies and/or conditions that make a timely settlement more uncertain.

All in all, if I'm selling, I'll give a little on the price to get a cash buyer!

An assortment of tidbits today.

Here's an interesting overall look at the Northern VA real estate market. It only comes out as far as Loudon and Prince William but you can extrapolate from there.

Bank of America appears to be set to buy Countrywide. This is good news. Countrywide appeared to be headed for bankruptcy which would have been unbelievably disruptive to the industry.

Zillow has announced that the number of homes it covers and the accuracy of it's estimates are greatly improved. You could have fooled me. When I took a look at where I live there was no Zestimate at all for our home or any of our neighbors.

This blog post if right on in pointing out that REALTORS should be the first ones objecting to NAR's absurdly rosy predictions. Credibility once lost is hard to regain.

Ben Bernanke appears set on cutting interest rates again this month. A half point cut now seems entirely possible. The effect on the mortgage interest rate remains to be seen. However, LIBOR, a rate used to set interest rates on adjustable rate mortgages fell this week. Good news if you've got an ARM due to reset soon!

The recession fears are overwhelming any inflation fears at the moment. And that means good news on mortgage interest rates. The 30 year fixed rate right now is hovering right around 5.5%. That's great news for buyers and if you're looking to buy in the next 3-6 months it's worth crunching some numbers to see if this might be the time to jump.

But today I wanted to focus on refinancing. It's not something I touch on much, because I don't typically get involved when my clients refinance. Once awhile they'll call for help in recommending an appraiser or finding some papework, but generally a refinance doesn't require a real estate agent's involvement.

However, if you've never done this before and are looking for some help. Here are a couple of hints.

1. Try an online mortgage calculator. A Google search will provide a slew of them. Be careful of the ones that are too basic. And make sure it tells you how many months it will take to recoup your costs. There will be fees associated with refinacing. While you may save money each month with lower interest, if you move in six months and it takes a year to break even based on the fees you haven't really gained anything.

2. Don't choose your mortgage lender solely on rates. It should be clear to everyone by now but not all financial institutions are created equal. Go with someone reliable! Get recommendations from people you trust.

3. Read the fine print. This should be obvious by now as well, but make sure you undestand the mortgage you're getting. Ask whether there are pre-payment penalties. Make sure you know if your rate is fixed or adjustable. And, if you choose to go adjustable make sure you understand completely how that adjustment process works and what your payments are going to be two years or three years or five years from now.

All that said, it's a great time to take a look at your mortgage and see if it makes sense to refinance.

I've heard a lot of talk amongst real estate agents lately, both online and in person, about short sales. And, the gist of the conversation is that they are horrendous and no real estate agent in their right mind would do them.

While I certainly understand the sentiment, I am disturbed by the remarks.

First of all, let's be clear that real estate agents are running a business. And, if the business does not make a profit it soon goes out of business. So, it's not reasonable to expect real estate agents to take on listings that will not pay them but will result in increased costs.

There are a number of reasons why it's risky to list a property where the owner owes the bank more than the property is worth. First of all, you sign a listing agreement with the owners. And, in that agreement, they agree to your fee. But the lender must agree to any contract and they have a history of voiding the listing agreement you signed with the owners and telling you what your fee will be. (By the way, it's always lower.) At that point you've already done a tremendous amount of work and it makes no sense to walk away, even if it turns out that what the bank pays you is a pittance. Something is better than nothing.

And, you'll work much harder for that reduced commission. Dealing with the bureaucracy at most lending institutions is a real pain. And, often you're dealing with both a first and a second mortgage.

The other big problem is that most short sales never happen. In most cases, especially in this kind of market, the property goes into foreclosure a couple of months later. Since lenders already have established relationships with real estate agents, you then lose the listing altogether.

All that being said, there are families who need help keeping their homes from going into foreclosure. We are uniquely positioned to perform that service. And, there are, of course, big hearted people who willingly take these risks and help these homeowners. I'd just like to see more of them.

It's interesting that attorneys don't refuse to take on bankruptcy cases our of fear of not getting paid. They get their fee up front or they don't take the case. Maybe that's what needs to happen here. Or maybe there's a retainer so the agent knows there will at least be some pay for their trouble.

I think the industry has an obligation to figure this out. I think it's in our self-interest to show we're willing to go out of our way to help. It certainly can't hurt the overall reputation of our profession!

99% of deals that fall apart do so because of financing!

Don't let anyone tell you differently!

That's why it's critically important that buyers choose a reputable lender. Yes, it's important to the seller and their agent because they want to be sure they'll get to closing and get a check.  But it's also important to you. Generally the financing falls apart at the last minute.  If you're a first time home buyer you've already given notice to your landlord.  Odds are you're mostly packed. If you already own a home and have sold yours it gets even more complicated!

So, if you're thinking about buying a home, take a few minutes now to think about choosing your lender. The best lender is not necessarily the guy who promises you the best rate. There are plenty of shady people who will promise you the world to get you to sign on and then well into the process will inform you that you don't qualify for that particular program. I had a client last year who was initially working with a lender who promised her an incredibly low interest rate.  (If it sounds too good to be true it probably is!) Turns out there was no such rate. In fact, the actual rate turned out to be almost 3 percent higher! He'd been lying from day one and he almost cost her the deal on the house she was buying.

Lately I've seen a lender who approved a client for a purchase price up to a specific amount.  The property the client purchased was actually below that amount. However, the lender then informed the parties that the home had to appraise well above the agreed upon purchase price in order for the loan to be approved by underwriting. In this particular instance it worked out. But that's a very, very risky proposition.

There are many more horror stories about loans that didn't happen because of a lender who was over-promising and under-delivering. So do your homework before choosing your lender. There are also a lot of wonderful, ethical lenders out there. You just have to find one! There are a number of ways to do that.

Ask around and find out who other people have used.  Ask your real estate agent who's good. A local lender, as opposed to someone in another state, can definitely be an advantage. For one thing, if something goes wrong you know where to get your hands on them!  And a local lender doesn't last long if they have a reputation for steering people wrong, giving unrealistic estimates and/or not being able to get the deal closed. In addition to real estate agents, settlement companies have contact with a lot of lenders and usually know who's good and who's likely to cause last minute heartache.

And, if you're a seller, when an offer is presented, ask your REALTOR what they know about the lender and how strong the letter is. But be aware that a letter can sound wonderful and not be worth the paper it's written on!

If you're looking for a good lender in our area, visit my web page, http://www.JulieEmery.com and click on Local Partners. You'll see a list of lenders there that have a successful track record so you know when they tell you that you really can afford the house of your dreams, it's going to work!