An ongoing dialog on real estate news, opinion and trends in Northern Virginia and the greater Piedmont area. Julie is an Associate Broker at Century 21 New Millennium, 5451 Old Alexandria Turnpike, Warrenton, VA 20187
Freddie Mac has posted a video on YouTube to help homeowners who are facing the possibility of foreclosure. It takes you through what documentation you're going to need to put together for your lender in order for them to help you avoid foreclosure.
This paperwork is, in most cases, the same paperwork needed if you're contemplating a short sale.
I hope this is helpful but even more, I hope none of you need this information!
A smarter agent/blogger would no doubt have waited to write this blog. Emotions are still pretty raw.
I learned today that a house I have listed for sale in Fauquier has gone into foreclosure.
We've had this listed as a short sale for at least seven months. For slightly less than six months we've had an offer on the table, an offer very close to what the bank's own BPO came in at. We've been unable, despite daily phone calls, to get the bank to move forward with that offer.
In the interim, as the house has sat empty, it's been repeatedly vandalized. The first incident resulted in the theft of both heat pumps. The most recent theft involved copper plumbing and the water heater.
And, over these six months, property values have continued to decline.
The bank is now sitting on a property worth substantially less than the offer they had in their hands.
The owners will have a foreclosure on their credit record rather than the short sale that would have been less damaging.
The potential buyers have wasted all these months and so many hopes and dreams on a house they won't be buying any time soon.
I'm out many months of work for no compensation at all.
And, it didn't have to work this way.
This is the first short sale that I haven't been able to get to settlement. I'll admit to being angry as well as sad.
Would I take another short sale where this same bank held the note? Absolutely not! Will I be warning other agents about dealing with this particular bank? Of course!
If there are days I seem less than sympathetic to the losses being suffered by many financial institutions, here's a good reason why.
With more and more families locally going through foreclosures or short sales, the question is going to become, when can they get another mortgage?
Well, we finally have some guidelines from Fannie Mae, Freddie Mac, FHA and VA. Courtesy of Beth Goodwin at First County Mortgage, here's what they look like:
SHORTSALES/FORECLOSURES
Guidelines for future mortgage approvals
CONVENTIONAL (Fannie and Freddie)
When the applicant’s previous credit history includes a foreclosure-related action, a FIVE YEAR elapsed time period must have occurred. In addition, the new conventional loan will require a 10% down payment and a minimum FICO of 680. Additional re-established credit requirements will apply as well (Call for specifics). SHORTSALES have a TWO year time period with no exceptions for extenuating circumstances.
FHA
FHA loans will require a THREE YEAR time frame with re-establishment of credit. NO WAIVERS FOR EXTENUATING CIRCUMSTANCES.
VA
The Veteran’s Administration will follow their Chapter 7 Bankruptcy guidelines that state that with a TWO YEAR time elapsement and with re-established credit, they will consider guaranteeing a VA loan. HOWEVER, if the foreclosed/short sale loan was also VA, the veteran may not have full entitlement!!!
The conventional loan programs MAY consider a shorter time frame with “extenuating” circumstances, such as death of the main wage earner but does NOT consider divorce, mishandling of debt, transfer of job or current market conditions to be “extenuating”
FOR MORE INFORMATION CONTACT:
BETH GOODWIN
Sr. Loan Officer
540-226-2402
You can also reach Beth on her e-mail at beth.goodwin@firstcountymortgage.com
Given that the bulk of sales in our area are either short sales or foreclosures, home warranties are becoming increasingly important.
Most short sales and foreclosures are sold "as is" meaning that the owner is not willing to repair any defects in the property. So, if the refrigerator doesn't work, too bad.
These are the properties buyers are snapping up and they're getting excellent deals. But it's a higher risk transaction and home warranties are one way to take away a little bit of that risk.
There are a couple of things to keep in mind if the seller is buying the home warranty, an increasingly common occurrence in this market.
Home warranties typically have basic coverage with options available for additional coverage. The additional coverage can cover things such as the roof, well and septic, swimming pools, etc. Depending on the property you're buying, it may make sense to consider purchasing the additional coverage yourself.
If the seller buys the basic coverage, most companies will allow the buyer 30 days to add additional coverage. Note that this is not meant to allow you to find problems and then buy insurance retroactively to cover them! So, the best way to do this is really at the settlement table.
When you're buying foreclosures or short sales, you should really have a home inspection before making an offer. But if you don't, a home warranty can be a very good investment!
It's time to tell another story about a specific local house!
This house is located in Amissville in Culpeper county on a quiet country road. As with many local properties, it was once part of a larger farm. And, in fact, one of the things I love about this house is the old farmhouse that is at its core.
It's been nicely renovated in ways that allow you to still see the original and it's special character. The second floor is all hardwood floors, a very rare thing these days, but fairly common in 1940 when this house was originally built. It sits on just under 2 acres with some nice fencing.
There are 4 bedrooms and 2 full baths. The kitchen is modern and large with lots of light. It's got that great front porch and some beautiful mature trees. In short, there's lots to love about this house.
For horse people, there's adjoining pasture that rents pretty cheaply. ($200/mo.)
The house sold in December, 2004 for $314,000 with a $9000 subsidy to the buyers to help with closing costs. It was on the market for 127 days before selling. In 2004, that was actually a long time. And, at that point in time the $9000 help for the buyers was also unusual.
It next sold in May of 2007. This time it was on the market for 292 days before being sold for $360,000.
It's back up for sale now. It's been for sale for 86 days. It was originally listed at $349,900 and is currently listed at $299,900. It's a short sale this time around, meaning that the owners owe more to the bank than the home will sell for. The possibility of foreclosure looms if the property does not sell.
If the home sells for full price (unlikely in this market) it will be 17% off the highest sales price. That's a little less than the price declines we've seen overall in Culpeper County.
I believe, overall, this home is a pretty good value in this market. Part of why it's lingering at this price is the fact that it's a short sale. Real estate agents are reluctant to show short sale properties. There are a number of reasons for this, including a lengthy/complex process that frustrates their clients and usually produces a smaller paycheck for them.
It may also be sitting because of the new home that's being built nearby. While there's enough distance between them that it's not intrusive if you're a city person; people moving out here often want no sign that neighbors even exist!
Still, for someone with horses and not a big house hunting budget, I think this has a lot of appeal.
Surrounding sellers will no doubt be unhappy with the low price on this. If this sells for under $300K, and it ultimately will, many surrounding properties are clearly overpriced. Or, at least, that's what potential buyers and appraisers are likely to think!
This Wall Street Journal article was too interesting to leave for another day. If you're interested in buying a short sale, or contemplating a short sale on your own property, you should definitely read this.
In the Fauquier Times Democrat Weekend paper, I'm quoted in two separate articles. The first one "Few Find Escape From Threat of Foreclosure" is on page one and continues throughout the paper. The second, "By The Numbers" is on page 3.
The second article is basically information taken from one of last week's blogs. No problems there.
The problem is in the front page article. First of all, thanks to Laura Ruby for putting this together. It's good to see local coverage on this, along with some helpful information. But, there are some inaccuracies in the article that I'd like to address.
Dave Bryan says that "97 percent of homeowners facing foreclosure will, in fact, lose their homes, leaving only three percent who are able to actually come to some sort of agreement with their loan servicer."
I've spent hours trying to verify that number. I can find no documentation to support it. I finally called Laura Ruby to find out if Dave had cited a source when giving her that quote. He said "he had read it somewhere."
So, just let me say that after trying NAR, Mortgage Bankers Association and realtytrac.com and being unable to verify that number, I have serious reservations about it. My experience is that the number is nowhere near that bad. And, I'm concerned because I don't want families to think it's hopeless!
I then made calls to agents, lenders and organizations designed to help people with these issues. No one had specific numbers. But no one believed that the numbers were anywhere near this grim.
Keep trying! It is not hopeless. Every situation is different!
Another paragraph says "When homeowners have a second mortgage, short sales are virtually impossible, as that requires the approval of two loan servicers."
A first and second mortgage certainly make things even harder. But I've successfully done short sales with two mortgages. Again, it's not impossible. But you've got to be willing to take on the battle!
The last piece in here that I disagree with is from Dave Bryan again. "If you get behind two or three months, it's too late. You won't be able to sell it before it goes to foreclosure."
Again, absolutely not true! In fact, you can't do a short sale until you are behind on paying your mortgage! Again, I've done this for clients and it's worked! You do have to very aggressively price your home. If the home languishes on the market for months, eventually it will move into foreclosure. Then you'll have lost that window of opportunity. And, some short sale homes are in such terrible condition that it's tough to price them low enough to find someone interested. But I'd never say it's impossible!
My big concern here is that not enough homeowners are seeking help now because they feel overwhelmed and hopeless. They need to reach out for help early. But most importantly, they need to get help, whether it's early or not! There are very few times I walk away from someone and tell them there's no hope!
Ask for help. Be aggressive! Don't take "no" for an answer! I can't guarantee anyone a win every time, but your odds are a lot better!
Negotiating a short sale, where the homeowner owes the mortgage company more than the house will sell for, is much different than your typical home sale. And, in these days where first and second mortgages are the norm, it's even more complicated.
So today I was happy to get verbal approval from a lender on a short sale for one of my clients. Negotiating with this many parties is a slow and painful process. But when you get a result in the end that's good for everyone it's a very satisfying thing!
There are a lot of very discouraged sellers and a lot of sellers on the verge of foreclosure. With an aggressive plan, implemented early enough, that usually doesn't have to happen.
I love happy endings!
Also, a brief note here that the detailed Fauquier and Culpeper county market statistics are now available in the categories for those counties as well as in the Local Market Conditions category.
Rappahannock and Prince William will be posted there tomorrow.
A lot of senators and congressmen and women are going to be leaving Washington and heading towards home this week. I'd like to make an appeal to all of you to find them and give them an earful about a couple of bills awaiting their return to Washington.
HR1876 and Senate Bill S1394 are both designed to help homeowners who have been through what's known as a short sale. For those of you who aren't familiar with the term, it's when you sell your home and actually owe money to the bank as a result of that transaction.
These transactions are becoming pretty frequent as home values decline or, at the very least, stall. If you get transferred a year after you bought your house, in this market, you're going to have a short sale. If you lose your job and have only been in your house two years and have to sell because you can no longer afford it, it's likely to be a short sale. And there are an increasing number of people with adjustable rate mortgages who are going to be forced to sell because the adjusted payments are unaffordable.
Whatever the reason for a short sale, it's a miserable situation currently made worse by our friends at the IRS. Current law says that if the bank forgives any additional debt owed on the house, a not uncommon situation, the amount of the debt forgiven is taxable income.
There's going to be enough economic misery before this housing market recovers. The law as currently written just adds insult to injury. This would be a very practical move by Congress to help not just their constituents involved in short sales, but the overall economy of the country. There are certainly a lot of sellers who could use a little good news right now!
So, go find your Representatives and Senators in August. And, if you can't find them around locally, write them a letter, send them an e-mail or make a phone call!
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