I wanted to let you know I have completed a guide for individuals wanting to buy a home. Whether you are a first time homebuyer or a repeat buyer there is a lot of great info for you to review. If you would like me to email me you a FREE COPY of the guide just let me know. This is a MUST HAVE for all buyers thinking of buying a home in 2015. – Zackry Cooper 925.338.9225
“Conventional wisdom is not to put all of your eggs in one basket. 80/20 wisdom is to choose a basket carefully, load all your eggs into it, and then watch it like a hawk.”
— Richard Koch: is a former management consultant, entrepreneur, and writer
WHO’S THE QUARTERBACK?
Given that it’s Superbowl Week, I thought we might go with a football theme today. I can’t tell you how many different people I hear proclaim that they are the quarterback of the real estate transaction – the agent, the loan officer, an attorney, accountant or financial planner. But for goodness sake, the buyer/borrower had better be the one calling the shots. Not that everyone else doesn’t play an important role, but the buyer/borrower is the one most impacted by the choices made.
How the team works best:
• Head Coach (Your Loan Officer) – Your loan officer should be the Head Coach. After careful analysis of your income, credit and assets, this is the person in the best position to make sure you are playing to your strengths and minimizing your weaknesses. Your loan officer can discuss the economic realities of homeownership, while listening to your quality of life concerns. (How often you’ll be able to eat out or vacation, for example.) The loan officer can set up the game plan.
• Offensive Coordinator (Your Real Estate Agent) – Your real estate agent is your offensive coordinator. Armed with the game plan (which includes your limitations), the agent calls the plays, counseling you on the geography, the competition, the best ways to negotiate your way to your personal touchdown. Agents know the playing field (the inventory and the market). If you hire them to represent you, they can disclose the weaknesses of your competition (the seller).
• Offensive Line (Your Attorney, Accountant and Financial Advisors) – Your attorney, accountant and financial advisors are your offensive line. They are there to protect you from the blitzes that come from outside (sellers, title issues, tax consequences, and protecting your assets). Not the glamour positions, but vital to any success you are going to have.
• Running Backs and Wide Receivers (Your Friends and Family) – Your friends and family are the running backs and wide receivers. They often receive the glory and attention, but honestly, if everyone else doesn’t do their job, they rarely ever see success. Bad game plans, weak play calling, poor execution on the offensive line or by you, as quarterback, leave them merely as names on the roster.
As with any team, communication is the most important component to getting the desired results. Being the center of the action on the field, the quarterback (you) needs to honestly talk with your coaches and coordinators, so they can help direct you on the proper play calling. Simultaneously, you need to heed the feedback from your offensive line, running backs, and receivers to filter wise advice from emotion. Be the quarterback of your own home-buying process and you’ll be more likely to realize your dreams (and not the dreams of someone else).
IS IT TIME FOR YOUNG FAMILIES TO BUY A HOME?
It has been reported that almost six million adults between the ages of 25 to 34 are currently living with their parents. That number reflects an almost 50% increase since 2003. These young adults are now being advised to jump into homeownership.
Who are the people selling them on the American Dream? Their parents! It seems that parents of some adult children are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some moms and dads are helping financially and are even co-signing for the mortgage. Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.
In Fannie Mae’s most recent National Housing Survey, they asked the question directly: Is this a major reason to buy a home?
The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:
1. It means having a good place to raise children and provide a good education.
2. You have a physical structure where you and your family feel safe.
3. It allows you to have more space for your family.
4. It gives you control over what you do with your living space (renovations & updates).
Should this surprise us? Aren’t these the same reasons our parents bought their home? Aren’t these the same reasons we purchased our home? These are the same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.
And today, the cost of homeownership is at all time lows:
“The numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”
“[S]omeone who plans on staying put for seven years would come out ahead by about $9,000 if they bought a median-priced home rather than being a tenant in a median-priced rental.”
“Homes today are more affordable for average families than they have been since 1971. Median-income families today have nearly double the funds needed to purchase the average home.”
Now that the economy is beginning to show signs of stabilizing, people are getting back to the core values that families have always embraced. Homeownership is definitely high on that list. And today, from a financial standpoint, it may be the opportunity of a lifetime.
OBAMA REFI PLAN WOULD HELP NON-GSE-BACKED BORROWERS
In the details released today, President Barack Obama fleshed out a proposal he announced in his State of the Union speech to boost the housing market by helping more underwater home owners than are currently being served by lenders.
The President said he wants to make the federal government’s existing mortgage refinance program, called HARP (Home Affordable Refinance Program) available to more home owners. It’s currently available to struggling borrowers with loans backed by Fannie Mae and Freddie Mac. For these borrowers, incentives are provided under certain conditions to make refinancing more attractive.
1.) More underwater home owners would be able to tap federal refinance assistance than can do so today,
2.) mortgage servicers would be restricted in their ability to foreclose until after they’ve exhausted efforts for borrowers who’ve make a good-faith effort to modify their mortgage, and
3.) efforts to reduce the inventory of foreclosed homes through bulk sales to investors for use as rental housing would be tried in a pilot program.
Under the new proposal, HARP would be expanded to include borrowers with loans that aren’t backed by Fannie and Freddie. These are the borrowers whose loans were securitized in private-label securities without any federal backing, and they would be allowed to refinance into FHA-backed loans, the same as the Fannie and Freddie borrowers. The administration has estimated that borrowers would save $3,000 a year in mortgage costs.
To be eligible, borrowers would have to have made their mortgage payments over the last six months with only one delinquency, and their loan amount couldn’t exceed the FHA loan limit for their area. If borrowers owe more than 140 percent of the value of their home, the lender has to agree to reduce the loan balance. Also, borrowers wouldn’t have to submit a full file of paperwork for the refinancing as long as they can verify their employment. The proposal also would enable borrowers who still have equity in their home — up to 20 percent — to participate.
The changes will require legislation, so Congress will have to agree to them for the expanded program to take effect.
In his State of the Union speech last week, Obama said he would pay for the expanded program using a fee charged to the country’s largest banks so the initiative wouldn’t add to the deficit. But some members of Congress have said they oppose charging banks a fee to cover the cost.
The Obama plan would also introduce a Bill of Rights for home owners, part of which is intended to smooth the mortgage modification and foreclosure processes, which today can be contentious and difficult for borrowers to understand. A key part of this is an effort to curb banks’ practice of undertaking a mortgage modification while at the same time proceeding with a foreclosure — a process called dual tracking. Before they can start foreclosure, banks will have to show they took all reasonable steps to modify a borrower’s mortgage.
To help ease inventories of foreclosed homes, the plan would give a green light to Fannie Mae to implement a pilot program to make foreclosures available to investors in bulk purchases for conversion to rental housing. Under the pilot, Fannie would package for sale foreclosed homes in a limited number of markets and require them to be used as rental properties for a period of time.
NAR has concerns with this proposal and has been talking with federal regulators to ensure that the program is carefully tailored to the communities who can truly benefit from it, that small- and medium-sized investors be able to participate, and that real estate professionals continue to play a role in the disposition of the homes.
In a statement released after the President outlined the details of his proposal, NAR said it’s urging the regulator of Fannie and Freddie, the Federal Housing Finance Agency, “to proceed cautiously with the REO-to-rental program since housing markets are complex and varied.
“NAR believes an overly aggressive REO-to-rental program that is not privately administered by local entities and does not involve substantial participation of local market experts, especially licensed real estate professionals, could be disruptive and counterproductive to communities already suffering from high foreclosure inventories and lower housing values.”
FIRST-TIME BUYERS MORE WILLING TO COMPROMISE
When it comes to space and upgrades, first-time home buyers are more willing to compromise than repeat buyers, according to the National Association of REALTORS®’ 2011 “Profile of Home Buyers and Sellers.”
While they have big wish lists too, first-time buyers seem to be most driven by finding a home that offers a reasonable monthly mortgage payment.
“Single home buyers tend to value affordability above all when they are choosing a home and a neighborhood,” says Jessica Lautz, NAR’s manager of member and consumer survey research. “They also focus more on living some place convenient to friends and family, as well as entertainment and leisure activities.”
The median age of first-time home buyers is 31, and about 26 percent are married with children.
First-time home buyers tend to rate energy efficiency high on their wish list, as well as simple, no-hassle technology use in their house, the study finds.
But “even if they like the idea of solar panels, first-time buyers are not likely to spend an extra $20,000 to have them,” says Stephen Melman, director of economic services for economics and housing policy for the National Association of Home Builders.
First-time buyers also are willing to compromise on space: The median-size of a home purchased by a first-time buyer is 1,570 square feet.
Overall, “the top three things that buyers want are a great room instead of a formal living room, a walk-in closet in the master bedroom, and a laundry room,” says Melman. “First-time buyers want the same thing, but they are more likely to be satisfied with a small laundry room without an attached mudroom and with a smaller master bedroom and a smaller walk-in closet.”
But one thing first-time buyers aren’t as willing to compromise on: Buying a home that needs a lot of repairs.
“Buyers that don’t have any experience with home maintenance tend to be afraid of renovations, so home sellers should be sure to fix everything they can and make minor home improvements in order to appeal to first-time buyers,” Melman says.
TEAM EMPOWERMENT MORTGAGE CHATTER: Feb 2; Who’s The Quarterback?; Is It Time For Young Families To Buy A Home?; Obama Refi Plan Would Help Non-GSE-Backed Borrowers; First-Time Buyers More Willing to Compromise
“Be sure you put your feet in the right place, then stand firm.”
— Abraham Lincoln: was the 16th President of the United States
10 SURPRISING REASONS YOU CAN’T GET A HOME
Getting a home signifies financial security and an investment for the future. Owning a home is part of the American Dream. There are some surprising reasons why you can’t get a home.
1. Down Payment – You may have the required 10%-25% on the asking price of the home you are interested in but how you acquired it and how long you’ve had it could keep you from getting the home. Many times relatives offer young couples the down payment. Lending institutions take this into consideration when looking at the ability of a homeowner to keep up with mortgage payments. Saving the down payment over time lends to the credibility of money management.
2. Credit– Credit history is an ongoing process. Student loans are one of the first obligations a person may have as an adult. Late payments may have a bearing on your ability to acquire a home later in life. Credit scores are also affected by utility payments. Any recurring bill that is paid late may come back to haunt you even though your financial situation is now more sound. Your debt to income ratio ideally needs to be under 45%. Less than a 3 month asset reserve in a bank account will generally keep you from getting a home. Check your credit score with all 3 agencies and make sure there is nothing being reported incorrectly. You need to aim for a score of 660 or better.
3. Job Security – Your job history may be why you can’t get a home. Lenders look for stability. If you jump from job to job, regardless of monetary or career improvement, lenders see you as a financial risk. When the economy takes a downward turn, employers tend to retain employees with seniority. Also taken into consideration is the risk of the job.
4. Parent History – If your parents have a questionable credit history, you may be dealing under their shadow. If parents foreclosed, you may be affected. If they were late with mortgage or credit card payments, you may be looked upon as having the same traits. If you are asked information on parent particulars, you may need to look elsewhere for home financing.
5. Location – The location of a home may affect whether or not a lender is willing to risk mortgaging it. LNG routes, Super Site areas, fault lines, destructive weather patterns all have bearings on mortgage risks lenders are willing to take on.
6. Inspection – More and more, home inspections are being required to seal the closing deal. Hopes have been dashed to learn major expenses must be incurred to pass inspection for the approval of the sale.
7. Condition – Fixer-uppers may offer pricing that appears affordable. If you have no background of construction or home improvement projects completed, lenders are leery to finance such undertakings. They may require a lump sum amount be in an account to cover the improvements necessary to ensure the property does not result in a loss to the lender.
8. Liens – If you owned property before and were subject to liens for unacceptable reasons such as credit card debt or unpaid taxes, you may not get the home you desire. A current homeowner may also have substantial liens that need to be satisfied at closing either from the sale itself or as additional costs to the buyer.
9. History – The history of the home may be the deciding factor that keeps a lender from financing in your behalf. A murder, haunting, nearby sinkhole, or other less favorable activity, bear upon the lender’s willingness to finance such a home.
10. The Bank – Economic conditions and bank lending history may be the reason you can’t get a home. Banks may be leaning toward only very secure clients to up their lending credibility. If a bank turns you down, look to other options before you decide to settle on thinking you can’t get a home. FHA, VHA, or a first time buyer program offer other alternatives for which you may qualify.
If you can’t get a home loan with one lender, chances are good that another institution will also turn you down. You should take some time and work at increasing the good points that will work in your favor. Try again when your situation has improved.
ARE HOME OWNERS HAPPY WITH HOME OWNERSHIP?
Seventy-two percent of home owners say they are satisfied with owning a home, mostly attributing their satisfaction to the pride home ownership brings them as well as the freedom to control what type of home improvements and upgrades they can do to their homes, according to HomeGain’s 2012 Home Ownership Satisfaction Survey of more than 1,400 home owners across the country.
The survey shows that “in spite of declines in the values of homes nationwide, satisfaction among home owners remains high … with nearly 3 of 4 home owners satisfied with home ownership.” Louis Cammarosano, general manager of HomeGain, said in a statement.
The Northeast had the highest percentage of satisfied home owners at 77 percent, followed by the Southeast (73 percent), West (71 percent), and the Midwest (68 percent), according to the survey.
But for those 28 percent of home owners who say they aren’t satisfied with home ownership, the majority blamed it on the price depreciation of their home as the chief reason.
Here are some other differences the survey uncovered for home owner satisfaction verses dissatisfaction:
–The survey found that home owners who purchased their homes three to eight years ago tended to be the most dissatisfied. On the other hand, home owners who purchased their home in the last three years, or more than eight years ago were found to be the most satisfied.
–The home owners who were the most satisfied with home ownership paid less than $75,000 for their home, whereas home owners who purchased a home for more than $800,000 were the least satisifed.
–Home owners purchasing a foreclosed home or a home in a short sale also had some of the highest home ownership satisfaction rates, according to the survey.
HOW TO HELP YOUR CLIENTS BUY A FORECLOSURE
Home buyers can be attracted to the big bargains that foreclosures and pre-foreclosures can offer, but these can be tricky, lengthy transactions to negotiate and there’s a lot to think about before jumping in, real estate professionals say.
Make sure you get a good value: Before a buyer makes an offer on a foreclosure or short sale property, real estate agents say buyers need to carefully review with their agent’s comparable sales prices in the area, the number of nearby foreclosures, the school districts, and close-by amenities–which all can be important factors that can influence home values, says Daren Blomquist, vice president at RealtyTrac.
“You want to be careful if every house is in foreclosure,” Blomquist says. “When you purchase a property in this market, the value will probably go down before it goes up. If it’s the only property in a market, you can probably get a good deal.”
Generally, Alexis McGree, co-founder and president at ForeclosureS.com, says that buyers need to be realistic and shouldn’t expect any more than a 10 percent to 20 percent discount on a bank-owned property.
Watch the condition: Foreclosed homes often are sold as-is, but experts urge buyers to get a home inspection done prior so they know the cost estimates of any repairs needed. “Getting a home inspection is not a requirement, but you can make it a requirement by including an inspection contingency clause in your offer agreement,” says Marvin Goldstein, president of the American Society of Home Inspectors. “No one wants surprises on the last day.” Plus, you may be able to use any condition problems uncovered in the home inspection in negotiations to justify a price discount.
Look for special financing: The Department of Housing and Urban Development offers some options. For example, “the Federal Housing Administration Section 203(k) program is great for foreclosed home buyers,” says Blomquist. “The FHA loans give you more money to help fix up the property.” The loans, which are insured by HUD, allow borrowers to use some of the loan for any needed repairs. The loans require a down payment of 3.5 percent of the purchase price.
Run a title search: Experts also recommend running a title search on the property to find out if the property has any liens from other lenders or whether any property taxes are owed.
BANKS, GOV’T NEAR DEAL ON FORECLOSURE SETTLEMENT
Up to 1 million at-risk, underwater borrowers may be eligible for a reduction on their mortgage principal, if a settlement between big banks and government officials gets the final approval.
The mortgage aid is reportedly on the table as big banks and federal and state government officials are nearing an end to months of settlement talks stemming from foreclosure abuses allegedly made by banks that caused many home owners to lose their home.
“We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Shaun Donovan, U.S. Housing and Urban Development Secretary, said during a recent forum at the Winter Meeting of the U.S. Conference of Mayors in Washington.
Under the proposed settlement, major lenders J.P. Morgan Chase, Bank of America, Wells Fargo, Citigroup, and Ally Financial would pay between $20 billion to $25 billion to settle alleged foreclosure abuses.
Donovan also said banks also would reduce the mortgage principal of up to 1 million borrowers by about $20,000 each. Furthermore, he noted that some families who were wrongly foreclosed upon may get compensated as a result of the settlement.
DON’T LAG ON WINTER HOME MAINTENANCE
Homes may require some extra attention when it comes to maintenance to protect itself against the cold, harsh weather.
A recent article at Realty Times offers up some maintenance tips for the winter months:
Keep out drafts. Twice a year check your windows and doors for any air leaks, and add caulking, if needed. If extra caulking won’t suffice and you don’t have the money for a replacement, consider adding a storm door to keep out drafts or at least purchasing a draft blocker, which lies at the bottom of your door to block out the cold air.
Check the heating system. “Central heat and air units need to be checked over,” the Realty Times article notes. “When a unit is well-serviced it will save you fuel and thus money.”
Assess the ductwork. Make a trip to the attic to ensure that any parts haven’t become disconnected as well as a critter hasn’t chewed through any duct work.
Clean the gutters. Gutters can become clogged of leaves or other debris. When that happens, they can hold water, which can eventually rot away the siding or roof of your home. Make sure to keep the gutters clean.
Prevent freezing pipes. “When the weather drops below freezing you need to keep your pipes from freezing,” the Realty Times article notes. “Let faucets drip and unhook all outdoor hoses.”
“To get through the hardest journey we need take only one step at a time, but we must keep on stepping.”
— Chinese Proverb
PEOPLE ARE BUUYING HOMES AND GETTING MORTGAGES!
Many believe that very few houses are selling and that almost no one can get a mortgage. We want to let everyone know that neither of these assumptions is true. Recently, the National Association of Realtors (NAR) released their Existing Homes Sales Report. According to the report there are, on average, 12,109 homes selling in the United States EACH and EVERY DAY! That means that approximately 12,000 houses sold yesterday, approximately 12,000 will sell today and approximately 12,000 will sell tomorrow. So the thinking that homes aren’t selling just isn’t true.
Another interesting fact in the report was that 72% of these transactions were accompanied by a mortgage. That means that approximately 8,719 people qualify for a mortgage on a daily basis in this country.
There are over 12,000 homes sold and over 8,000 mortgages granted every day. The real estate market is doing better than many believe.
FANNIE EXTENDS MORTGAGE RELIEF TO UNEMPLOYED
Fannie Mae says it will be providing more mortgage aid to the unemployed, possibly extending the forbearance period to up to a year to those who qualify.
Starting on March 1, Fannie Mae will require mortgage servicers to extend the forbearance relief to qualified unemployed borrowers for six months — without any approval needed from Fannie Mae. The government-sponsored enterprise also says special consideration will be made for some borrowers in suspending mortgage payments or reducing them for up to a 12-month period.
Fannie’s announcement follows on the heels of Freddie Mac’s announcement earlier this week about similar changes to its mortgage relief program for the unemployed. Freddie Mac announced it will begin offering a 12-month forbearance period to qualified unemployed borrowers starting on Feb. 1.
To qualify, mortgage servicers will determine if the “borrower has less than 12 months worth of mortgage payments in reserves and has monthly housing expenses above 31 percent of their incomes before extending a forbearance plan,” HousingWire reports.
During the third quarter of 2011, the GSEs issued more than 7,000 forbearance plans, according to the Federal Housing Finance Agency.
CREATING WEALTH THROUGH HOMEOWNERSHIP – THE PROOF
Several real estate economists have shown that the average homeowner accumulates more overall wealth than the average renter.[i] However, it is not clear how this is done. Is it that owned property usually appreciates at such a rate that, after considering leverage, returns to ownership are extraordinarily high? Said another way, might homeowners accumulate more overall wealth because ownership is a great levered equity creator through property appreciation? Or, is it that owners acquire greater wealth, on average, because they are systematically paying down a mortgage thereby creating equity thanks to loan amortization? In other words, paying off property creates wealth.
In ongoing research being conducted by Beracha and Johnson,[ii] these and other questions concerning homeownership and the accumulation of wealth are being investigated. In earlier research, Beracha and Johnson show that renting is the superior investment strategy; however, in this earlier strict horserace between buying and renting, a very bold assumption is made. Specifically, it is assumed that any rent savings (from lower rent versus mortgage payments) are reinvested without fail. Thereby, after balancing all of the costs and benefits from ownership and comparing them to renters’ portfolios from reinvesting rent savings, renting wins.
The question, however, very quickly becomes that, in a setting where Americans generally save less than 5% of their disposable income, is this assumption realistic and how might the removal of this reinvestment decision alter the outcome of the horserace between buying and renting? As part of their current research, this question is directly addressed. In particular, Beracha and Johnson find that after allowing renters to spend any rent savings on consumption (beer, cookies, healthcare, education, etc.), ownership leads to greater wealth accumulation, on average. The graph below highlights this finding.
The graph looks at the ratio of renters’ portfolio values to owners’ proceeds from sale for the entire U.S. between 1978 and 2010 both with strict reinvestment of rent savings and without reinvestment of rent savings.[iii] Clearly, numbers greater than 1 indicate that renting leads to greater wealth accumulations, while numbers less than 1 indicate that homeownership creates greater wealth, on average.
When renters are forced to reinvest (top line in the graph), the results confirm the earlier findings of Beracha and Johnson (2012). That is, in a strict horserace between buying and renting, renting wins in the vast majority of cases. However, when renters are allowed to spend rent savings on consumption (i.e. economically act like the typical American consumer), homeownership wins in virtually all instances. Notice that in the bottom line of the graph (no reinvestment), the renters’ portfolio values divided by owners’ sale proceeds is great than 1 for only four of the 32 years of the study. Thus, when renters are allowed to spend rent savings, homeownership is the clear winner in the wealth accumulation horserace.
Finally, in the same current research, Beracha and Johnson find that allowing for property appreciation rates to increase as much as 20% over their actual historic values results in virtually no change in the outcomes concerning wealth accumulation. That is, property appreciation contributes only marginally to wealth accumulation.
Without proof many have speculated about this outcome for years. However, there is now actual quantifiable evidence that homeownership is not the great levered equity creator that it has so often been touted to be. Instead, it appears that homeownership creates extra wealth mainly through its ability to force owners to save rather than through property appreciation. Thus, homeownership appears to be a self-imposed savings plan, which through time leads to greater wealth accumulation as compared to comparable renters. In short, buying a home makes Americans save.
Who says that Americans are horrible savers? Apparently, we are not. We have simply been saving through our homes rather than putting our savings in the bank.
[i] Homeownership is the most viable path to wealth creation for the majority of Americans. See Engelhardt (1994), Haurin, Hendershott and Wachter (1996), and Rohe, Van Zandt and McCarhty (2002), among others.
[ii] Eli Beracha and Ken H. Johnson, 2012, Beer and Cookies Impact on Homeowners’ Wealth Accumulation, ongoing research.
[iii] The research assumes 8-year holding periods. When the holding period is allowed to vary between four and twelve years, the results change only marginally. Thus, holding period has very little to do with the results.
OPTIMISM BUILDS IN HOUSING MARKET
Several recent indicators for the real estate industry are pointing to a market that is on the mend and entering recovery mode.
Housing experts’ predictions for the new year tend to center around a market stabilizing before entering a gradual, albeit very slow, recovery. However, the tone is more upbeat than it has been in years for the housing market.
Here are a few of the signs that are showing the market moving in a more positive direction:
Home sales: Existing home sales are expected to increase 12 percent this year, following a 2 percent jump last year, Moody’s Analytics predicts. The signs are already showing: In November, pending home sales — a gauge for future home buying — reached its highest level in 19 months, the National Association of REALTORS® reported.
New-home market: Coming off of what could be considered the worst year for new-home building ever recorded, the sector is expected to bounce back this year. New-home sales and starts were already showing a rebound in the last few months of 2011. Moody’s is predicting that single-family housing starts will increase 37 percent this year, and new-home sales will soar 74 percent.
Housing stocks: Investors are starting to get optimistic about the possibility of a rebound too, and are turning to home builder stocks. These equities have recently outperformed the broader stock market and the S&P 1500 homebuilding index has increased 38 percent since mid-October, USA Today reports.
Consumer confidence: With mortgage rates at record lows and housing affordability high, about 71 percent of Americans say now is a good time to purchase a home. Also, more Americans are optimistic that home prices will rise over the next year — about 26 percent say prices will rise in 2012, an increase of 4 percent over the last survey, according to Fannie Mae’s December National Housing Survey
HOUSING NEWS: 11 TRENDS FROM 2011
The National Association of Realtors surveys homebuyers and sellers each year to uncover housing trends and monitor changes taking place in the industry. This year’s report highlights a number of trends that haven’t been seen in years. Here are just 11 highlights from the 2011 report.
1. In 2011, 37% of homebuyers were first-time buyers – which was down from 50% in 2010.
2. Last ye ar, 88% of homebuyers used the Internet to search for a home. That number was down slightly from a high of 90% in 2009.
3. The typical homebuyer searched for 12 weeks and viewed 12 homes.
4. The number of buyers who purchased their home through a real estate agent or broker climbed to 89% – a share that has steadily increased from 69% in 2001.
5. Nearly 1 out of 4 buyers said the application and approval process was “somewhat more difficult” than expectedand 16% reported it was “much more difficult” than expected.
6. About half of home sellers traded up to a larger and more expensive homeand 60% traded up to a new home.
7. The top 3 factors influencing neighborhood choice were: the quality of the neighborhood, the convenience to job, and the overall affordability of homes.
8. The typical seller lived in their home for 9 years. That n umber has increased from 6 years in 2007.
9. Although 61% of sellers said they reduced their asking price at least once, the average home sold for 95% of the listing price.
10. Only 10% of sellers sold their homes without the assistance of a real estate agent. Of those people, 40% knew the buyer prior to the sale.
11. The typical “for sale by owner” home sold for $150,000 compared to $215,000 for the average agent-assisted home sale.
“If you turn it over to the universe you will be surprised and dazzled by what is delivered to you. This is where magic and miracles happen.”
— Dr. Joe Vitale: Motivational author and speaker
WHEN THE PROPHET SAYS BUY – BUY!
John R. Talbott, previously a Goldman Sachs investment banker, is a bestselling author and economic consultant. When it comes to the housing market he is also a prophet. When housing prices started to skyrocket in 2003, he published The Coming Crash in the Housing Market correctly warning us that a real estate bubble was forming. Then in January 2006, he called the absolute peak of home prices in the US by releasing a new book, Sell Now! The End of the Housing Bubble.
Mr. Talbott, the person who accurately predicted the housing bubble and its bust, now has a new prediction – IT IS THE TIME TO BUY A HOME! In a recent article, Homes – Buy Now!, Talbott simply explains:
“I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt.”
He goes on to explain that his conclusion is based on four different metrics, all of which favor buying today:
- Home Prices Relative to Peak Prices During the Bubble
- Home Prices Relative to Construction Costs or Replacement Costs
- Home Prices Relative to Incomes and Rents
- Home Prices in Real Terms, Not US Dollar Terms
If the person who called the real estate bubble and its bust says now is the time to buy, we believe it is time to buy.
MAKING IT HAPPEN, PART 2
In last week’s View article, we focused on 5 steps to achieving your New Year’s Resolutions. Those steps included: setting realistic goals, making a simple plan for each goal, announcing your goals, tracking and celebrating your progress, and avoiding the urge to give up if you have a setback.
Luckily, you’re not on your own to work through those steps. That’s because there are a number of social media websites and smart phone applications designed to help you.
Obviously, popular apps like Facebook and Twitter can help you announce your goals, hold yourself accountable, and receive supportive feedback from friends and family members. But there are a number of additional resources that you may not know about.
Here are just 5 social media sites and apps that can help you set your New Year’s resolutions…and stay on track!
1. Tweet Reminders. Twitter is great for connecting with people and sharing news instantaneously. But did you know it’s also a great way to remind yourself about tasks? Need a reminder to go to the gym… or to call those past clients? No problem. Visit the Tweet Reminders site, and then enter your Twitter username and up to 5 tasks or reminders. You can even pick a date and time. Then, Tweet Reminders will send you a direct message on Twitter to remind you about them. It’s both an easy and helpful thing to do.
2. Moteevate. Regardless of whether your goal is big or small, this site has the inspiration, energy, and advice you need to reach it. With moteevate, you get support from people you already know as well as advice from experts in the field – all while being surrounded by people looking to achieve similar goals. You can even moteevate in teams and act as moteevators for each other. The site also includes cool trackers to record your progress and milestones. Plus, you can customize the privacy settings to keep your goals to yourself or share them with others. And best of all, the basic platform is free to use with the caveat that you pay whatever you want after you achieve your goal. In fact, this honor system is the only thing old-fashioned about moteevate.
3. Toodledo. This is a businessperson’s dream app. You’ve no doubt seen a To-Do list before…but this app kicks it up a notch! Not only does it help you easily organize your tasks and set alarms, but it also allows you to collaborate with other people and establish sub-tasks to work towards your goal in small steps! Plus, Toodledo can be used on your mobile phone, in your email, on your calendar, and even integrated directly into your web browser. So you can stay on track from anywhere…and at any time.
4. StickK. The basic principle of this app is that “incentives get people to do things.” So if you really want to achieve a goal – whether it’s personal or professional – it’s time to put your money where your mouth is. Basically, stickK allows you to create a Commitment Contract focused on achieving a specific goal. As part of the process, you set your goal and timelines, stakes, referee who will monitor your progress, and supporters who will cheer you on. If you achieve your goal in your timeframe, you don’t lose the stakes you wagered. But – the best part is – even if you don’t achieve your goal, the money you wagered goes to a worthy cause or charity that you designate. So it truly is a win-win situation!
5. GymPact. This is similar to stickK in that you put money on the line…but it’s different in that you can also earn some money. You start by making a commitment that you will go to the gym a certain number of times per week (don’t worry, you can change your pact any week). You also set the monetary stakes that you’ll pay if you don’t meet your commitment. Then, you simply use the GymPact iPhone app to check in when you go to the gym. When you meet your weekly goal, you’ll be rewarded with real cash, funded by the people who didn’t work out! The more days you commit, the more cash you earn. The only downside is that you need an iPhone (or an iPod Touch and a gym with Wi-Fi) to participate, since apps for other systems aren’t available.
Of course, this is just the tip of the iceberg when it comes to social media websites and apps designed to help you set and achieve your goals. Best wishes to you in the coming weeks and months.
And, if your New Year resolutions involve any financial or housing matters that I can help with, please call or email today. I’ll be happy to help out in any way that I can.
FED OFFICIALS CALL FOR MORE HOUSING FIXES
New programs and “housing policy interventions” are needed to help the real estate market rebound and boost growth in the overall economy, three Federal Reserve policymakers said Friday.
The latest statements join a range of calls by the Federal Reserve in the last week urging for more government intervention to help the housing market. Last week, the Fed released a 26-page white paper providing an outline on how the government needs to take more aggressive action to prevent home values from falling further, seek solutions to the foreclosure crisis, and loosen stringent underwriting standards that are keeping borrowers from securing mortgages or refinancing.
New York Fed President William Dudley said on Friday that the housing market is “only one factor behind the frustratingly slow” economic recovery, but it’s an “important one that deserves our attention.”
Dudley said that it’s important for monetary policy to complement actions taken by lawmakers in order to help stabilize home prices and bring about a recovery to the housing sector within the next year or two. He said programs are needed that are aimed at preventing additional foreclosures, easing burdens for home owners in refinancing mortgages, and getting more renters into REO properties.
“Forceful and effective housing policies have the potential to significantly influence the speed and strength of our recovery,” Fed Governor Elizabeth Duke said in separate comments made last week at an event in Virginia.
The Fed will hold its next policy-setting meeting Jan. 24-25.
4 WAYS TO ENHANCE YOUR WEB SITE
A good Web site can do some of the work for you to bring in new clients. Tricia Andreassen, CEO and founder of Pro Step Marketing, recently highlighted ideas in an article at RISMedia about how to enhance your real estate Web site to make sure it’s serving as a lead generator for your business. Among her ideas:
1. Have a strong MLS tool on your Web site’s front page. “Having an interactive search tool where the visitor can choose a specific town, price range, and even property type can be a powerful way to compel them to want to click-through and access listings,” Andreassen writes. “Having an IDX-integrated search on the home page eliminates the need for buyers or sellers to click-through three or four levels just to view homes.”
2. Make sure your visitors can contact you. Ensure you are the point of contact through easy-to-find buttons throughout your Web site, even when your Web visitors are searching the MLS from your site. Make it so they can easily click a button to access more information, schedule a showing, or share the listing with a friend or family member.
3. Include social media features. Have icons to your Facebook wall or your Twitter account, and allow your Web visitors to easily share any information on your Web site via social media.
4. Set up e-mail campaigns. Allow your Web visitors to sign up to receive more targeted information from you. “For example, let’s say you come across a great foreclosure deal and you want to let your foreclosure buyer pipeline know about it,” Andreassen says. “Have the tools so that you can e-mail the entire group within moments to let them know about the new listing.”
5 TIPS TO ENHANCE YOUR LISTING PHOTOS
High-quality images are an important ally in attracting buyers to your listing and selling a home, real estate pros say.
David Rezendes, who won the 2011 “Top Real Estate Photographer” honor by the Photography for Real Estate organization, offers up some of his secret tips to AOL Real Estate on taking better property photos:
Don’t always shoot wide. A wide shot can capture an entire room and show off its roominess, but sometimes focusing in on a vignette or architectural detail will better “convey the feeling of a house and give a stronger effect,” Rezendes told AOL Real Estate.
Remove clutter. Sure, you’re going to remember to fluff the pillows and ensure stacks of papers are out of the frame. But don’t forget to hide exposed power cords or personal items. “Keep your photos neat but not sterile,” Rezendes says.
Beware of vertical photos. “Shooting at a downward or upward angle can skew the vertical lines of the photo, making them no longer parallel,” Rezendes told AOL Real Estate. You can tweak this using photo editing software, but beware of it when you’re shooting if you don’t want to correct later.
Stay out of the frame. When taking a photo near mirrors or windows, watch the reflection so you or your equipment don’t wind up in the picture.
Don’t shoot into the sun. When photographing a home’s exterior, avoid taking the photo in the direct, midday sun. Instead, a better time to capture the exterior is in the morning or early evening, capturing the best natural light backdrop for the home.
CONTINUING EDUCATION COURSES HELP YOU STAY ON TRACK
To provide its members with the tools and expertise to build their business and better serve clients, the National Association of REALTORS® and The CE Shop, Inc., have entered into a partnership to provide continuing education for REALTORS® taking online designation and certification courses at REALTOR® University’s School of Professional Development & Continuing Education.
Continuing education is now available in 20 states across the country for several courses including some of NAR’s most popular certifications and designations, which include ABR®, GREEN, SRES®, AHWD, BPOR, e-PRO®, SFR, and RPR™. These programs help REALTORS® serve the unique needs of their clientele, including first-time home buyers, seniors, consumers interested in green building practices, and buyers and sellers involved in foreclosures and short sales. The CE Shop and NAR are currently in the process of securing continuing education for additional states in the U.S.
“REALTORS® bring value to their clients, and continuing education is just one example of how they do that,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “These courses encourage REALTORS® to strengthen their skills while offering them a chance to stay up-to-date with their designations, certifications and state-mandated continuing education hours. Meanwhile, home buyers and sellers can rest assured they are working with a professional who has exceptional real estate knowledge and experience.”
As an added member benefit, the courses being offered are approved for continuing education credit at no additional cost. The REALTORS® University School of Professional Development & Continuing Education offers over 400 hours of online education and professional development courses through Learning Library Inc.and is the exclusive provider of courses leading to NAR’s official designations and certifications.
REALTORS® University also has received approval to operate from the Illinois Board of Higher Education and has submitted an application for degree-granting authority to the Board. REALTORS® University will be applying for candidacy for accreditation from the Higher Learning Commission of the North Central Association of Colleges and Schools.
The CE Shop is the nation’s leading provider of online real estate continuing education. The CE Shop proudly offers courses certified by the Association of Real Estate License Law Officials (ARELLO®) and approved by real estate regulatory agencies across the United States.
Learning Library Inc. is the leading North American provider of integrated education e-store, automation and management systems primarily supporting compliance education with a core focus on servicing the real estate industry and the NAR family for 10 years.
“When you are in the zone, your intuition comes to the forefront, … Your intuition will guide you. It is your best friend. It has information your mind does not have. When you are a zone performer — no matter what it is you do — you are operating on intuition and you have an unfair advantage over the competition.”
— Jim Fannin: Nightingale-Conant author
5 QUICK TIPS FOR JANUARY 2012
1. Attack the Expired Listings
There will probably be more listings expiring this December 31st than any other single day in real estate history. We should not let this tremendous opportunity pass us by. These sellers may not have had an agent that was strong enough to price their home correctly. Prospect these sellers and explain what it will take to sell their home in this market and let them decide what is best for their families.
2. Prepare a Powerful Pricing Conversation
Whether working expired listings, FSBOs, new listings or your current listing inventory, it is crucial to have a well prepared conversation concerning pricing. Building a large inventory of salable listings in January will guarantee your success throughout the year – BUT THEY MUST BE SALABLE. Pricing will be the most crucial component of salability throughout the first quarter of 2012. For more on this subject you can read: House Prices: Where They Will Be in the Spring.
3. Be Seen As a Trusted Advisor
In the current economic climate, many consumers are losing confidence in both corporations and the individuals who represent those corporations. We must make sure that we know how to build trust with both our buyers and sellers. Once people realize that we are knowledgeable and truly care, they will more readily trust us and the information we share with them. To help with this you can listen to a recorded version of a webinar we recently did on this subject: How to Build Trust in Times of Doubt.
4. When Speaking With Buyers, Talk Affordability
The combination of falling prices and record low interest rates has made owning a home more affordable than almost any other time in history. Know what the affordability indices (ex. Price-to-Income, Mortgage Payment-to-Income) mean and be able to explain them simply and effectively. Dr. Ken Johnson of FIU has done great research on this issue. To download a copy of a PowerPoint presentation Dr. Johnson recently did on the subject, click here.
5. Become a Go-To-Agent
We must realize that it is not just the number of people we talk to but the depth of conversations we are capable of having with them. We need to position ourselves as the source of great information regarding the real estate market. We must develop and be able to communicate compelling messages for both buyers and sellers. For additional information, you can listen to a recorded version of a webinar we recently offered: How to Position Yourself as the Go-To-Agent.
5 REAL ESTATE TRENDS TO LOOK FOR IN 2012
Predicting trends during the most volatile housing market in American real estate history is no easy task. We strongly believe these are the five real estate items we should keep an eye on in 2012:
1. Buyers Will Return
In 2011, a lack of consumer confidence in the overall economy dramatically impacted the housing market. Buyers were afraid to make a purchasing decision on any big ticket item. By the end of 2011, consumer confidence began to return and sales increased. Economic conditions will continue to improve throughout 2012 and consumer sentiment will solidify. Once that happens, home buyers will realize that now is the time to buy.
2. Foreclosures Will Increase
The ‘shadow inventory’ of foreclosures which has been growing since the robo-signing challenges of late 2010 will finally be introduced to the market. Distressed properties sell at discounted prices. They will impact the housing values of the non-distressed homes in the area.
3. Prices Will Soften
As more and more foreclosures come to market, there will be greater downward pressure on the values of houses in the region. Foreclosures impact values of non-distressed properties in two ways:
• They will eat up some of the buyer demand in the market.
• They will impact the appraisal on ALL transactions in the area.
An increase in foreclosures will have a negative impact on values. This will cause more homes to be underwater.
4. Short Sales Will Increase
As mentioned above, we strongly believe that home prices will soften through at least the first half of 2012. Falling prices will force more homeowners into a position of negative equity. Negative equity is one of the triggers that cause people to strategically default on their mortgage obligations. If this happens, there could be an increase in the number of foreclosures. However, we predict that banks will take preventative measures which will help many of these homes avoid foreclosure by easing the requirements in the short sale process for both homeowners and real estate professionals.
5. Great Agents Will Be VERY Successful
Real Estate professionals who have invested the money, time and energy to truly understand what is happening and why it is happening will separate themselves from their competition and do very well this year.
Those who take that next step of learning how to simply and effectively communicate the market to their clients will be seen as industry leaders. These experts will dominate their markets.
BUYERS VS. SELLER ON HOME PRICES
Housing analysts are expecting home prices to stabilize in 2012, but that doesn’t mean that buyers and sellers won’t continue to be at odds over home prices in the new year.
While buyers are feeling good about the housing market and saying its a great time to buy, seller sentiment is falling to record low, a new report by the Mortgage Bankers Association shows. Sellers say they are unhappy because they’re unable to snag the prices for the home that they want.
According to the MBA report, a large gap is occurring between home buying and home selling that isn’t expected to narrow for at least the next five quarters.
From 1992 to 2005, seller sentiment remained high — between 40 percent and 60 percent, according to the report. However, since 2005, seller sentiment has decreased to 7.6 percent. Meanwhile, home buyer sentiment has remained high despite unemployment and economic conditions. Nearly 80 percent of American households say now is a good time to purchase a home.
As home values have dropped over the last few years, many sellers are refusing to budge on their prices to reflect current market traditions. One reason why: Some sellers are underwater on their homes. About 20 percent of home owners nationwide are considered “underwater,” owing more on their mortgage than their home is currently worth. Also, some sellers are realizing there may be a benefit in waiting to sell or to keep the home on the market holding out for a higher price, notes the author of the report, Gary Engelhardt, a Syracuse economics professor. “This could hold prices high enough to drive a substantial wedge between the existing buyer and seller. And a poor jobs market with limited mobility, a key driver of housing-market transactions, may exacerbate this,” an article at HousingWire notes about the report.
MAKING IT HAPPEN! 5 SIMPLE STEPS FOR ACHIEVING YOUR NEW YEAR’S RESOLUTIONS
Each new year is full of promise and potential. Perhaps that’s why so many of us choose this time of year to make positive changes in our lives.
And, believe it or not, achieving your goals can be easier than you think. The following 5 steps can help you get started and follow through!
1. Set realistic goals. The first step to your successful New Year’s resolutions is to set realistic goals for the coming weeks and months. You can start by focusing on the things you’re passionate about or the things you’ve always wanted to do. Maybe it’s a worthy cause you want to become involved in…or maybe you want to kick a habit that’s bothered you for years. If it’s something that you’re passionate about, you’ll have a better chance of being successful. Once you have the topic, make sure you write down a specific, attainable goal. It’s not enough to just think about doing something. Come up with a specific statement you want to achieve. For example, the most common resolution is to lose weight. But that’s not specific enough. Write down exactly how much weight you want to lose and by when. But make it realistic…and healthy at the same time.
2. Make a simple plan to achieve each goal. Once you have your goals written down, take the resolution a step further by figuring out how you’ll achieve it. That means breaking the goal down into simple steps that you can achieve over time. And, often, it means multiple little steps. So, for the weight loss resolution, you may write down a number of simple, daily or weekly steps – such as exercise 20 minutes three times a week, eat vegetables and fruit with each meal, switch to diet cola or better yet water during the day, and lose a certain number of pounds per month. Remember to consult a physician before starting any weight loss or exercise routine to make sure you’re approaching it in a healthy manner.
3. Announce your goals. One of the best ways to make sure you stick to your goals is to make them known to your friends, coworkers, and family members. The reality is, once you’ve told people you’ll do something, you’ll feel more accountability than if you just keep it to yourself. You’ll also have a cheering section to help you stay focused and positive as you work to achieve your goals. But don’t just share your goals; share the specific steps that you’re going to take each day or week to achieve those goals. If you use any social media websites to connect with friends and family, make your goals and steps part of your daily/weekly updates…it’s a great way to get the word out and hear feedback from people who want to help you stay on track.
4. Track and celebrate your progress. Small steps aren’t just about making your way to a goal; they’re also about building momentum, a positive attitude, and celebrating successes along the way. There are a number of ways to track and celebrate your success. For example, if your goal is to work out 20 minutes a day three times a week, you can use a marker and a calendar. Each day you work out, simply color that day in green (or another positive color that you like). As the month unfolds, you’ll see more and more green covering the calendar, which will help you see just how much work you’ve done and keep you motivated to keep going. In addition, you can also use social media to track and celebrate your success. Maybe you tweet or update your Facebook status every time you exercise. Or maybe you announce when you’ve lost a few pounds. The point is, you’ve already announced your goals to friends and family as a way to hold yourself accountable, now it’s time to celebrate with those same people every time you achieve a step along the way.
5. Don’t get discouraged. You’re bound to have good weeks and bad weeks. Just because you fall off track once or twice doesn’t mean you should give up. Instead, acknowledge that you had a bad day or week, figure out what happened to throw you off track (maybe it was a busy or stressful week), and then make a plan to overcome the problem if it happens again. For example, if you had a tough week at work that required you to work late and miss the trip to the gym, make a plan to be proactive the next time work gets busy. Perhaps you make a plan to walk during your lunch break or wake up early to do jumping jacks and push-ups before heading into the office. But…whatever you do…don’t give up on your goals or yourself. Review your plan and recommit yourself to those simple steps. You can even use social media to acknowledge a mistake and commit to overcoming that problem in the future. That way, you’ll have a new sense of accountability and support from your friends and family.
“All you need is the plan, the road map, and the courage to press on to your destination.”
— Earl Nightingale: was an American motivational speaker and author
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GOV’T REVIEWS PROPOSALS FOR FORECLOSURE-RENTAL PROGRAM
The Federal Housing Finance Agency (FHFA) received more than 400 proposals on how it should handle the high number of foreclosures that are plaguing many markets across the country. The proposals suggest various ideas on how the FHFA can go about turning thousands of repossessed homes that Fannie Mae and Freddie Mac own into rentals, in trying to curb losses, stabilize neighborhoods, and prevent further drops to housing values.
Fannie and Freddie service more than half of all U.S. home mortgages so any foreclosure-to-rental program could have a significant impact on the housing market, real estate experts say. The FHFA received more than 4,000 submissions during its call for proposals — however, only about 10 percent were deemed valid, the agency said.
“FHFA is proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012,” Corinne Russell, an FHFA spokeswoman, told Bloomberg. FHFA has declined to discuss specific submissions or a timeline for the program.
But proposals for the foreclosure-rental program reportedly documented joint-venture partnerships, sales, and auctions.
As of Sept. 30, Fannie Mae has 122,616 foreclosures with a carrying value of $11 billion — costing Fannie $733 million to maintain in the third quarter alone, according to a Securities and Exchange Commission filing. Meanwhile, Freddie Mac owns 59,6161 foreclosures, costing it $221 million to operate and manage in the third quarter.
BEST POST OF 2011: SHORT SALES
Short Sale Vs. Foreclosure: A Short Sale Always Wins
Today’s ever changing real estate industry has brought upon some very challenging questions from our clients. We as counselors, want to put forth the best, non-emotional advice that we can, in hopes that we can help our clients and their families navigate the rough waters of the short sale process.
The most prevalent question and one that continues to permeate the industry is:
“Why should a seller go through the short sale process rather than letting their house be foreclosed upon?”
While we cannot speak to every client circumstance, we can say one thing with complete conviction. In almost all instances in which a potential seller is contemplating whether they should short sell their house or let it go through the foreclosure process, a short sale is the better option. The following are examples to consider:
Example A- Short Sale
Mr. Smith owns a home in which he has a mortgage balance of $220,000 and a current market value of $150,000. Mr. Smith has elected to short sell his property. His Realtor successfully obtains a buyer who puts forth an offer price of $120,000 (80% current market value according to Realty Trac Foreclosure Report 5/26/2011). After reviewing the buyers offer and the financial hardship information from Mr. Smith, Mr Smith’s bank agrees to accept the short payoff of $120,000 which would leave a deficiency balance of $100,000.
The transaction closes and is final. Mr. Smith then pulls his credit report 30 days after the transaction takes place. On the report he notices that the mortgage trade line states “Mortgage debt was settled for less than full” and the balance on the mortgage is $0. Mr. Smith is now on the road to financial recovery.
Example B- Foreclosure
For the ease of illustration we will use the same value and mortgage debt amounts as in Example A. However, Mr. Smith has elected to forgo the short sale process and let the bank foreclose on the property. The bank holding his mortgage facilitates the proper legal procedures to foreclose on the property, all of which are costly. Mr. Smith is notified and his property foreclosed upon of which is taken back by the bank to sell as an REO.
Six months later, the bank finally sells Mr. Smith’s home only they sell it for $90,000 (60% of current market value according to Realty Trac Foreclosure report dated 5/26/2011). Remember, as a short sale, the home would have sold for $120,000 keeping the deficiency to $100,000. In addition to the deficiency now being $130,000, the bank has elected to add on legal costs of $15,000 and asset preservation costs of another $5000 for a total deficiency liability of $150,000. Mr. Smith pulls his credit report 30 days after being notified that the bank has sold his property and of his liability.
On the report he notices that the mortgage trade line states “Foreclosure” and the balance is $150,000. Because of Mr Smith’s choice to choose foreclosure vs. short sale his road to financial recovery has taken a major detour. He not only has a foreclosure on his credit report but now has a much larger deficiency balance in which the bank, in most cases, will report on his credit report as a balance owed.
The Best Option is Clear
While the financial and credit advantages are clear when choosing a short sale over a foreclosure, other advantages are sometimes overlooked. The most important of all of them is maintaining the seller’s dignity and peace of mind. We have heard too many stories of families having to leave their homes because of a Sheriff’s order or some other type of legal action. The short sale process alleviates this negative social impact. The process puts the control back in the seller’s hands so that they can get back on the road to financial recovery and start providing for their families. In the battle of the two evils, a short sale always wins!!!
7 CITIES WHERE LIST PRICES ARE FALLING THE MOST
Nationally, median list prices have mostly been flat since June, but some markets are still seeing some decreases in home prices, according to the latest data from Realtor.com of 146 metro markets.
The following are the cities where list prices have fallen the most from October to November:
• Month-over-month decrease: -4.61%
• Year-over-year decrease: -12.47%
• Median list price: $84,900
2. Monmouth-Ocean, N.J.
• Month-over-month decrease: -4.32%
• Year-over-year decrease: -3.05%
• Median list price: $300,444
3. Santa Barbara-Santa Maria-Lompoc, Calif.
• Month-over-month decrease: -3.52%
• Year-over-year decrease: -1.95%
• Median list price: $539,250
4. Pueblo, Colo.
• Month-over-month decrease: -3.45%
• Year-over-year increase: 0.29%
• Median list price: $139,900
5. Tulsa, Okla.
• Month-over-month decrease: -3.38%
• Year-over-year decrease: -5.34%
• Median list price: $140,000
6. Peoria-Pekin, Ill.
• Month-over-month decrease: -3.18%
• Year-over-year increase: 3.71%
• Median list price: $139,900
7. Charleston, W. Va.
• Month-over-month decrease: -3.09%
• Year-over-year increase: 6.67%
• Median list price: $159,900
TAKE ADVANTAGE OF THE WINTER MARKET
“There’s a misunderstanding that winter is quiet,” Andrea Webb, an agent with Keller Williams in Montclair, N.J., told The Star-Ledger (New Jersey) in a recent article.
Real estate pros report that the weeks between now and the Super Bowl can be some of the most hectic in getting a head-start on what’s traditionally considered the busy spring buying season.
“Most good associates use the months of November and December as an opportunity to get organized for the coming spring market, which can arrive as early as January,” Gary Large, president of the New Jersey Association of REALTORS®, told The Star-Ledger.
More real estate pros reportedly recommend to their sellers to host open houses during the cooler months because they’ll face less competition. Also, they say, more serious buyers often come out during the winter months, such as corporate clients who are needing to relocate within the first quarter of the year.
“We try to encourage the sellers to pretty much get their house on the market early in January to beat the rush, because most people tend to wait until the spring,” Marilyn Bailey with Prudential New Jersey Properties in Morristown, N.J., told The Star-Ledger. “It’s a nice time of year to shop — not as many buyers are out there, so you’re not competing with other offers as much.”
Real estate pros are also using the winter months to focus on networking (such as through holiday parties that can create plenty of opportunities for meeting new clients or gaining referrals) and taking continuing-education classes to ramp up their skill sets before the spring buying season hits, agents report.