Short Sales: A Dignified Solution for Many Families

 

I am truly excited that the banks are beginning to see that a short sale in many cases is a good alternative to foreclosing on a property. It makes more sense to sell the property at a higher price. At the same time, the banks are creating less vacant REOs (foreclosures owned by banks) which have blighted neighborhoods and negatively impacted  surrounding house values for the last several years 

It is also satisfying that so many of my fellow real estate professionals are taking the time to get properly trained to facilitate these transactions to a successful closing. It is a good revenue stream for some agents at a time that has proven to be very difficult for many industry professionals to make ends meet.

However, today I don’t want to speak to the financial aspects of the surge in short sales. Instead, I want to address the impact it has on the families living in these homes. They have found themselves in over their heads. In many cases, they can’t afford the mortgage and are trapped – unable to sell because the mortgage exceeds the home’s value. They may believe that they are left with only one alternative – allow the home to proceed to foreclosure.

Let’s realize the consequences of this decision for the family. The day will come that someone in an official capacity knocks on the door and notifies the family it is being evicted immediately. No matter how well they have prepared, at that moment, spouses look to each other in embarrassment. There is a big difference between imagining how this moment might feel and actually experiencing it. 

And, in so many cases, there are children involved. The official stands there as a mother or father gets on a knee and explains to their son or daughter that they must go pack up some of their toys and belongings in a hurry because the family must leave – now!

The short sale process avoids these situations. The family plans around a set closing date. The children are made aware of the move months in advance and the parents have time to lessen the pain of that move. 

Short sales make good financial sense for all involved. They also allow families to exit an extremely difficult situation – WITH DIGNITY.

Low Home Prices Mean It’s Cheaper To Buy Than To Rent In Many Cities

As the national real estate slump deepens, home prices in many cities have crossed a worrisome milestone.

It’s cheaper to buy a home than to rent onein 74 percent of the country’s largest 50 cities, according to the real estate site Trulia — findings that confirm the national epidemic of depressed housing prices remains in full swing.

Trulia’s research, which compared the median list price and median rent for two-bedroom apartments, condos and townhomes in America’s 50 largest cities, found that renting is more expensive than buying in dozens of markets, particularly in Miami and Las Vegas, as well as Mesa, New Mexico, and Arlington, Texas.

In a minority of cities, including New York, Seattle, Kansas City and San Francisco, it’s still more expensive to buy than to rent.

A spate of recent studies have shown that home prices remain low throughout the U.S. Earlier this month, the real-estate company Zillow reported that average prices were down 6.2 percent from a year before, and aren’t expected to touch bottom until 2012. Data from CoreLogic and Case-Shiller showed similar declines between 2010 and 2011.

Low home prices are seen as delaying a recovery in the housing market, and by extension a turnaround in the broader national economy. When home values are low, homeowner wealth sinks accordingly, and many consumers end up spending less money than they might in a more prosperous market. Meanwhile, prospective homebuyers are more likely to delay a purchase if they believe prices will continue to fall.

On Tuesday, figures from the Commerce Department showed that construction on new homes fell 1.5 percent in July — not as sharp a decline as economists had expected, but still an indication that the housing sector is far from rehabilitated.

A number of forces stand in the way of a housing recovery, including high unemployment, falling wages and a growing inclination among homeowners to save for retirement, rather than try to upgrade to a better house.

Last month, Morgan Stanley released data showing that the U.S. home-ownership rate is only 59.7 percent if delinquent borrowers are excluded from the count — an all-time low, and one that may herald a nationwide shift toward becoming a “rentership society” instead of an ownership society, a Morgan Stanley strategist said at the time.

Compliments of the Huffington Post.

Should You Be LOCKING Your Loans?

Should you lock in the interest rate on your mortgage? A couple of things to consider:

1. While I am confident that the Debt Ceiling Debate will be settled (whether it’s for six months or a year), my greater concern is the growing belief that the ratings agencies are looking at downgrading our government’s bonds from our AAA status.  By lowering the credit rating of the bonds being presented to the market, the confidence of those who buy our bonds will be shaken.  In order to overcome the risk of lower rated bonds, we will need to offer greater rates of returns on our bonds.  THAT will result in a rise in mortgage rates because mortgages are what make up the bonds.  This will affect virtually every conforming loan limit home buyer, whether they have conventional or government (FHA/VA) financing.

2. The pending lowering of the maximum loan amounts (slated for October 1^st) that can be sold to FannieMae, FreddieMac and GinnieMae (in high cost areas from $729,250 to $625,500 for single family homes) will create more “Jumbo Loans”.  Jumbo loans have historically been .25% to .375% higher than conforming loans; however, industry insiders are hinting at a much bigger spread (.75% or more).  Granted, this will not impact most home buyers, but it is worth noting.

Now, it is possible that neither item becomes effective.  Let’s keep our fingers crossed.  Yet, what is the benefit of NOT locking.  Maybe rates could go down an eighth or a quarter of a percent.  Is that worth the risk of a rate increase that would be quick and dramatick of a half of a percent or more?

The safe bet is to LOCK to protect yourself……my mother always said, “better safe than sorry”.

Selling Your House? Waiting May Not Make Sense

There have been some bright spots in the residential real estate market over the last couple of months. Several price indices have reported a stabilization of prices and some regions have even shown small levels of appreciation. This has led some to believe that we may have reached a bottom for home values. We must realize that what we are actually experiencing is a ‘window of opportunity’ as the banks are delayed in bringing certain inventories of distressed properties to the market. Let’s look at what others are reporting:

Bloomberg Businessweek

“The crux of Simon’s analysis is that the loose lending practices seen during the housing bubble allowed 5 million renters to become homeowners, and that the market is in the protracted process of evicting this group. He believes housing prices will decline 6 percent to 8 percent nationally, with 6 million to 7 million more foreclosures yet to come.”

Yahoo Finance

“The problem with the real estate market remains excess inventory. Based on Shilling’s research, there are 2 million to 2.5 million excess homes in the country — a supply that will take 4-5 years to work-off. The result: Housing prices will fall another 20% and underwater mortgages will balloon from 23% to 40%, he says.”

Housing Wire

“Both warmer weather and the drop in distressed sales percentage have contributed to recent home price improvements. However, given the disappointing pace in housing demand recovery, both factors may turn against us in the coming winter and push home prices lower again…

This supply-demand imbalance affirmed JPMorgan analysts’ estimate of a further 4% drop in home prices from the first quarter of 2011 to a new bottom next year.”

DS News

“Home prices have gotten a little bit of a boost in recent months thanks to a seasonal uptick in market activity. Most analysts, however, expect further declines to characterize the later part of the year and possibly extend into next year, largely because of the huge supply of foreclosures on the market.”

Bottom Line

If you are thinking of selling in the next twelve months, you would probably do much better if you sold your house sooner rather than later.

 

Compliments of the KCM Blog.

Celebrate the 4th in the Springs!

  

While the usual Memorial Park fireworks display is not happening, there are several around, the Springs this weekend.

Have a happy and safe holiday!

COLORADO SPRINGS PHILHARMONIC SALUTE TO THE TROOPS: Traditional concert and fireworks, activities at 4 p.m., concert at 8 p.m., fireworks at dusk, Friday; Iron Horse Park at Fort Carson, Gate 1 from Highway 115; free, open to the public; csphilharmonic.org.

COLORADO SPRINGS SKY SOX INDEPENDENCE DAY FIREWORKS EXTRAVAGANZA: One Man Village People Act and fireworks after the game; 7:05 p.m. Saturday; Security Service Field, 4385 Tutt Blvd.; $7-$10; skysox.com.

TRI-LAKES FOURTH OF JULY: Pancake breakfast at 7 a.m., children’s parade at 9:30 a.m., parade at 10 a.m., street fair 11 a.m.-3 p.m. in Monument; music, food and activities at 3 p.m., fireworks at dark in Palmer Lake; free; trilakeschambercom.

BUFFALO BAR-B-Q AND FIREWORKS: Food, crafts and entertainment, 10 a.m.-6 p.m. Saturday and Sunday, fireworks 9:30 p.m. Saturday; Soda Springs Park, 900 block of Manitou Avenue, Manitou Springs; free; 685-9655 or 685-1444.

FIREWORKS AT FLYING HORSE COMMUNITY: 9:15 p.m. Saturday, Colorado 83 at Northgate Road; free; 785-3235.

FIREWORKS AT THE AIR FORCE ACADEMY: Family-oriented games and music by Blue Steel at 5 p.m. and fireworks at 9:30 p.m. Saturday; enter through North Gate, Exit 156-B off I-25; free, open to the public; www.usafa.af.mil.

FIREWORKS EXTRAVAGANZA: After races; gates open at 3:30 p.m.; El Paso County Speedway at the Fairgrounds, 366 Tenth St., Calhan; $8-$15; elpasocountyspeedway.com.

SYMPHONY ABOVE THE CLOUDS AND FIREWORKS DISPLAY: Florissant Jammers show at 5:30 p.m., Colorado Springs Philharmonic concert at 7:30 p.m. fireworks at dark Sunday; Woodland Park Middle School, 600 E. Kelly Road, Woodland Park; free; 575-9632.

Are Short Sales Getting Easier?

Short sales (where the lender agrees to accept less than the mortgage amount due on the sale of a property by a seller) have never been easy to complete. We are not suggesting that they now will be easy. However, there is mounting evidence that the banks are seriously favoring short sales over the option of foreclosure. Here is the evidence that has led us to this conclusion.

Banks Net More Money on a Short Sale

RealtyTrac’s latest data tells us that a short sale sells at approximately a 10% discount. A foreclosure sells at approximately a 35% discount. Obviously, the bank will net more by agreeing to short sale than they would by bringing the home to foreclosure.

Banks Are Beginning To Pay Short Sale ‘Bonuses’

In a recent article, HousingWire reported on a new program being instituted by CitiMortgage an affiliate of Citigroup:

CitiMortgage, is paying borrowers an average $12,000 after completing a short sale this year.

Justin Rand, the senior vice president of loss mitigation at the bank, said servicers are putting more of an emphasis on streamlining the process and pursuing a short sale ahead of foreclosure.

There is no better proof that some banks prefer a short sale than the fact that they are paying bonuses to homeowners who pick that option.

The Numbers Already Show an Increase in Short Sales

In the same article mentioned above, CitiMortgage said the percentage of troubled loans that now go to short sale route have quadrupled (4% to 16%) in the last two years.

And in a separate article, Bank of America reported they completed over 95,000 short sales in 2010 which more than doubles the number in 2009. BofA also reported that they completed more short sales than it sold previously foreclosed homes every month for the last year and a half. Last month (May), BofA completed roughly 9,000 short sales compared to 7,000 foreclosures sold.

Bottom Line

There are many advantages to a short sale over a foreclosure for the seller (they get to plan their move, there is less embarrassment with friends and neighbors, the negative impact on their future ability to purchase is much less severe). Luckily, it now seems that the banks also think it is in their best interest to pursue a short sale.

 

Post compliments of the KCM Blog!

http://kcmblog.com/

FHA Loan Limits to Decrease Sept 30th, 2011

As many of you know, FHA temporarily increased its loan limits for El Paso County from $271,050 to $325,000 to help stimulate the purchase market and to help refinance consumers out of subprime loans.

Well, the party is ending and as of September 30th. FHA loan limits for El Paso county will go back down to $271,050. ALL LOANS OVER $271,050 MUST FUND BY SEPTEMBER 30TH!! Not submitted, not locked, not case number ordered, but actually FUND by September 30th or the loan will no longer be FHA eligible and must be restructured.

If you have clients that are looking to utilize FHA financing and want to go over the $271,050 limit they must act now. FHA loan limits vary by county. El Paso is going back down to $271,050, Elbert and Adams County is going down to $368,000 (down from $406k), Summit County is $625,500 (down from $729,750).

 http://portal.hud.gov/hudportal/documents/huddoc?id=fhaloanlmhera.pdf