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.

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.

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”.

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.

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.

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/

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

1. Your neighbors. Most homeowners contemplating selling their homes understand the importance of well-kept neighboring homes. Many a buyer has pulled up to an amazing house, viewed it, and left shaking their head with woe because they just can’t cotton to buying the place on account of the shoulder-high weeds, car in the yard or crumbling ruins of the house next door.

On the flip side, your neighbors themselves – not just the homes, but the people – can actually help sell your home. Many homeowners know people who want to live in their neck of the woods; this is one reason many seasoned real estate professionals hold their listings open to neighbors and send out postcards to neighbors announcing the listing – the neighbors might know people who are interested in your home! Also, neighbors who are out and about chatting with each other, laughing and playing with their kids, mowing their lawns or painting their fences, or even who just offer a smile and helpful area knowledge to the buyer-to-be they pass on the street can make a very favorable impression on prospective buyers.

It’s a good idea, if and when you decide to list your home for sale, to touch base with neighbors you know and let them know; it’s in their best interests to get good new neighbors, so they might be able to go the extra mile in showing the neighborhood’s biggest asset – themselves – off to its best advantage.

2. The right sights, smells and sounds. It’s no news flash that the view of a used car lot; stinky foods or animal smells; and the siren song of a fire station next door could be deal-killers. What might surprise is some of the right sights, smells and sounds that can help seal the sale of your home. My experience has been – agents, chime in here! – that the more natural beautiful sights, smells and sounds are, the more favorably they’ll be received by the largest population of prospective buyers.

For example, playing a soundtrack of classical musical is fine, but will cause some skeptical buyers to wonder what noises you might be trying to cover up – especially if you’re in a condo or other potentially thin-walled property where neighbor noise might be an issue. On the other hand, birdsong can be attractive to some buyers. Artificial air fresheners? Not so much. The scent of the jasmine or lavender that grows in your yard? Even allergy victims can appreciate that.

You might be desensitized to the amazing views of trees, mountains or even water outside your window, but pulling back the curtains so prospective buyers can see for themselves is an absolute must.

Home buying is a multi-sensory experience – visual staging of the property itself is no longer a plus, it’s a must. But homes which create pleasant impressions that fire on all of a buyer’s sensory cylinders definitely have the edge on their competition.

3. Your dog. The New York Times ran a piece a few months ago about sweet, well-behaved dogs (and cats!) who reportedly helped sell their owners’ Manhattan apartments. In a departure from the conventional wisdom that dogs should be removed and every trace of their presence erased from the home during showings, the article featured several buyers and brokers attesting to their belief that the presence of a particular cat or dog “help[ed] sell a property by making the place seem warmer or more appealing.” And I’m sure you’ve all heard me tell the story of the San Diego buyer who fell in love with a tract home listed at a price higher than all the nearly identical comparables he’d seen and wanted to make a full-price offer immediately – so long as the deal included the dog!

Definitely consult with your agent before you decide to implement leaving your dog at home for showings as part of your plan. I’m a dog lover, and would be concerned that someone might inadvertently let one of “my girls” out, if I left them there while my house was being shown; as well, would-be buyers or their agents may have allergies your pet could set off. Lately, it seems like I’ve seen many brokers attempting to capture the best of both worlds by making sure that the family pet or even the broker’s own pet is captured in a charming tableau in 1 or 2 of the listing pictures, even if they’re not present at the home during showings.

4. Your happiness. Video and even written love letters that extoll all the virtues for which you love your neighbors, your neighborhood and your property are contagious to buyers. I’ve seen sellers help buyers see their homes through their own loving eyes by posting videos on YouTube and including the link on the listing flyer or even by putting a binder containing a letter plus menus and flyers from their favorite neighborhood restaurants, dry cleaners and other local merchants out on the counter during showings.

Wide-open curtains that let light stream in, light and bright paint and decor colors and other home features that science has proven make residents more happy and functional also create this thought process in a buyer’s mind: “Hmm, these people seem happy here. I could be, too.”

Similarly, indicators that you invested a lot of love in your home, by keeping it in immaculate order and pristine condition, by tending a well-cared for kitchen garden, lovingly furnishing and making comfortable (if not overly customizing) your kids’ rooms, all create the feel that a home was happily lived in – it’s like staging your home with a life well-lived, not just paint and tile.

5. The freeway or subway you thought was too close. There is such a thing as a freeway or elevated train tracks being too close to your home; if your place rattles or roars, for example, every time the train passes, chances any buyer will view that as a selling point are pretty slim. However, homebuyer attitudes toward being located near freeways and subways or bus lines are a-changing. Every upward click of gas prices renders buyers a tiny bit more interested in a location that is more commutable.

Where yesteryear’s buyers were all about the posh exclusivity of far-out suburbia, today’s buyers are more interested in financial and ecological efficiency and convenience. I’ve never heard so many homebuyers looking to own homes that will allow them to ditch their cars entirely as I have in recent years!

What might once have been seen as too close to the freeway has gotten a new spin, lately, as a highly convenient, commuter-friendly location.

Article compliments of Trulia.com

But, I assure you, that is not the case. The only way lenders can stay in business is to lend money. It is what funds the operation and pays for salaries, rent and paper clips. Lending is what creates the value of the company. No closings, no revenue, no company.

So why the perception of over-documentation and over analysis when we know the lenders have to make loans? This is the reality of a post-subprime world. Lenders got too liberal and under-documented files and forgot the primary role of underwriting (judging a borrower’s ABILITY and WILLINGNESS to repay the loan) as they approved files. And now, the pendulum has swung back to a very conservative stance. Common sense seems to have been replaced by a “Cover Your Butt Mentality”.

No one is immune. Appraisers error on the side of lower valuations and heightened criticism of a home’s condition.  Underwriters labor over pay stubs, tax returns, bank statements and credit information. Closing agents meticulously examine title and closing documents. Each of them has learned that their mistakes, miscalculations, or errors in judgment (no matter how minor) can result in a loss of their job, a bad loan, and/or monetary damages to their companies.

So, today I just wanted to counsel home buyers. Your lender WANTS to make your loan. However, understand that they have been burned by borrowers, burned by their bad judgment, burned by moronic industry trends of the past. Lenders are going to be a little gun shy. If you can prove that you are willing and able to repay the loan, lenders have lots of money available at incredible (once-in-a-lifetime) rates. When you think your lender is asking for too much, know it’s because they want to say “yes” AND know that their decision is both a good and defendable one.

Yet, appreciation or depreciation is not usually the first thing that matters when the average family decides to buy or sell a home.

People move for numerous reasons. Here are a few examples:

• to create a better lifestyle for themselves and their children
• to be closer to family in other regions of the country
• to be closer to necessary healthcare
• to take advantage of a promotion or a new job
• to downsize and lower long term financial obligations

Most voluntary moves help families achieve their goals and/or dreams. 

Bottom Line 

Which is more important: waiting to get a few more dollars for your home, sitting on the sideline hoping prices drop just a little bit lower before you buy or moving on with the rest of your life? Only you can decide.