This Month in Real Estate - July 2009
This Month in Real Estate - June 2009
This Month in Real Estate - May 2009
This Month in Real Estate - April 2009
Talking Points: Where's the Market Now?
Are we weathering the worst of the market now, have we hit bottom already, are things picking up in predictive markets? While no single source can provide the definitive answer, assessing information from different sources often brings the future into sharper focus for savvy agents.
Consider the information below, and feel free to further your research through these and other national sources. Then the next time a potential client asks you the basis for your professional advice, you'll be able to explain the why's and how's behind your expectations and analysis.
- Mortgage Rates Drop Below 5%: Freddie Mac reports a drop in the 30-year fixed mortgage rate to 4.98 percent during the week ended March 19 from 5.03 percent the prior year, marking the lowest rate since 4.96 percent in mid-January. Experts say rates could fall further in response to the Federal Reserve's announcement that it will add $1.2 trillion to the economy to alleviate the credit crisis.
Source: Tulsa World, Tulsa, OK, March 20, 2009
- According to the Associated Press, US housing construction posted a surprisingly large increase in February, showing improvement in all parts of the country except the West. The Commerce Department reported that construction of new homes and apartments jumped 22.2% in February compared with January. While the dramatic increase seems a harbinger of better times to come, industry experts remain cautiously optimistic.
Source: Associated Press, Martin Crutsinger, (AP Economics Writer), March 17, 2009.
- Frank Nothaft, Freddie Mac vice president and chief economist recently experessed that: "The economy slowed by 3.8 percent in the fourth quarter of 2008, LESS than the market consensus, with inflationary pressures held at bay. Meanwhile, personal incomes fell by only HALF as much as some market forecasters predicted. [The bottom line is that] low mortgage rates and falling house prices have made housing the most affordable in 19 years.”
Source: UPI.com, Business News: Bottom Line Improves the Housing Market, February 5, 2009.
Also keep in mind that in October 2005 – near the peak of the real estate boom – the median sales price for a home reached a staggering 7.3 times per capita income in the United States. By May 2008, that number had fallen to 5.7 times per capita income, which is in line with historical norms.
Further, the national sales figures that grab all the big headlines do not necessarily apply to the state of Georgia. In fact, when hard-hit states such as Florida, Arizona, California, and Nevada are taken out of the statistical mix, the overall picture present in the overwhelming majority of the US is much more encouraging, and not nearly so gloom-and-doom. Let's not project another state's statistics onto Georgia.
Call (404) 226-6091 To Get A Detailed Evaluation of Your Homes Value and Comparison to Other Homes For Sale in Your Area and Metro Atlanta.
Perhaps Short Sale is Your Best Shot - 4/24/09
by John Adams
As we progress through the first year of the Obama administration, we are still in an economic slump. In the residential real estate market, we have a huge glut of existing bank-owned homes that are preventing the open market from functioning properly. In addition, low consumer confidence is preventing average buyers from buying their next home.
As recently as October, banks believed that they would be bailed out by the Troubled Asset Relief Program, but the Bush administration changed course later that year and announced that it would not be using government funds to purchase troubled assets.
The latest direction of the Treasury and their $750 billion bailout is to offer banks the opportunity to sell non-voting preferred stock to the government and agree to pay approximately 8 percent return on that stock. So far, that approach has not had the desired effect of easing lending.
Regardless of the individual situation, banks in America today are extremely reluctant to make any loans except to their best customers, and then only for a short term and at a variable rate. Now, more than ever, the lenders need to sell this excess of homes they have foreclosed on. But they still are overlooking one solution that could stem the flow of future foreclosures. That solution is called a short sale.
A short sale is nothing more than accepting a discounted payoff on the loan balance when a borrower is facing foreclosure, and it makes sense for the bank when the situation indicates that the bank will end up owning the house.
According to figures from the Mortgage Bankers Association, when a bank takes back ownership of a house through the foreclosure process, that bank will end up losing around $35,000 by the time it gets the house sold, sometimes many months later.
Here's how a short sale can work:
> The owner of a home facing foreclosure often tries to sell the home in hopes of paying off the mortgage. It is then that the owner recognizes that he or she owes more on the house than it will sell for, and contacts the lender asking for help.
> The lender contacts an independent appraiser or broker, and pays for a drive-by assessment of the home's value in today's market. This way, the lender gets a true picture of the situation it is facing. If it simply forecloses, it will end up owning a house that is worth less than the loan balance.
> With the lender's permission, the house is now relisted with a broker, often at a more attractive price, in the hope of attracting any buyer at almost any offering price. At this point, the owner has agreed to receive nothing for the sale of his or her house in exchange for being relieved of financial liability.
> A prospective buyer, lured by the possibility of a bargain price, makes a formal offer on a traditional contract form --- an offer that is probably well below the current balance on the home's existing loan.
> This is where the tricky part starts. The lender's loss mitigation department must process the requested short sale and get it closed before the lender's collection department gets the foreclosure sale completed. Often, one department doesn't seem to know what the other is doing.
> One of the biggest hurdles to a successful short sale is that lenders insist on requiring documentation of a borrower's "hardship" situation. In other words, if you can truly prove that your horrible situation is not your fault, then maybe the lender will take pity on you. The truth is that the lender is only considering a short sale because that is in the lender's best interest --- and not out of any desire to do something noble for the borrower.
> Specialists at the lending institution have to try to determine how big a loss is likely if they have to take the house back, and whether or not the offer on the table is a better deal for the lender. Typically, the buyer's first offer is rejected or countered as the lender seeks to get every possible dollar toward paying off the loan.
> Finally, if the moon and the stars align properly, and if the lender accepts the borrower's hardship explanation, then a deal is struck and the modified offer is accepted. Approval to close is granted and the buyer usually gets a bargain house.
Unfortunately, this whole process can take up to six months, and there is no guarantee of success along the way. While this is a greatly oversimplified list of steps, it points out some of the hoops that brokers and buyers must jump through to complete the short sale.
Every time the lender can prevent a house from entering the foreclosure process, the smaller the number of bank-owned homes there are to be sold, and the nearer we all are to a normal market. Recent numbers indicate that short sales account for about one-eighth of the volume of foreclosures in the nation today, but that number appears to be rising.
That's good news for lenders, borrowers and potential buyers. The lender avoids another bank-owned home and can now concentrate on selling the houses it already owns. And hopefully it has lost less money than it otherwise might have. The former borrower walks away from a house in which his loan was "upside-down." And he has no further liability for payments.
Better yet, the buyer has purchased a house at a bargain price, hopefully planning, if necessary, to rehab the property and restore it to neighborhood standards.
John Adams is a broker and investor. For more real estate information or to make a comment, visit www.money99.com.
Making an Offer on a Short Sale? What You Need to Know
Are you looking to buy a new home? Are you thinking that now’s a great time to find bargains? Before you make an offer, it pays to know a little about the seller’s situation.
If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.
A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.
You’re a good candidate for a short-sale purchase if:
- You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
- Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
- You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.
If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:
- Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
- A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
- Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.
Some of the other risks faced by buyers of short-sale properties include:
- Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
- Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
- No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.
The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.
Content Provided By NAR
Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.
John Zercher is your Atlanta Short Sale Distressed Property Expert!
Let us HELP You SELL YOUR HOME in ATLANTA!
Talking Points: Where's the Market Now?
Are we weathering the worst of the market now, have we hit bottom already, are things picking up in predictive markets? While no single source can provide the definitive answer, assessing information from different sources often brings the future into sharper focus for savvy agents.
Consider the information below, and feel free to further your research through these and other national sources. Then the next time a potential client asks you the basis for your professional advice, you'll be able to explain the why's and how's behind your expectations and analysis.
- Mortgage Rates Drop Below 5%: Freddie Mac reports a drop in the 30-year fixed mortgage rate to 4.98 percent during the week ended March 19 from 5.03 percent the prior year, marking the lowest rate since 4.96 percent in mid-January. Experts say rates could fall further in response to the Federal Reserve's announcement that it will add $1.2 trillion to the economy to alleviate the credit crisis.
Source: Tulsa World, Tulsa, OK, March 20, 2009
- According to the Associated Press, US housing construction posted a surprisingly large increase in February, showing improvement in all parts of the country except the West. The Commerce Department reported that construction of new homes and apartments jumped 22.2% in February compared with January. While the dramatic increase seems a harbinger of better times to come, industry experts remain cautiously optimistic.
Source: Associated Press, Martin Crutsinger, (AP Economics Writer), March 17, 2009.
- Frank Nothaft, Freddie Mac vice president and chief economist recently experessed that: "The economy slowed by 3.8 percent in the fourth quarter of 2008, LESS than the market consensus, with inflationary pressures held at bay. Meanwhile, personal incomes fell by only HALF as much as some market forecasters predicted. [The bottom line is that] low mortgage rates and falling house prices have made housing the most affordable in 19 years.”
Source: UPI.com, Business News: Bottom Line Improves the Housing Market, February 5, 2009.
Also keep in mind that in October 2005 – near the peak of the real estate boom – the median sales price for a home reached a staggering 7.3 times per capita income in the United States. By May 2008, that number had fallen to 5.7 times per capita income, which is in line with historical norms.
Further, the national sales figures that grab all the big headlines do not necessarily apply to the state of Georgia. In fact, when hard-hit states such as Florida, Arizona, California, and Nevada are taken out of the statistical mix, the overall picture present in the overwhelming majority of the US is much more encouraging, and not nearly so gloom-and-doom. Let's not project another state's statistics onto Georgia.
Call (404) 226-6091 To Get A Detailed Evaluation of Your Homes Value and Comparison to Other Homes For Sale in Your Area and Metro Atlanta.
Perhaps Short Sale is Your Best Shot - 4/24/09
by John Adams
As we progress through the first year of the Obama administration, we are still in an economic slump. In the residential real estate market, we have a huge glut of existing bank-owned homes that are preventing the open market from functioning properly. In addition, low consumer confidence is preventing average buyers from buying their next home.
As recently as October, banks believed that they would be bailed out by the Troubled Asset Relief Program, but the Bush administration changed course later that year and announced that it would not be using government funds to purchase troubled assets.
The latest direction of the Treasury and their $750 billion bailout is to offer banks the opportunity to sell non-voting preferred stock to the government and agree to pay approximately 8 percent return on that stock. So far, that approach has not had the desired effect of easing lending.
Regardless of the individual situation, banks in America today are extremely reluctant to make any loans except to their best customers, and then only for a short term and at a variable rate. Now, more than ever, the lenders need to sell this excess of homes they have foreclosed on. But they still are overlooking one solution that could stem the flow of future foreclosures. That solution is called a short sale.
A short sale is nothing more than accepting a discounted payoff on the loan balance when a borrower is facing foreclosure, and it makes sense for the bank when the situation indicates that the bank will end up owning the house.
According to figures from the Mortgage Bankers Association, when a bank takes back ownership of a house through the foreclosure process, that bank will end up losing around $35,000 by the time it gets the house sold, sometimes many months later.
Here's how a short sale can work:
> The owner of a home facing foreclosure often tries to sell the home in hopes of paying off the mortgage. It is then that the owner recognizes that he or she owes more on the house than it will sell for, and contacts the lender asking for help.
> The lender contacts an independent appraiser or broker, and pays for a drive-by assessment of the home's value in today's market. This way, the lender gets a true picture of the situation it is facing. If it simply forecloses, it will end up owning a house that is worth less than the loan balance.
> With the lender's permission, the house is now relisted with a broker, often at a more attractive price, in the hope of attracting any buyer at almost any offering price. At this point, the owner has agreed to receive nothing for the sale of his or her house in exchange for being relieved of financial liability.
> A prospective buyer, lured by the possibility of a bargain price, makes a formal offer on a traditional contract form --- an offer that is probably well below the current balance on the home's existing loan.
> This is where the tricky part starts. The lender's loss mitigation department must process the requested short sale and get it closed before the lender's collection department gets the foreclosure sale completed. Often, one department doesn't seem to know what the other is doing.
> One of the biggest hurdles to a successful short sale is that lenders insist on requiring documentation of a borrower's "hardship" situation. In other words, if you can truly prove that your horrible situation is not your fault, then maybe the lender will take pity on you. The truth is that the lender is only considering a short sale because that is in the lender's best interest --- and not out of any desire to do something noble for the borrower.
> Specialists at the lending institution have to try to determine how big a loss is likely if they have to take the house back, and whether or not the offer on the table is a better deal for the lender. Typically, the buyer's first offer is rejected or countered as the lender seeks to get every possible dollar toward paying off the loan.
> Finally, if the moon and the stars align properly, and if the lender accepts the borrower's hardship explanation, then a deal is struck and the modified offer is accepted. Approval to close is granted and the buyer usually gets a bargain house.
Unfortunately, this whole process can take up to six months, and there is no guarantee of success along the way. While this is a greatly oversimplified list of steps, it points out some of the hoops that brokers and buyers must jump through to complete the short sale.
Every time the lender can prevent a house from entering the foreclosure process, the smaller the number of bank-owned homes there are to be sold, and the nearer we all are to a normal market. Recent numbers indicate that short sales account for about one-eighth of the volume of foreclosures in the nation today, but that number appears to be rising.
That's good news for lenders, borrowers and potential buyers. The lender avoids another bank-owned home and can now concentrate on selling the houses it already owns. And hopefully it has lost less money than it otherwise might have. The former borrower walks away from a house in which his loan was "upside-down." And he has no further liability for payments.
Better yet, the buyer has purchased a house at a bargain price, hopefully planning, if necessary, to rehab the property and restore it to neighborhood standards.
John Adams is a broker and investor. For more real estate information or to make a comment, visit www.money99.com.
Making an Offer on a Short Sale? What You Need to Know
Are you looking to buy a new home? Are you thinking that now’s a great time to find bargains? Before you make an offer, it pays to know a little about the seller’s situation.
If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.
A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.
You’re a good candidate for a short-sale purchase if:
- You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
- Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
- You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.
If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:
- Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
- A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
- Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.
Some of the other risks faced by buyers of short-sale properties include:
- Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
- Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
- No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.
The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.
Content Provided By NAR
Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.
John Zercher is your Atlanta Short Sale Distressed Property Expert!
Let us HELP You SELL YOUR HOME in ATLANTA!
