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Posts Tagged ‘short sales’

Are Foreclosures Really Decreasing?

RealtyTrac – a leading provider of tracking data on Foreclosure Activity, used by many private and public sector organizations to help evaluate foreclosure trends, reported late last week on a national level foreclosure activity dropped 9% in April.

Sounds like good news right?

Well – hold 0n just one minute there, Bucko.   There may, indeed, be more to the story.

What if there were lots and lots of  homeowners, who can’t afford their payments have realized that the banks are taking a long time to take action against them?

What if some of those homeowners just stopped making their payments and are staying in their homes, making no payments for up to a year or more?

Diana Olick of CNBC says these are questions that have to be considered.   Here is her article from May 13, 2010 on this very subject called  “Banks Ignore Delinquent Borrowers”

I’ll hang on here while you go read that.

OK  – Done?

So how does that affect owners that are operating outside of this part of the market.  You know, people who have equity in their house and would like to sell.

While no one knows for sure when those foreclosures are going to hit the market – or if they are in your town, your neighborhood, one thing is for sure.  If they do, it will affect the value of your home in a negative way.

Again – every situation is different and you have to work with your Realtor to determine the best course of action for you.  Having said that, if you are interested in selling, come up with marketing plan and a price point that will move your house quickly.  The idea of  “Trying a high price” for a while – may have passed.

If you have a need to move for one reason of another, such as wanting more space, less traffic, nearer to work or school – just get it done.   Even though the economy shows signs of getting better, the decline in housing prices may not be over – not for quite a while.

——

Rick Schwartz,   REALTOR

Homes for sale in Danbury, Bethel, Brookfield, Newtown, New Fairfield, New Milford, Ridgefield and Redding CT.

Should you buy a Short-Sale or a Foreclosure?

December 29, 2008 Leave a comment

Bargain-hunting is the name of the game in free market capitalism.

We hear so much today about the number of short sales and foreclosures that it’s natural to wonder if this is where the bargains are.  Are these areas that we should be pursuing?  Will we get a “great deal”?

First, let’s go over the difference between a short-sale and a foreclosure.

A short-sale simply means that a seller is offering his home for sale – and that he owes an amount greater than the current value.  So if the value of a home is currently $100 and the seller owes $105 – he will, upon the closing of the sale, come up five dollars short – hence the term short sale.

Contrary to what you read, being in a short sale position does not always mean that the seller is in danger of having the bank take his home away.  It could simply mean that the owner wants to sell his home for a new job, or because of a growing family or other reasons. He may indeed have the five dollars he needs to make up his shortage and thereby can pay all that is owed at the time of the sale – even though he will be taking  a loss.

The short-sales that we hear most about in the news are the homes where the owner owes more than the value of the house and is being forced to choose between selling and having the bank take the house away because he is behind on his payments with no resolution in sight.

These sales are very cumbersome and time consuming.  If you need to purchase a house because you have a need to move into it quickly, you should probably not consider this option.  The sale price must first be negotiated with the seller – and then, if the price is less than the mortgage amount, it must also then sit subject the approval of the lending institution.  The lender may not only want to recoup the amount that they are owed on the mortgage but also any late fees and penalties that have accrued.  So once you bid, you simply have to wait- and wait – and wait.  The time frame before the offer is approved can run into months.

Aside from the monetary approval, during the course of the sale, other liens may surface. If there are other debts on the property that have had liens taken out – the additional amount of these debts must be paid off before title can pass to a new owner.

This is not to say that there aren’t some bargains in short sales but if you choose to pursue this avenue you need to go into it with your expectations set accordingly.

Foreclosures are typically a cleaner transaction.  Once a home has gone through the foreclosure process, the original home-owner is not involved. The bank now owns the property and only their approval is necessary.  The listing Realtor, represents the bank – not the original homeowner. So should you choose to make an offer, the listing Realtor will present the offer and the bank will respond.  It can still take a bit of time – but we’re usually talking weeks as opposed to months as can happen with short-sales.

The question is – how much of a bargain will you get on a foreclosure?  Here are some of the things to consider.

If the original amount of the mortgage was 90-100% of the value of the home – at the time it was purchased – and that value has declined by 20% in the last few years – the bank could be looking to collect an amount that far exceeds the current value. PLUS, in addition to late fees and penalties (the same as with short sales) there will be administrative costs and legal fees that the bank incurred during the foreclosure process.

If the home was foreclosed on more than a few months before you are making a offer – the bank also has been paying land taxes as well as  utilities, in some cases. They will likely want to recoup that money as well.

Also – depending on how long the house has been vacant, the condition of the home may not be tip-top.   There are cases where frustrated homeowners on the verge of losing their house, abandon it  – even before the foreclosure.  If the house was abandoned, for a lengthy period of time , there could be freeze damage, burst pipes, ruined floors,  vandalism and a host of other issues. Remember, if they abandoned the house before they were forced out, the house could have been vacant for some time without the bank knowing so they would not be protecting the property by keeping utilities connected or “winterizing” a vacant home.

So if you do ultimately purchase the foreclosed home, you have to mentally add the cost of making the home habitable to what you paid.  Whether you are buying it to live in or as  investment, you still must being the house up to a certain condition.  So if you could save 50K by purchasing a foreclosure and you have to put 40K into it, you’re savings is 10K.   Still a deal, but is it enough of a deal to make you happy.

Lastly, keep in mind that unless you are paying cash, you’ll have to get your own lender to approve you for a loan to buy the house. You may have great credit but remember that a lender looks at your credit and also at the value of the home you want to buy.  When they do an appraisal – it has to present at the value you are buying the house for.  Otherwise, they’ll be lending you more than the value of the house and you will instantly be “upside-down” – the bank won’t do that.

Seeking to buy foreclosures and short sales is becoming more popular for folks looking to get a great deal.  It certainly is possible to accomplish this but it’s important to educate yourself on this issue in detail as to what is a great deal and what is not.

So, talk this over with your  Realtor who can give you some specifics on what properties are available in your area and how best or proceed.

NAR Urges Passage of 4-Point Housing Stimulus Plan and Return of Congress for Lame-Duck Session

October 16, 2008 Leave a comment

The National Association of Realtors® will offer a four-point legislative plan to reinvigorate the housing market, calling on Congress to act during a lame-duck session. NAR believes the plan will give a boost to the economy and help to calm jittery potential homebuyers.

The plan features such consumer-driven provisions as eliminating the repayment of the first-time homebuyer tax credit and expanding it to all homebuyers, making higher mortgage loan limits permanent, pushing banks to extend credit to Main Street, and prohibiting banks from entering into real estate.

“Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible,” said NAR President Richard F. Gaylord. “It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans. We are asking Congress to act right away.”

Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said NAR, as the leading advocate for homeownership and private property rights, believes it is important for Congress to address the concerns and fears of America’s families, much in the way it has addressed Wall Street turbulence. “Housing is and has always been a good, long-term investment and a family’s primary step towards accumulating wealth,” Gaylord said.

NAR recommends Congress pass new housing stimulus legislation that includes the following priorities:

1. Remove the requirement in the current law that first-time homebuyers repay the $7,500 tax credit, and expand the tax credit to apply not only to first-time buyers but also to all buyers of a primary residence.

2. Revise the FHA, Fannie Mae and Freddie Mac 2008 stimulus loan limit increases to make them permanent. The Economic Stabilization Act, enacted in February, made loan limit increases temporary, and subsequent legislation reduced the loan limits and made them permanent. This has broad implication for homebuyers in high cost areas.

3. Urge the government to use a portion of the allotted $700 billion that was provided to purchase mortgage-backed securities from banks to provide price stabilization for housing. The Treasury department should be required to use the newly enacted Troubled Assets Relief Program to push banks to:

• Extend credit down to Main Street, making credit more available to consumers and small businesses;

• Expedite the process for short sales;

• Expedite the resolution of banks’ real estate owned (REOs) properties.

4. Make permanent the prohibition against banks entering real estate brokerage and management, further protecting consumers and the economy.

Gaylord said that NAR will strongly pursue those proposals and is calling on Congress to return to enact housing stimulus legislation in a lame-duck session after the national elections in November.

Copyright National Association of REALTORS®, Reprinted with permission.