Real estate sales are up 21.1%…What about the prices? Not so much!
According to the Associated Press, 5/25/2010 a private report showed home prices fell during March despite government support and low mortgage rates, signaling weakness in the housing sector. Prices fell even though the government said Monday that sales had risen in April, and a realtors’ trade group said on May 4 that buyers signing contracts to buy homes jumped in March. A record number of homeowners, more than 10 percent, were delinquent on their mortgages in the first quarter, according to the Mortgage Bankers Association. The flood of foreclosed homes on the market is weighing on prices.
OK Sean, “‘What about the price of my home? Should we sell now or wait out the storm?”
Both great questions! Call me immediately at 201-427-1020 for your free personal and confidential property evaluation.
Tell us what you think?
With the unemployment rate at 9.5% as of October and headed to 10.5% by the end of the year, foreclosures and short sales are occurring in epidemic proportions. When someone is facing the devastating fact that they can no longer maintain their mortgage payment, it is important for financially devastated home owners to protect themselves as best they can. So where do you turn once you realize you cannot hold onto your home?
Once a home owner gets to this point there are two possible choices they can make. Walk away through foreclosure and live with the devastating effects on your credit for years to come or find an alternate solution. At first, home owners who are already mentally exhausted after months of falling behind on payments with no relief in sight might be tempted to just throw in the towel and walk away. However, foreclosure is the worst option you can choose. So what are the alternatives and why is foreclosure the worst option?
The Foreclosure Option
In the foreclosure process the lender assumes ownership of the house. Not only do you lose your house, you lose your equity (if there is any) and down payment as well. Also, a lender can get a judgement against you for any late fees and the cost of the foreclosure action. That’s just the beginning. Your credit will be in complete shambles for years to come making any sort of credit purchase almost impossible. This option should be the absolute last resort.
The Short Sale Option
The short sale of a home is possible when the property is worth less than the amount owed on the loan, commonly referred to as being “upside down” on a mortgage. However, in order to make a short sale possible, the mortgage lender must agree to discount the balance of the home loan due to the financial hardship of the borrower. The negotiation of the new loan balance usually takes place between the borrower and the loan modification or workout department of the bank or lender.
Although your credit will be affected negatively, this can be salvaged much sooner than redeeming your credit from a foreclosure. Another advantage to a short sale is once a buyer has been found, most home owners can avoid paying the mortgage payment while negotiations are taking place. Your home will also be put up for sale as is, which means you won’t be stuck with repairs in order for the house to close escrow.
Getting a Short Sale Done in Time
Getting a short sale done before a foreclosure takes place is of the utmost importance. To do that, you must have a Realtor in place that is experienced with the short sale process in order for it to not fall through. “Well…aren’t all Realtors knowledgeable in short sales”, you ask? Absolutely not. Short sales must go through a bank or lending institution as opposed to a seller and a specific ‘short sale’ process must be followed. Experience can make or break the short sale purchase.
Time is of the essence and your credit is at stake. This is not the time to place your future in the hands of a Realtor that is not completely experienced in the short sale process and might not get the job done in time.
Sean T Shallis and The Shallis Group are considered one of the Nations leading Short Sales experts. Call Sean immediately for a personal and confidential conversation about your personal situation. My direct line is 201-427-1032.
Streamlining the Short Sale Process
The Making Home Affordable Program is offering up new help today for homeowners facing foreclosure according to the U.S. Treasury and the U.S. Department of Housing and Urban Development (HUD). This program was created by the Obama administration in hopes of offering financially destitute homeowners a loan modification option in order to save their home from foreclosure.
The Short Sale Option
When a loan modification is no longer an option, homeowners look to short sales as a way to salvage their credit for the future. The short sale of a home is possible when the property sells for less than the amount owed on the loan. However, in order to make a short sale possible, the mortgage lender must agree to discount the balance of the home loan due to the financial hardship of the borrower. You’ll need a professional real estate broker/agent who is specifically trained on how to perform short sales, because your broker/agent will be negotiating a “short payoff” on your mortgage with the lender. According to U.S. Treasury Secretary Timothy Geithner, the short sale option provides a “quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future.”
List of New Incentives and Process:
- Borrowers (Homeowners). Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program but don’t qualify for a modification or do not successfully complete the three month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate. Incentives.
- Incentives include: (1) $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).
- Standardized Documents. The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.
- Property Valuation by Appraisal or BPO. Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.
- Timeline. In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.
- Commissions. The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.
- No Borrower Fees. Servicers may not charge fees to borrowers/homeowners for participating in the FAP.
- Program Expiration. The program is in effect through 2012.
- Deed-in-Lieu of Foreclosure Option. Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).
Not exactly sure what to do in your personal situation?
(source: realtor.org press release)
With foreclosures at an all time high, 12% as of May 2009, many homeowners are facing the stress of financial hardship. Facing a default on a mortgage loan due to the inability to meet the monthly mortgage payments has left thousands of homeowners vulnerable and desperate. They become easy targets and victims of scam artists that prey upon a financially destitute homeowner hoping for some assistance. Many fraudulent foreclosure specialists promise desperate homeowners relief only to turn a quick profit leaving the victim with no resolution.
How a Scam Operates
Some scam artists use claims such as, “We guarantee we’ll stop your foreclosure!” or “We can save your home, guaranteed!” preying upon the vulnerability of the homeowner in foreclosure. Here are some potential scams and their warning signs:
- Fraudulent Mortgage Counselors: Some of them might ask for a fee up front in order to negotiate with your lender. They may also ask the homeowner not to contact their lawyer, lender or bank. Once the fee is paid, the scam artist skips town with the money. Another tactic is for the fraudulent counselor to get the homeowner to make all the mortgage payments directly to him under the guise that he will act on your behalf. After a few months of payments, the scam artist skips town.
- Signing Documents Under False Pretense: Scam artists get homeowners to believe that they are signing new loan documents in order to bring your loan current. However, the document actually relinquishes the deed of the title to the scam artist as part of the “rescue” loan.
- Rent to Buy Back: Many desperate homeowners fall for the rent-to-buy-back tactic which is when the title to the house is signed over on the premise that the homeowner may still live there and pay rent with an option to buy back in the future. The scam artist has now acquired any equity in the home and can raise the rent to the point that is no longer affordable. The previous homeowner, now renter, can be evicted for the inability to pay the rent.
There is plenty of legitimate help available with no fee involved. If you have received a foreclosure notice or are just having difficulty making your mortgage payment, contact your lender to see what options are available. Many lenders have ‘work-out’ departments specifically devoted to homeowners in financial hardship.
For further options such as short-sales, please contact Sean T Shallis at The Shallis Group. Call 201-427-1032 for a free personal and confidential evaluation of your individual situation.
For more information on Foreclosure Scams, please visit ftc.gov.
What is a short sale and is it for me?
Defining a Short Sale
With the current economic climate and housing market bust many homeowners are wondering if a short sale on their property is a way out of a possible foreclosure. As of May 2009 the latest number of foreclosures in the US has risen to 12%, most of which are taking place in the southwest. These figures are leaving many homeowners to consider the possibility of a short sale on their property. The short sale of a home is possible when the property sells for less than the amount owed on the loan. However, in order to make a short sale possible, the mortgage lender must agree to discount the balance of the home loan due to the financial hardship of the borrower. The negotiation of the new loan balance usually takes place between the borrower and the loan modification or workout department of the bank or lender.
Pros and Cons of a Short Sale
Usually when a homeowner comes to the point of considering a short sale, it is because he has already defaulted on the loan due to the inability to meet the monthly mortgage payments. A short sale can be advantageous to the homeowner and lender alike. The homeowner has a way out from underneath his mortgage obligation without foreclosure or bankruptcy and the lender receives the money loaned on the property except at a reduced rate. Although lenders have agreed to settle for a lesser loan amount, they are able to claim the loss on their taxes and use it as a tax write off. On the downside, the borrower must claim the difference between the original loan and the discounted loan as earned income and be responsible for the taxes owed on the amount. Homeowners should discuss the impact of a short sale with a tax consultant before making a final decision.
Purchasing a Short Sale
Due to the nature of a short sale, the obvious advantage to this kind of purchase is the reduced price of the property. Some buyers may find a 10% price reduction as compared to similar properties in the neighborhood. However, the final sale price of the property will not be left for the owners to decide. The prospective purchaser of a short sale home must have the approval of the current homeowner’s lender in order for the sale to take place.
Find out about Short Sale opportunities in New Jersey
Sean T Shallis and The Shallis Group are considered one of the Nations leading Short Sales experts. Call Sean immediately for a personal and confidential conversation. My direct line is 201-427-1032.