Simply put, a short sale is when a seller has a hardship (e.g. death, divorce, job loss), needs to sell, and owes more on the mortgage than the home is worth. It is a complicated process for both sellers and buyers and is anything but short when it comes to time frames.
Sellers first should speak to their lender’s short sales specialist (which could entail many phone calls) and submit a financial package. Not all lenders will accept short sales – it may be financially better for them to foreclose. There could be tax consequences if the IRS considers the amount forgiven as income or the lender may still want the difference owed even after the sale. Sellers should speak with a CPA and lawyer.
Buyers need lots of patience! Even if the Seller accepts your offer, it still has to be approved by the lender. This could take months. (It is more complicated with multiple loans on the house.) The National Association of Realtors® report that on average, short sales sell at a 17% discount. A short sale can be a good deal but understand the obstacles and bring plenty of patience.
Keeping my buyers and sellers educated is part of my job. Give me a call if you would like to work with a Realtor® who will always keep you informed, 603-526-4116.
Article by Preston Howard.
At the height of the mortgage boom, required down payments were at an all time low. In June of 2006, the average down payment percentage on the purchase of a single family residence was 4%. If you had good credit and a heartbeat, there were lenders who would provide you with a 100% loan with no documentation outside of your name, address, and Social Security Number. Now, all of that is about to change. Serious talk is being floated around Washington D.C. that the return of the days of a minimum of 10% and an average down payment of 20% is swiftly approaching.
The Obama Administration has called for 10% minimums on Fannie/Freddie loans. Sheila Bair, Chairwoman of the FDIC has stated that she flat out wants 20% down payments. Many banks are already there. An analysis of major metropolitan areas reveals that the current average down payment is at 22%. Much of this is driven by the large commercial banks pushing for higher down payments to stem their losses and discourage delinquencies with borrowers having “more skin in the game.” In addition, this is also a form of pre-emptive planning as housing prices continue to fall. The thought is that lower leverage equals lower risk. This conventional wisdom holds true in the majority of cases as most property owners are less likely to walk away from a property in which they have made a significant investment. However, what happens to the individual who wants the “American dream” but no capital? Their option will most likely be a government agency.
As previously mentioned, Fannie/Freddie will require 10%. That’s half of the new norm, but depending on who you are and your price maximum, that’s still a lot of money. Then, there is the FHA and the VA. They have seen a lot of action over the last 2.5 years. In 2009/2010, 50% of all mortga
These actions have resulted in the financial world of two extremes: those with a 20% down payment who get all of the perks, and those without the capital who get all of the fees. I foresee a great demand for something in the middle to be created. It may take some time to materialize as the methods of filling the void in the past have faltered. Mezzanine financing above 80% CLTV is currently non-existent. Currently, cities are broke so the availability of the Housing Finance Agency’s “silent seconds” is scarce. The private market hasn’t been incentivized to fill the gap, so the void with the need to be filled will remain, and hard money is too expensive. I believe that if the American public was aware and takes a close look at this new reality, protests will ensue, lobbying will occur and something will be done, as the “charges for some, but not for all” mantra can’t continue for too long. Eventually, a product or solution will be produced, as the margin between 3.5% and 20% is too wide, the demand is heavy and the pending increases in Fannie/Freddie costs are too real.
Preston Howard is a mortgage broker and Principal of Rose City Realty, Inc. in Pasadena, CA. Specializing in various facets of real estate finance, he can be reached at howardpr@rosecityrealtyinc.com.
Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase options, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price. Some tips to achieve a positive impact on value are:
- Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.
- Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who won’t allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.
- Cosmetics are important.
- Fresh paint will always add more value than it costs.
- Clean or new carpet/flooring adds more value than it costs.
- Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.
- If you can, add some colorful flowers and new grass.
- Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.
- Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accommodate for property condition and repairs.
- If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.
- Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.
(reproduced in part from www.yahoo.com)
Despite a frigid and snow‐caked New Hampshire winter, sales in the state increased marginally in the first month of the year over the same period from a year ago, marking the second straight January that has seen a monthly uptick in residential homes sold. According to data released this week by the New Hampshire Association of REALTORS (NHAR), there were 543 homes sold in January 2011, up 2.1 percent over the 532 sold in the first month of 2010. Median price on those homes, meanwhile, dipped by 3.9 percent, from $215,000 in January 2010 to $206,600 in January 2011. “Considering the limitations on the ability for sellers to actually get out and see homes this season, we’re taking any increase in activity as a positive sign,” said NHAR President Tom Riley, a 35‐year veteran of the real estate industry and president of Riley Enterprises in Bedford. “As the economy slowly begins to turn in a positive way, as long as we don’t see dramatic changes in either direction, we feel as though the big picture with regard to the housing market is steadily brightening.” Riley stopped short of making any predictions, pointing out that there is still no clear trend line over the past two years to give a real sense of the market’s future course. Impacted by the home buyer tax credit in 2009 and 2010, the market saw nine consecutive monthly sales increases through the middle of 2010, then five straight months of decreases prior to an uptick in December, and now a January increase. In terms of local markets, seven of the state’s 10 counties saw unit sales increases in January compared to a year ago, including a 67 percent jump in Carroll County, 8.1 percent in Merrimack County and 4.5 percent in Cheshire County. The state’s largest county, Hillsborough, witnessed a 1.3 percent sales increase. Median price, meanwhile, saw increases in four of 10 counties. With inventory still relatively high, interest rates low and prices competitive, Riley said he would not be surprised to see an excellent spring in terms of sales. “There is no crystal ball, but there is no doubt that the climate is ripe for a continued increase in activity,” he said. “Buyers have excellent opportunities right now.” Click here for January 2011 data residentialClick here for January 2011 data condo
1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
5. Predictability. Unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
6. Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
Online resources: To calculate whether buying is the best financial option for you, use the “Buy vs. Rent” calculator at www.GinnieMae.gov .
Original source: Realtor.org in REALTORMag, the Business Tool for Real Estate Professionals
Existing-home sales rose sharply in December, when sales increased for the fifth time in the past six months, according to the National Association of REALTORS®. Existing home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 12.3 percent to a seasonally adjusted annual rate of 5.28 million in December from an upwardly revised 4.70 million in November, but remain 2.9 percent below the 5.44 million pace in December 2009. Lawrence Yun, NAR chief economist, said sales are on an uptrend. “December was a good finish to 2010, when sales fluctuate more than normal. The pattern over the past six months is clearly showing a recovery,” he said. “The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to an adequate, sustainable level. The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.” The national median existing-home price for all housing types was $168,800 in December, which is 1.0 percent below December 2009. Total housing inventory at the end of December fell 4.2 percent to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November. NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said buyers are responding to very good affordability conditions despite tight mortgage credit. “Historically low mortgage interest rates, stable home prices, and pent-up demand are drawing home buyers into the market,” Phipps said. “Recent home buyers have been successful with very low default rates, given the outstanding performance for loans originated in 2009 and 2010.” Regionally, existing-home sales in the Northeast jumped 13.0 percent to an annual pace of 870,000 in December but are 5.4 percent below December 2009. The median price in the Northeast was $237,300, which is 1.4 percent below a year ago. The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries. Source: From the National Association of REALTORS, Washington, DC, January 20, 2011
The good news from NAR was that Pending home sales rose again in November, with “…the broad trend over the past five months indicating a gradual recovery into 2011….” The Pending Home Sales Index (PHSI), a forward-looking indicator, rose 3.5 percent to 92.2; this number is based on contracts signed in November. The data is based on contracts and not closings, which usually occur within one or two months of a signed contract. Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he said. “But further gains are needed to reach normal levels of sales activity.” In the Northeast, the PHSI increased 1.8 percent to 72.6 in November but is still somewhat below November 2009. The West was the only part of the country which actually showed a small increase above the same time period last year. “If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume,” Yun said. “Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy.” The 30-year fixed-rate mortgage is forecast to rise gradually to 5.3 percent around the end of 2011; at the same time, unemployment should drop to 9.2 percent. “All the indicator trends are pointing to a gradual housing recovery,” Yun said. “Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with a continuing flow of distressed properties coming onto the market, as long as there is a steady demand of financially healthy home buyers.” “As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012,” Yun said. The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
According to the December 2010 Economic Outlook released by Fannie Mae’s Economic & Mortgage Market Analysis Group, improvements in consumer spending & confidence, increased demand for goods & services, and falling unemployment claims are all positive factors pointing to a housing recovery going into 2011. Fannie Mae’s Chief Economist Doug Duncan says, “We expect modest increases in home sales, despite recent interest rate rises, due in part to modest additional declines in home prices, and we expect people to take advantage of affordability as their employment and income outlook brightens.”
While total home & condo sales in *9 area towns for 2010 were about the same as in 2009, with a slight decrease in the median selling price, Springfield, Wilmot and Bradford all saw increases in their sales numbers – encouraging news for our market area!
Sold Listings Median Selling Price Ave. Days on Market
2010 261 $236,500 175
2009 257 $245,000 158
*Andover, Bradford, New London, Newbury, Springfield, Sunapee, Sutton, Wilmot, Warner
Donna Forest, ABR
Broker Associate
The August 23, 2010, issue of RISMEDIA online daily newsletter included an article by David S. Jones, discussing the pros and cons of reverse mortgages. Jones, the senior editor for the Real Estate Center at Texas A&M University, took much of the material from an article in the July issue of Tierra Grande magazine by Dr. James Gaines, research economist for the Real Estate Center.
Although these mortgages may not benefit everyone, there is no doubt that they are becoming more popular. They use, as a basis, the home’s current value, borrower’s age and existing interest rates. The loan can come as a lump sum payment, spread out in specific amounts or as a line of credit, or both.
Pros of a Reverse Mortgage
• There is no fixed due date.
• As long as the home remains the borrower’s principal residence,
no repayment is required
• Loans are payable upon death, sale, ceasing to live in the home or failure to keep taxes, insurance or maintenance current.
• Borrowers cannot be foreclosed on.
• Reverse mortgages are nonrecourse loans. The amount owed can never exceed the selling price.
• Borrowers continue to hold title to the property.
• There are flexible payment options.
• Loan proceeds are not taxable.
• Underwriting and approval do not depend on the borrower’s current income or employment status.
• Would-be borrowers are required to meet with an independent financial counselor prior to getting a loan.
• The lender’s lien on the property is removed if the lender fails to make loan advances according to the agreement.
Cons of a Reverse Mortgage
• Homeowners must be at least 62 years old, own their home outright or have high home equity.
•Typically, reverse mortgages provide around 65 percent of the home’s value.
• The loan, all accrued interest and costs are due when the borrower dies. Usually, the home would need to be sold to repay the loan at this time. If an heir wishes to retain the home, the full amount due must be paid off, even if it exceeds the current value of the home.
• To offset fairly high up-front costs, borrowers often need to stay in the home at least ten years.
• Borrowers are responsible for all other ownership costs.
• Homes can be foreclosed on if borrowers cease to live in them for 12 consecutive months or default on any obligation, such as maintenance, taxes or insurance.
• Generally, reverse mortgages can have more complicated terms and conditions and can also generate fairly aggressive solicitation for other products and services.
For a comprehensive explanation, read “Reverse Mortgages: Alternative Home Equity Funding” by Gaines and former Center research assistant Beth Thomas. It can be found online at http://recenter.tamu.edu/pdf/1939.pdf.
The news was full of sales data from many sides about the sharp dip which existing-home sales took in July on the heels of the expiration of the home buyer tax credit. However, according to the National Association of REALTORS®, home prices continued to gain.
Existing-home sales, which include completed transactions of single-family, townhomes, condominiums, and co-ops, dropped 25.5 percent from July, 2009. This meant that the seasonally adjusted annual rate was 3.83 million units in July, 2010, vs. 5.26 million in June, 2010. This is the lowest level since May of 1995.
The total housing inventory increased 2.5 percent to 3.98 million homes available for sale (a 12.5-month supply at the current pace, up from an 8.9-month supply in June); however, the median existing single-family home price was $183,400 in July, which is 0.9 percent above a year ago.
Although existing-home sales in the Northeast dropped 29.5 percent to an annual pace of 620,000 in July and are 30.3 percent lower than a year ago, the median price in the Northeast was $263,800, which is up 4.8 percent from July 2009.
Source: NAR
August, 2010