It’s a challenging market for home sellers right now. Buyers have a lot of options—and they don’t have to buy what you’re selling. Your house is likely just one located in a sea of for-sale signs, so you can’t be sloppy about putting it on the market. Luckily, we’ve rounded up the dos and don’ts that will help you collect thousands (if not hundreds of thousands!) for your place. Don’t … ask for too much money.
Yes, you know what you paid for the house. But that doesn’t mean that it’s still worth that amount—or that it’s appreciated in value since you bought it. “Your house is only worth what the market is willing to pay you,” says Chris White of the White and Weeks Team.
The tax law passed by Congress this week to avert the "fiscal cliff" turned out pretty well for the real estate industry.First, the Mortgage Forgiveness Debt Relief Act of 2007, which was scheduled to expire on Dec. 31, 2012, has been extended through the end of 2013.This means that homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale of their principal residence during 2013 may exclude up to $2 million of forgiven debt from their taxable income.Had this law not been extended, income tax would have had to be paid on such forgiven debt -- making short sales and loan modifications less attractive to some distressed homeowners than foreclosure and bankruptcy.
Are some appraisers failing to see the improvements in real-estate values in local markets that have recently bottomed out and turned positive? Chris White says several recent offers on his listings have appraised lower than their true value. Fortunately he's been able to provide more data for the appraiser to review and increase the value.
When multiple bids push a house price thousands of dollars above what the seller is asking — not unusual in neighborhoods where demand is particularly robust — are appraisers still coming in with values below the agreed-upon contract number?
Yes. Growing numbers of loan officers and real-estate agents say appraiser reluctance to report local appreciation is becoming a significant complication in sales transactions.In a new poll of its members, the National Association of Realtors found that 33 percent of them reported appraisal problems during the month of May.
Some people believe negotiations are bound to be contentious. But they needn't be. It's clearly possible to negotiate with a cool head and reach an agreement that pretty much satisfies both parties. Here's how:
1. Start by listening
Don't reveal what you want right away. Let the other side go first, so you know what you're dealing with. If they're hesitant, be firm. Explain that you can't give them what they want without knowing what they need.
2. Stick to the process
Experts tell us there's a 3-step process to successful negotiations:
For the Seattle-Bellevue-Everett metro area, prices are seen rising at a 5 percent annualized rate.
But that won't come before an additional 3.3 percent price decline through the rest of this year. The Seattle area was late to the party, with prices reaching their peak in the second-quarter of 2007 compared with a national peak in the first quarter of 2006.
"There's always a danger of being premature," Case-Shiller Indexes revealed last week. "But a number of favorable factors are going to put a floor under prices."
Among them: better employment numbers, fewer markets dominated by foreclosure sales and bank-owned properties, and affordability at record levels. Fiserv studies data from 380 markets nationwide.
"Seattle is a very unique market," Stiff said. Chris White agrees and thanks to aerospace, software, life sciences and other economic assets, it has a deep, specialized labor pool making good money. He expects Seattle to stabilize sooner.
The White and Weeks Team has recently reviewed their client's home purchase and sale statistics for 2012. According to Chris White, "We're seeing a slight rise in prices and multiple offers are slowly increasing. 2012 will most likely be the last chance to purchase bargain homes."
Buying a home may never get any cheaper than this. Several housing experts are predicting that this year will be the last chance for bargain hunters to cash in on the best deals of the weak housing market.
With home prices down 34% nationally since 2006 and mortgage rates at historic lows, homes have never been more affordable -- but it won't stay this way for much longer. Stuart Hoffman, chief economist for PNC Financial Services (PNC, Fortune 500), said he expects home prices to flatten out by the third quarter and start climbing by next year.
A number of factors will help bolster the housing market, he said, including a decline in the number of foreclosures and continued job growth. In addition, homebuyers will have better access to mortgages as they get their finances in order and improve their credit scores. "Foreclosures are definitely down and the move is to short sales", says Chris White.
The Federal Housing Finance Agency laid out new rules aimed at speeding up the short sale process, a move that could keep many homes from falling into foreclosure. In a short sale, the bank that holds the mortgage must agree to accept a price for the home that is less than what is owed.
Even though short sales are considered a better alternative to foreclosure, banks often take so long to review and approve short sales that the deal falls apart and homes get repossessed. "Delays in approving short sale requests remain a significant challenge for realtors and consumers and often results in canceled contracts and the property going into foreclosure," said the president of the National Association of Realtors.
The organization attributed much of the closing problems to extended lender response times. Some agents said that lenders even foreclosed on the homes before a short sale could close.
Buying is more affordable than renting in 98 out of the nation's 100 largest metropolitan areas — even in New York, Los Angeles and Boston, according to real estate company Trulia's rent vs. buy index.The index is based on asking prices for rental units and homes for sale on the company's website between Dec. 1, 2011, and Feb. 29.
“As rents rise and prices stagnate, homeownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face.”Homeowners are choosing, or being forced, to rent rather than buy even though the latter is cheaper in key markets Trulia reviewed.
Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.Banks are now lending amounts up to 3.5 times borrower earnings.
For those who purchased a home between 2003- 2009, they owe it to themselves to talk with a Realtor about the ins and outs of a short sale, says Chris White, and here's why...
"Freddie Mac, a taxpayer-owned mortgage company, is supposed to make homeownership easier. One thing that makes owning a home more affordable is getting a cheaper mortgage.But Freddie Mac has invested billions of dollars betting that U.S. homeowners won't be able to refinance their mortgages at today's lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom", according to National Public Radio.
White is very concerned for his clients and these investments, while legal, raise concerns about a conflict of interest within Freddie Mac. Freddie Mac, formally called the Federal Home Loan Mortgage Corp., was chartered by Congress in 1970. Their website says it has "a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership."
First-time buyers are often less patient than move-up buyers, and don’t want to wait for a short sale to go through. But with patience and a good short-sale savvy Realtor, first-time buyers can hit a jackpot.
According to the monthly Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, the share of short sales purchased by first-time buyers dropped to 40% in August 2011 after peaking at 54% of all short sales in November 2009.
“A short sale can be a great way to get an undervalued property, but buyers need to make sure that both agents, including their buyer’s agent and the listing agent, are experienced with short sales,” says Chris White. “I always recommend that buyers put in a drop-dead date into their contract, such as allowing the lender 30 days to approve the offer, because this puts pressure on the listing agent.”
It’s a tarnished silver lining for people at risk of losing their houses and homeowners in neighborhoods blighted by bank-owned properties, but the robosigning scandal that slowed the foreclosure process to a crawl appears to have increased lender interest in short sales.
“Foreclosure sales are pretty devastating,” said Faith Schwartz, executive director of Hope Now, a resource for homeowners facing foreclosure. “We’d much prefer a modification, but if [homeowners] don’t quality, then the next best alternative is deed-in-lieu or short sales.”
Short sales, in which the lender agrees to let the owner sell the home for less than the amount owed on the mortgage, and foreclosures both climbed in 2010, but while short sales rose by 26,000 this year, the number of foreclosures fell by 255,000, according to Hope Now.
Short sales, along with deed-in-lieu of foreclosure deals in which the lender takes the deed essentially as payment for the mortgage, still upend families, torch credit ratings and hurt neighboring property values, but they’re far less toxic than foreclosures.
Freddie Mac has expanded its winter REO sales incentive program to the states of Alaska, Kansas, Kentucky, Missouri, Oregon, and Washington. That makes the promotional offer now active in 33 states and the District of Columbia.
“We’re expanding our winter promotion to focus additional incentives to encourage strong sales activity in our ‘cold weather’ states over the next several months,” said Chris Bowden, VP of HomeSteps.
Offers must be received by HomeSteps between November 15, 2011 and January 31, 2012, with escrow closed on or before March 15, 2012. This offer is valid only on HomeSteps homes sold to owner-occupant buyers.
The program also extends additional incentives to these owner-occupant buyers. Freddie Mac will pay up to 3 percent of the final sales price towards the borrower’s closing costs. Some homes are also eligible for a two-year Home Protect limited warranty that covers electrical, plumbing, air conditioning, heating, and other major systems and appliances.
Banks are not only approving more short sales, they’re doing it in less time. In the second quarter, short-sale homes, also known as pre-foreclosures, sold an average 245 days after default, down from 256 days in the previous period, according to Irvine, California-based RealtyTrac. That reversed three straight quarters of increases.
"I use an attorney practice specializing in convincing the banks that a short sale benefits them as well as the seller. Our ratio of closed short sales outbeats other local agents", say Chris White, RE/MAX Metro and Eastside.
In a short sale, Freddie Mac agrees to accept less than a full payoff of a mortgage when the borrower is unable to sell their home for enough to pay off their entire loan. Freddie Mac short sales have risen from about 4 percent of completed workouts in 2000 to nearly 14 percent in 2010.Short sale fraud, also on the rise, enters the picture when real estate professionals fail to disclose affiliations with other parties involved in the transaction to rig sales at a low price and hide better offers from Freddie Mac and the distressed home seller. Then, after the house is sold, the fraudster can flip it a few hours later for the better price and walk away with the profitable difference.By concealing the higher offer, short sale fraud worsens losses to home sellers, Freddie Mac, and taxpayers.
Bank assisted short sales of homes surged in the second quarter of the year as buyers snapped up discount priced properties at some of the lowest mortgage rates in decades. The surge in home purchases from pre-foreclosures account for an eighth of all residential sales, but represent less than a quarter of all U.S. home sales.
Short sales, in which banks cooperate with mortgage holders to sell at a price for less than what is owed on the mortgage had an average sales price of $192,129, according to RealtyTrac. The figure represents a discount of about 21% under homes that are not foreclosures or short sale properties.
The surge in sales may be a major step for the housing market, troubled by record foreclosures and declining home values in most areas of the country. High unemployment and underemployment levels make it nearly impossible for more than a third of all U.S. households to qualify to purchase a home.
1. Get educated. "Education is the first step," says Chris White. "I have the CDPE ; you need this kind of training if you’re going to speak confidently and intelligently about the process." Remember that this is someone’s financial future in your hands, so you need to know what you’re doing, or you should refer the lead on to a Short Sale specialist.
2. Team up with experienced agents. If you’re new to Short Sales, it’s wise to find an agent who is doing them and is willing to partner up with you to share expenses and responsibilities. Not only will you learn the process and become better prepared, you’ll also minimize the chances of fudging your first few sales if you have a skilled mentor. "Fortunately I've successfully closed over 50 Short sales for my clients", says White.
I get asked all the time about the short sale process. Is it a good idea? How bad does it damage your credit? Why does it take so long? While the process can be extremely lengthy at times, overall it is still a good idea for those in a specific situation.
We all know that market values on the majority of homes has dropped and in some cases quite significantly. If you are willing to take a loss on your home and want out of your current situation then a short sale is a great idea.
A new bill to improve the process for approving short sales may soon bring relief to distressed homeowners who are unable to keep their homes and hope to avoid foreclosure. The bill, recently introduced in the U.S. House and strongly supported by the National Association of REALTORS®, would impose a deadline of 45 days on lenders to respond to short sale requests.The legislation, the “Prompt Decision for Qualification for Short Sale Act of 2011,” was offered in Congress by U.S. Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-N.J.).
“The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure."
Facing Foreclosure...Consider a Short Sale If you are one of the many homeowners who have fallen behind on your mortgage payments and you don't see any way to avoid foreclosure, a short sale may offer you the least painful way to resolve the situation. Obviously, the ideal scenario would be that you magically catch up on your mortgage payments and keep your home.
But for an increasing number of Americans, that is not a realistic possibility, so it's to your advantage to take an active role. This is what a short sale is all about -- resolving the problem, as opposed to simply hiding from your lender and hoping the issue will go away or, worse, walking away from the property.
One can only imagine all the high-fives and fist-bumps that erupt once a can't-make-ends-meet borrower finally, finally talks a lender into forgiving $3,000 in credit-card debt.
Now picture that person months later handing over a little piece of paper called a 1099-C to a tax preparer. The tax preparer must break the bad news: Most times, canceled debt is treated like income. And $3,000 of forgiven credit-card debt must be reported as income on the state and federal income-tax returns.
In April, the Obama administration formally rolled out a new program, called Home Affordable Foreclosure Alternatives, that was designed to spur more short sales, where banks allow homeowners to sell their homes for less than the mortgage debt outstanding.
Like other foreclosure-prevention initiatives, this one appears to be off to a slow start — just 342 sales have been completed through September.HAFA was designed as a cousin to the Obama administration’s Home Affordable Modification Program, HAMP, whose woes have been well documented.
Mortgage company Fannie Mae is introducing a website to help consumers who are struggling to avoid foreclosure learn about ways to get help. The government-controlled company has launched www.knowyouroptions.com. It is designed to provide easy-to-understand definitions of mortgage industry terms and online calculators that help consumers determine whether they can qualify for a refinanced mortgage or a loan modification.
The way to determine if you should do a short sale while in bankruptcy is to ask yourself this one simple question; Even though my creditis going to be damaged now, do I want to own a home again sometime in the future? If the answer is yes, then you should seriously consider the idea of doing a short sale regardless of a bankruptcy ﬁling.
The Obama administration last week introduced a program to encourage lenders to forgive some of the mortgage debt owed by homeowners. The purpose is to help people remain in their homes and reduce foreclosures. But the housing crisis is so huge that no one initiative can solve it all. So another kind of help is on the way. It's aimed at homeowners who can't afford to remain in their homes and instead want to sell them.
Is walking away really an option when facing foreclosure? A recent opinion piece in the Wall Street Journal; When It’s Ok to Walk Away From Your Home, gives advise that could lead down a scary alley. If you walk away, who might be chasing you? Unless the deficiency is released in writing by the lender, it can haunt you.
A real estate short sale is a form of agreement between the seller of a home in the beginning stages of foreclosure and their lender, allowing the home to be sold for less than the existing loan balance outstanding. The mortgagee would accept less than the loan amount in order to avoid a foreclosure proceeding. This short sale would result in a substantially discounted purchase price for the buyer of the home. The buyer would then proceed with the purchase of the home much the same as in any conventional realty transaction.
The U.S. Treasury Department recently announced new guidelines to the short sale process that could speed the housing market recovery, a move RE/MAX Executives have been promoting in Washington D.C. for the past year. Short sales, transactions that can occur when a lender accepts the sale of a home at a price below the actual amount owed on the home, have become an increasing part of the real estate business as besieged homeowners look for alternatives to foreclosure. RE/MAX Chairman Dave Liniger has promoted a streamlined short sale process since foreclosures began flooding the market and has presented specific proposals to government officials.
Get ready for the short sales. According to a Treasury spokeswoman, Treasury officials will soon announce a $2,500 subsidy ($1,000 to the servicer and $1,500 to the seller) to encourage short sales as a way to clear the excess inventory. The fees are designed to help compensate the servicer for the extra effort, and to incent the seller to be cooperative and leave the home in good condition. Presumably, the Treasury is trying to help facilitate a transaction that will result in less loss to the lender than in the case of a foreclosure.