Wednesday, July 29, 2009

Great time to buy a house

Is it truly a great time to buy a Home?
BY JR Hafer

Certainly, it is truly a great time to buy real estate for a fist full of reasons. It is a buyer’s market. Supply far exceeds the demand at present. Mortgage Interest rates are at historical lows, market values have dropped, in some cases, as much as 31% from the higher values of 2004 and 2005. Banks are unloading foreclosed properties at bargain basement prices and those upside-down are selling at negotiated short sales.

Because the number of foreclosures on the market and short sales added to those who are motivated by anticipated economical hard times, a buyer on today’s market should be able to find the perfect home without much compromise at all.

Those potential buyers with higher credit scores who make offers to purchase through a knowledgeable Realtor® can find sellers willing to make concessions to help with the buyers closing costs.

The national economic and financial hard times are giving potential first time homebuyers incentives to go ahead and buy rather than waiting. For example the federal government has passed The American Recovery and Reinvestment Act of 2009 has authorized the IRS to provide an $8,000 tax credit to buyer’s who haven’t owned a primary residence in the last three years.

You can find unbelievable deals in great neighborhoods and who can say if the market has bottomed out or not. However, several of these factors I have mentioned will pass you by if you “dilly dally”. The tax credit goes away on December 1st, 2009. Mortgage interest rates have but only one way to go and that’s up. They will surly start rising further and faster as the market stabilizes and recovers.

The Tsunami of foreclosures and short sales has certainly changed the whole landscape of the real estate market here in central Florida and many other places in the nation. But the fact is; the probabilities of a home buyer getting another opportunity like this, is perhaps nonexistent.

Indeed people can purchase the house of their dreams at bargain basement prices in this environment. But do it wisely. Your Realtor will advise and guide you how to get pre-approved and navigate the process wisely in order to achieve an excellent purchase for your family’s comfort and security.

Although there are many pitfalls, your Realtor can advise you how to avoid them. Make sure you ask him / her about a home inspection, a home warranty to circumvent any surprises and disappointments.

Yes, it is truly a great time to buy a home. But make sure you do it the right way. Get the right financing, and the right Realtor. Someone who can make your real estate experience a real easy one. Enjoy the process and enjoy your new home.

Friday, July 24, 2009

What is a short sale?

What is a “Short Sale”?
By JR Hafer
Perhaps you have a question you’re curious to ask: What is a short sale? Simply stated, a so-called “Short Sale” is: When the owner of a house (or any real property) owes more on the mortgage than what it is worth.
Since there are more foreclosures on the market and the list continues to grow exponentially, lenders will agree to accept a lesser amount as a total payoff, in most cases.
The cost to a lender to foreclose on a house can amount to as much as $40,000 to $50,000 after it is all said and done. These lenders realize it would be better to accept a lesser amount, rather than to pursue the expensive foreclosure process. They know there isn’t much chance to recoup the cost of foreclosure anyway. The additional cost to the lender, after foreclosure, is enormous. For example; the cost of insurance, taxes, homeowner’s fees, repairs and most likely vandalism make the opportunity of short sales an attractive alternative to foreclosure. The short sale has become a necessary evil for the lenders. It has also become a great opportunity for potential buyers to purchase a house at a deep discount.
The downside to the short sale is the time it takes to get the short sale process completed. It can take up to three months or more just to get an answer regarding your offer to purchase.
When the lender receives your offer a series of negotiations start which may produce a counter-offer rather than the acceptance of your original offer. Negotiations between your Realtor® and the lender can last a relatively long time depending on financing considerations, your financing, your pre-approval and other conditions and concessions you may have asked for.
Make sure you understand that short sales have no determined time limit and your lender’s interest rates may change substantially before you get an acceptable figure nailed down. Only after a solid dollar amount has been agreed upon can your lender start the underwriting process. Therefore, you should consider that additional time in your closing time projection.
Remember, when you enter into a “Short Sale” purchase attempt, the listing price may not be sufficient to pay the total of all liens and the cost of sale. The sale of the property at full listing price will require the approval of a third party (the lender). However, although the contract is between you and the seller, the bank must agree to accept a certain percentage of the amount owed. Also remember, the listing price may be an approximation of the amount that the lender may or may not settle for. Therefore, a “low-ball” offer is probably not realistic and could possibly even become counter-productive toward your effort to purchase the house in a short sale.
A short sale may be beneficial for you to consider. However, if your purchase schedule is limited and your time constraints will not allow for the time it takes to get an offer accepted, in some ways, you may find your efforts to be a waste of time for you and your Realtor®. So follow his advice.

Short Sale options Taint Realtors

Short Sale Options May Taint Realtors®
By JR Hafer
Over the years real estate agents have often been compared to used car salesmen. The comparison has naturally been resented, and on occasion given Realtorsâ reason to fiercely protect their professional reputations.
One of these occasions is happening within today’s trend of “short sales”.

Admittedly, the potential homebuyers can get a fantastic deal on houses tendered as short sales, if the transactions are straight short sales, that is. Offers that are actually negotiated directly by the realtor with the mortgage holder, for a discounted rate.

Where the process gets contaminated and starts to stink is when an investor steps in with an option contract. Although it is not yet illegal for these investor “flippers” to get involved and make large profits on the deal, it sure does give a perception of a “shady deal”… which, in turn, seemingly taints the reputation of Realtor®.

When a homeowner gives an option and a power of attorney to an investor authorizing the investor to negotiate with the mortgage holder in order to settle for a low payoff, the investor offers the same house to the public for a higher price. This cuts out the homeowner and seems somewhat shady. The desperate homeowner gives up his equity in order to get free of the encumbrance and allows someone else to profit on his hard luck, thinking it is his only hope. The investor can walk away from the deal without penalty if it doesn’t close leaving the homeowner holding a bag of hopes in sinking sand. This just doesn’t feel right.

When a buyer agrees to purchase the house, the investor closes at the lower price with the mortgage holder, and at the same time sells to the new purchaser, at the higher figure, thus making a profit without actually holding the title for any time at all. This is called a double closing; from A to B to C type of closing.

In the best-case scenario these double closing transaction are difficult. Only 10% of these option deals ever close without complications. These complications give the new purchaser the perception of Realtors® having questionable ethics and lacking competency. The perception of the Realtors® ability to close the deal is naturally in question when the transaction sours and goes bad regardless of fault… That stinks!

Several years ago the Federal Housing Administration (FHA) made a ruling that investors must actually own a property for 90 days before they could sell it. This is called “seasoning the deed”. This was directly due to some unscrupulous investors buying up distress properties at a very low rate and without much improvement, turning right around selling it at a big profit.

There is sometimes a very vague line between good old capitalism and opportunistic profiteers taking advantage of unknowing consumers who depend upon professional Realtors® to advise and guide them.

The option contracts and double closings cannot be done with FHA financing. The Federal Housing Administration has deemed it unacceptable for a reason. That reason is assumed to be due to the perception and appearance of impropriety.

Realtors® must contend with short sales due to the amount of impending foreclosures. This can be a helpful thing for those who face foreclosure. However, with due diligence we can ascertain the ones that have the aroma of road kill and option contracts and give these shady deals a wide berth so we don’t get the stench on us that will taint our professional reputation.

Realtors® have the responsibility to serve the public and to remain above reproach and fiercely protect themselves from those who would skirt legality and gray areas in the name of greed, under the guise of helping the “poor unfortunate homeowner” who is on the cusp of losing their home.

All Realtors® have a fiduciary responsibility to fully disclose all the factors of a short sale. This includes the option investor and the probable problems contained within these transactions.

Short Sales, by nature, are difficult without other mitigating factors. It is not a breach of the “steering” rule in making it clear to potential buyers why these types of transactions seldom work and some are a waste of time and effort in pursuing these deals.
According to Webster’s New World Dictionary, the definition of taint is: 1- spoil, rot; 2- make morally corrupt, contamination.