March 8, 2011

The Emotional Up-Side of a Short Sale

Posted by martikilby under foreclosure, Home Ownership, Selling your home, Short Sale | Tags: , , |
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Over the past two years we’ve all become somewhat numbed by the landslide of bad news about foreclosures and the declining value of our homes.  And if you’re in the real estate business, you’ve eagerly watched for the monthly sales statistics, anxious for a glimmer of hope. But beyond the news articles and charts of numbers are the real stories of individuals and families and lives forever changed.

No one buys a home with the idea that they might lose it one day.  We all buy a house with a vision of it being the place we call home until we move-up, downsize, or for one reason or another, decide to move.  And because it is ours, we put a lot of love (and money) into making it reflect our tastes and lifestyles.  We paint, we plant, we remodel – we make it distinctly ours.

When threatened with foreclosure, there are a lot of emotions, depending on the situation; anger, fear of the future, sadness and a sense of loss are a few.  But the overwhelming feeling that people express to me is a sense of helplessness.  Losing their home is usually not their decision and they often feel powerless to control the direction of their lives.

For many, a short sale offers an opportunity to put a positive spin on what is otherwise a negative situation.  Instead of losing your home, you are making a conscious decision to sell it – you are in control of the situation.  You are choosing to sell and salvage your credit rating; you are choosing to rebuild your financial picture; you are choosing to close one chapter, put the hurt behind you, and move forward with your life.

Facing a financial loss such as losing your home to foreclosure can be devastating.  A short sale may have benefits that go well beyond your credit report by helping you start that new chapter on a positive note.  Please feel free to call or email with any questions.

 

February 22, 2011

Short Sale vs. Foreclosure: You Be the Judge

Posted by martikilby under Credit score, Credit Scores, foreclosure, Short Sale | Tags: , , , , , , , , , , |
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Short sales can be a real pain for everyone involved…sellers, Realtors, buyers…and because so many fail, people are often left with a negative view of the short sale process.  But, do you really know the benefits that might make it worth the effort?

As I’ve mentioned before, I work with an exceptional short sale negotiation company that has a 99% success rate in getting approvals.  The president of that company recently put together a nice chart outlining the benefits of a short sale vs. a foreclosure and I’ll share the highlights.

Future Ability to Purchase a Home:    When you apply for a home loan, there is a question on the application that asks, “Have you had a property foreclosed upon or given title or deed-in-lieu thereof in the last 7 years?”  A positive response may impact your ability to qualify and will certainly influence the interest rate you are charged.  Currently, there is no question on the loan application with regard to short sales.

Impact on Credit Score:    With a foreclosure, credit scores can drop 250 – 300 points.  Conversely, with a short sale only late payments will impact the credit score.  After a short sale, the mortgage that was paid-off short will be reported as ‘paid as agreed’, ‘negotiated’, or ‘settled for less than agreed’.  This can lower your score as little as 50 points and will usually have little to no effect in twelve to eighteen months.

Impact on Credit History:   Foreclosure remains on your credit history for seven years.  Since short sales are not specifically reported their impact is only as great as the number of missed payments, as noted above.

Deficiency Judgment:  Unless you’re in a state with anti-deficiency laws, the bank can pursue a deficiency judgment.  In a successful short sale, the bank will waive the right to pursue a deficiency judgment.

Current and Future Employment and Security Clearance:   Many employers require credit checks for all employees, and certainly for anyone hoping to attain a security clearance.  While individual companies and agencies have different requirements, a foreclosure can have a negative impact on your ability to get a job, keep your job, or get certain clearances.

Of course I’m not a lawyer or accountant, and each individual’s situation is different, and not everyone will qualify for a short sale.  You should always consult the appropriate professional for advice.  But as a real estate professional, I would definitely give the short sale serious consideration before deciding to just walk away.  For a confidential consultation just give me a call at 619-846-9249.

 

February 17, 2011

Good News about the American Dream

Posted by martikilby under Buying versus Renting, foreclosure, Home Ownership, Real Estate Sales Statistics | Tags: , , , , , , |
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I’m almost feeling like we can breathe again.  We’re not out of the woods, but here in San Diego, we’re headed in the right direction.  And surprisingly, the next generation of home buyers is not running screaming into the night frightened by the plague of foreclosures, but rather embraces the idea of one day owning a home.  Check the numbers.  What do you think?

According to a January 2011 Harris poll conducted on behalf of Trulia, the American Dream of home ownership is alive and well.  70% of those surveyed say that home ownership is still part of their dream, and 78% of homeowners surveyed say that their home is the best investment they ever made.  Well, those are probably folks who didn’t buy in 2004-2006.  Buyers during those years are probably the 20% who feel trapped in an underwater equity home or the 14% who are considering just walking away.  Like I said, we’re not out of the woods.

But what I found very refreshing is that 88% of 18-34 year olds aspire to be homeowners, and overall  in the west 70% of renters plan to become homeowners.  In my estimation, this group will drive the long-term recovery, and drive the next real estate bump in value. Only 10% plan on buying in the next 24 months, but they will help prime the pump.  By 2015 we could be in the midst of the next upswing.

So when to buy?  Consult with your accountants and money managers, but my bet is now….just as we turn the corner and start to head up.

 

February 3, 2011

Whew! Home Prices Stabilize in San Diego

Posted by martikilby under Home Ownership, Real Estate Values | Tags: , , , |
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Home prices across the country have taken a roller coaster ride over the past few years with far more hair-raising dips than inclines.  According to a Fiserv, Inc. report, the ups and down may not be totally over, but the financial services company predicts that by the end of 2011 75% of U.S. metro areas will see stable prices.

The good news for San Diego is that we are only one of three metro areas that had prices stabilize in recent months.  San Francisco and Washington, D.C. are the other two.  Still suffering are hard-hit areas including Miami, Phoenix and Las Vegas where prices are not expected to smooth out until late 2012.

This is not to say that we won’t see some price reductions in certain neighborhoods, but overall the downward slide in value is over for most San Diego homeowners.  Foreclosures, unemployment, and restricted access to credit will continue to be the three negative factors influencing our market, but increased demand based on low prices and low interest rates seems to be balancing our market favorably.

So is this a good time to buy?  As I’ve said before…..absolutely!  Prices are already increasing in many areas, but if you’re curious about where you can get the most bang for your buck in San Diego county, give me a call.

 

January 18, 2011

Is the REO Sales System Really this Bad?

Posted by martikilby under foreclosure, REO, Selling REOs | Tags: , , , |
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If you’ve ever wondered why we’re drowning in REO properties, it could be that banks are stupid.  No, I shouldn’t say that.  Let’s rephrase that more politely to read, “People in banks who make decisions about liquidating foreclosed properties perhaps lack any trace of common sense.”   See if you agree.

Last night I received an email from the asset manager in charge of one of my foreclosure listings.  In case you aren’t familiar with the lingo, the asset manager is often an employee of a third party company that is assigned bulk REOs by a bank.  It is his/her job to hire a Realtor to market the individual properties, act as an intermediary between the Realtor with the listing and the bank, and get the properties sold as quickly as possible for the most money. It is a stressful, high-pressure job.

I like the asset manager on this deal, and so far we’ve worked well together.  I’ve been waiting though for her to open escrow on a sale they approved early last week….an all cash offer of over $300K on a home that needs more than $50K in repairs.  The buyer is ready to close, and I can’t understand the hold-up.  So my asset manager sends me the following email, “We have an issue on this one. The offer is $80 under what I can accept. And no I am not kidding. Is the buyer willing to come up $80?”

$80 dollars????  Are you kidding me?  On a $300K all cash deal?  Geez! I’ll write the check myself!  Let’s just get it done!  So this is what we’re dealing with….a system that is so screwed-up that the person in charge of unloading foreclosed homes doesn’t have the authority to waive $80 bucks!  Sigh.  It’s going to be a long road back to a ‘normal’ real estate market…..

 

December 29, 2010

Taking a Bet on Real Estate in 2011? Here’s My Predictions

Posted by martikilby under foreclosure, Home Ownership, Interest rates, loan modification, Real Estate Sales Statistics, Real Estate Values, REO, Short Sale | Tags: , , , , , , , , , , , |
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Once again, Santa forgot to bring me a crystal ball.  So this look into the future of the housing market is based on trends from the past year, projections from those that crunch the numbers, and my gut feelings based on life in the real estate trenches.

Foreclosures continued to be the top story in 2010 with robo-signing and questionable practices making headlines.  In 2011 so-called shadow inventory will be making news as it grows and clogs the pipeline.  This includes borrowers that are 90 days or more delinquent, homes in foreclosure, and bank-owned properties not yet on the market.  S & P estimates that it will take 41 months to clear the backlog, continuing to slow the recovery.

Short sales will increase as the government and lenders try to stem the deluge of foreclosures that add to the shadow inventory.   Right now about 35% of defaults end in a cure or short sale.  I see that number growing as banks and the government iron out the problems with HAFA (Home Affordable Foreclosure Alternatives), and the processing of short sales is streamlined.

Loan modifications will continue to be largely unsuccessful.   There is some hope for small improvement in the numbers if the FHA principal reduction program can be expanded.

Mortgage interest rates jumped this last month, but are gradually heading down.   Frank Nothaft, chief economist for Freddie Mac foresees rates staying below 5.00% throughout the year.  Let’s hope he’s right.

Home sales will increase, especially for first-time buyers, provided interest rates remain low and the economy continues to improve.  If unemployment continues to decrease and incomes increase we should see an increase in home sales over 2010 by the 2nd half of the New Year.

Home values throughout most of the country will reach the bottom by mid-year and many areas, such as San Diego County will see modest gains of 2.00 – 4.00%.  The exception continues to be the luxury home market where home prices in locations such as La Jolla and Rancho Santa Fe will continue to decline.

My advice?  If you own a home and are not terribly upside-down, hang tight.  Looking to buy?  Do it now!  This is a great time to purchase your first home or pick-up an investment property.  Struggling with your payments?  Let’s explore your options, before it’s too late.  Overall, I’m cautiously optimistic.

Best wishes for a happy, healthy and prosperous New Year!

 

December 22, 2010

Fannie Mae Slaps Foreclosure Victims

Posted by martikilby under Fannie Mae, foreclosure, Loan qualification | Tags: , , , , , , , |
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Just in time for Christmas, Fannie Mae put new rules into effect on December 13th that will make it even more difficult for homeowners who have had a foreclosure to buy again.

Under the new lending guidelines that control qualification standards for Fannie Mae backed mortgages, a borrower who has had a foreclosure will now have to wait seven years before being approved for a new mortgage.  That is up from the current wait time of four years.  Another provision of the guideline revision tightens the acceptable debt-to-income ratio (DTI) to 45%, down from 55%, and includes stricter scrutiny of all installment debt.  Under the new guidelines, even one missed payment on a credit card could mean the difference between approval, and not qualifying.  Fannie Mae currently guarantees 28% of all residential loans.

While we all understand the need to move away from the “if you have a pulse, you qualify” standards of a few years ago, these new guidelines seem downright punitive!  On one hand the Fed is pumping money into banks urging them to make more loans to stimulate the economy, yet at the same time the new regulations make it more difficult for banks to lend.   And why the increase from four to seven years?  There is no rational reason for this extended wait time.  The only thing I can figure is that this is intended to scare homeowners considering strategic default into continuing to pay an inflated mortgage on a grossly devalued home.

Although there are several provisions of the new guidelines that may benefit some borrowers, overall this is not an effective way to get the housing market back on its feet.  Thanks Fannie:  You’ve just provided one more reason why I believe we’ll continue to see an increase in short sales over the coming year.

 

December 21, 2010

Hope for Homeowners Facing Foreclosure

Posted by martikilby under foreclosure, loan modification | Tags: , , , , , , , |
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Finally, it appears that something is working to help save homes and stop foreclosures.  In a report released on Monday, NeighborWorks America revealed that a homeowner who works with a housing counselor is nearly two times more likely to avoid foreclosure than those that receive no counseling.

NeighborWorks America is the administrator of the National Foreclosure Mitigation Counseling Program (NFMC) established by the federal government in 2008.  The first two years of the program were analyzed by the Urban Institute of Washington, D.C, and revealed the value of counseling intervention in not only reducing the number of foreclosures for homeowners who were counseled, but in mortgage modification.  Homeowners who worked with a counselor to get their mortgages modified ended up with reductions averaging $555 a month, compared to savings of $288 for those that did not work with a counselor. 

Another benefit of working with a counselor is that the re-default rate is lower.  After receiving a loan modification 49% of non-counseled borrowers re-default after 8 months, compared to 36% of those counseled.  This still seems high, but overall the report clearly demonstrated the value of counseling as 55% of those in foreclosure that sought counseling were able to cure the foreclosure and save their home within 12 months.

The report did not indicate if the lenders involved in the modifications reduced principal balances or simply modified rate and term.  And while counseling may be useful in many cases, I still believe that principal reductions are the only real tool to stop the foreclosure flood as counseling does not address the issue of strategic default.

 

December 10, 2010

Staggering Stats: Trillions in Equity Lost

Posted by martikilby under Home Ownership, Real Estate Sales Statistics, Real Estate Values | Tags: , , , , |
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This year alone U.S. homes are projected to lose $1.7 trillion in value.  Since the market peaked in 2006 there has been over $9 trillion in lost equity, according to Zillow.  But let’s put that in perspective.

Zillow cites a report by the Congressional Research Service, which says that from 2001 to the end of September of this year, the war in Iraq has cost the U.S. $750.8 billion.  This means that since 2006, the dollar value of home equity lost by U.S. homeowners is greater than the cost of 12 Iraq wars!

Now some might argue that home equity in 2006 wasn’t “real” money, and that inflated prices only created the illusion of equity.  Well, most of the country based many financial decisions on that illusion and by the end of the 3rd quarter 2010; more than 23.2% of homeowners owe more than their house is worth.

Looking forward into 2011, Dr. Stan Humphries, Zillow’s chief economist, doesn’t see the market settling into a natural equilibrium of supply and demand any time soon.  “Unfortunately, with foreclosures near an all time high in late 2010, and negative equity persisting, it does not appear that the first part of 2011 will bring much relief,” he said.

One bright spot for San Diego emerged however.  Out of the 129 market areas tracked by Zillow, only one-quarter showed any increase in value in 2010, led by Boston with a spike in residential home values of $10.8 billion and San Diego metro with an increase of $10.2 billion.

The message for San Diego homeowners:  Hang-on if you can and you’re not too far underwater.  For would-be buyers:  Don’t wait!  Prices and interest rates are on the rise.

 

November 29, 2010

Beware Forensic Audit Loan Scams

Posted by martikilby under foreclosure, lenders, loan modification, mortgage | Tags: , , , , , , , |
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Behind on your mortgage?  Beware.  You could become the target of a growing scam by foreclosure prevention “specialists” who use deception and outright lies to sell services that promise relief to distressed homeowners.

In the scam, homeowners are asked to pay an upfront fee to retain the services of an auditor, who is supposedly backed by an audit attorney.  This fee might be as much as 1.0% of the principal balance.  On a $350,000 loan that could be as much as $3500, and some audit companies even charge a monthly retainer of $1000.  For this fee, the audit team then offers to review your loan documents to determine if your lender complied with all state and federal lending laws.  The auditors propose that if irregularities are discovered, you can use the audit report as ammunition against your lender to stop foreclosure, get your loan modified, the principal reduced, or even cancel the loan.

Not true.  According to the FTC there is no evidence that forensic loan audits will help you get a modification or any other foreclosure relief, even if conducted by a legitimate attorney.  Some federal laws may allow you to sue your lender for errors in your loan documents, but even if you win your lender is not required to modify your loan.

The bottom line is that if it sounds too good to be true, it probably is and looking for lender errors or omissions is not going to save your home.  But you do have options.  For free guidance visit www.hopenow.com , view the options I discussed  in a previous post, or for immediate answers, please don’t hesitate to contact me directly.

 

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