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Archive for the 'Georgia Mountain Real Estate VIEWS' Category
I recently acquired my Certified Distressed Property Expert (C) (CDPE) designation. A CDPE is a real estate professional with specific understanding of the complex issues that confront homeowners in distress. Through comprehensive training and market experience, CDPE’s are able to provide real solutions for homeowners facing hardships in today’s market. My goal with this designation is to shorten the legal section in our local community newspapers here in the North Georgia Mountains with each passing week. In doing so, I will simply be helping families to stay in their homes, helping them to realize that there are many options other than walking away and ultimately facing Foreclosure. However a successfully negotiated Short Sale has consequences, and I would like to share with you 7 possible pitfalls or legal risks that you and your agent need to be aware of.
1. Misrepresenting tax consequences.
Although it’s true that the federal government passed a law in 2007 directing the IRS not to count mortgage debt forgiven by a lender as income, the provision is limited. It applies only to purchase money; it doesn’t apply to debt on a cash-out refinancing, and it doesn’t apply to second homes. There’s also a dollar limitation, albeit a generous one ($1 million for married couples filing separately, twice that for joint filers). “A lot of associates are telling people there are no tax consequences,” says Lance Churchill, a short sales specialist and trainer who operates in Boise, Idaho, and San Diego. “But it’s a limited law and you just need to be accurate about it.”
2. Misrepresenting how secondary debt is treated.
Practitioners might mistakenly tell sellers that all the house debt is forgiven once the primary lender approves a short sale. But that might not be the case, Churchill says. Holders of second deeds of trust don’t typically forgive the debt. More commonly, they accept a partial payment, like $2,000; and rather than write off the balance, they sell the balance to a collection agency for another few thousand dollars. In many states, these second loans are recourse, so sellers can be caught by surprise when the collection agency contacts them a year later seeking payment of the debt.
3. Acting on inappropriate lender requests for seller contributions.
It’s not uncommon for lenders to go after money that the sellers have in the bank or in a retirement account before they approve a short sale request. They’ll sometimes seek to put the onus on the real estate practitioner to get sellers to sign over a note for the amount they have in the bank as a condition of sale. But in states where mortgage debt is nonrecourse, lenders have no right to the money, and associates that suggest otherwise to the sellers might be later sued for negligence.
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According to foreclosure-tracking firm RealtyTrac, foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing.
It’s a small improvement from January and a just 6 percent increase over February 2009.
On a per-capita basis, foreclosure density varied by state:
* Nevada : 1 foreclosure filing per 102 homes
* Florida : 1 foreclosure filing per 163 homes
* Arizona : 1 foreclosure filing per 163 homes
* California : 1 foreclosure filing per 195 homes
Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average; 40 states fell below. Like everything else is real estate, it seems, foreclosures are local.
For today’s Home Buyer’s in Blairsville and Blue Ridge Georgia, foreclosures represent an interesting opportunity.
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If your mortgage is set to adjust this year, the smart move may be to let it. Today’s conforming mortgages are adjusting lower than ever before — as low as 3 percent. It may not be what you expected when you signed for your ARM several years ago.
The reason why ARMs are adjusting lower is because of how they’re made.
When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable. The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.
The formula looks like this:
New Mortgage Rate = LIBOR + 2.250 percent
LIBOR is an acronym for London Interbank Offered Rate. It’s an interest rate at which banks borrow money from each other. In Fall 2008, when Lehman Brothers fell and sparked a global banking fear, LIBOR spiked as the risk of inter-bank borrowing jumped.
Since then, however, LIBOR is down.
Normalcy is returning to banking and the timing couldn’t be better for Blairsville homeowners with ARMs. 15 months ago, a homeowner’s ARM may have adjusted to 6 1/2 percent. Today, that same ARM falls to just above 3.
As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too. The decision is a balance between how low do you want your payment, and how long might you live in your home.
The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.
If you’ve got an adjusting ARM, talk to your loan officer about your choices. Once March ends and the Fed withdraws its mortgage market support, mortgage rates may rise and the fixed-rate option may be gone.
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In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.
The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.
To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.
In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which the seller is a majority owner
- You can’t acquire the home by gift or inheritance
- Each buyer in the purchase must meet eligibility requirements
There’s other criteria, too.
For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.
You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.
And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction. This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.
If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.
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This is a “BIG DEAL!” Most Buyer’s and Seller’s are absolutely scared to death right now of a Short Sale agreement. Rightfully so in my opinion. These Banks and Servicing Institutions have got to get it together. I have been fortunate enough to have been apart of many Short Sale transactions that were closed in a relatively acceptable amount of time. However on the other hand, I have had the misfortune of being party to several that have not only been an embarrassment to all parties involved, but nothing more than total aggravation and frustration. Let me give you just one example and you decide for yourself.
I currently have a Short Sale contract where I am representing the Buyer for a Cabin for Sale in Blue Ridge, GA. The contract was entered into on July 24, 2009. The list price of the Cabin For Sale was $340,000. An agreement was reached by both parties of $300,000. After many months of sitting and waiting to hear something, anything from the Bank, we finally received a notice that they would not accept the Short Sale on the contracted price, but counter offered to use in the amount of $350,000. They highly encouraged a counter offer, of any kind from my client. So, after speaking with my client, we decided that we would counter offer $305,000 to show the Bank our good faith in the transaction. Another couple of months passed and we again finally received word from the Bank that they had yet another counter offer at a price of $389,000. I was in disbelief. Not only was this last counter offer higher than their first counter, but it was more than what was owed on the home to begin with. As a result of the ridiculous manner in which this Bank had handled this transaction, the Seller to my understanding is now filing for Bankruptcy, and will eventually lose the home through Foreclosure. I am currently searching for another property for my client.
Am I to feel sorry for these Banks? Do you?
Not sure what a Short Sale is? Click Here for a simple explanation.
I certainly hope that I haven’t ruined your day…..go out and Make it an AWESOME day!
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Sometimes, headlines for housing can be misleading and this week gave us a terrific example.
On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high.
A “Housing Start” is a privately-owned home on which construction has started.
Headlines on the Housing Starts story included:
* U.S. Housing Starts Hit 6-Month High (Reuters)
* U.S. Economy Receives Home Building Boost (Shepparton)
* Housing Starts Post Sharp Rebound (ABC)
Based to the headlines, the housing market looks poised for rapid growth through the Spring Market.
The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units. This includes apartments and condominiums — a sector of the housing market that’s notoriously volatile.
If we isolate Housing Starts for single-family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009. January’s tally is slightly below the 8-month average.
Perhaps more interesting than the Housing Starts, though, is the Commerce Department’s accompanying data for Housing Permits. After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.
One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit’s dwindling time frame. Sales are expected to spike in March and April and more homes will come online to deal with that demand. Home buyers in Blue Ridge should shop carefully, but with an eye on the clock.
As the tax credit’s April 30, 2010 deadline approaches, competition for homes may be fierce.
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Consumer Sentiment has been on the rise since last February and it’s something to which Blairsville Home Buyers should pay attention.
The affordability of your next home may hinge on consumer confidence.
As the economy recovers from a near-the-brink recession, many of the elements of a full recovery are in place. Business investment is returning, household spending is expanding, and financial systems are gaining strength.
Consumer confidence is at a 2-year high.
What’s missing from the recovery, though, is jobs growth. Another net 20,000 jobs were lost in January. Data like that hinders economic growth.
That said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009, but it’s still a net negative number. Not only does household income drop when Americans lose jobs but so does the average American’s confidence in his or her own economic future.
This is one reason why jobs growth is so closely watched by Wall Street — jobs are linked to higher confidence levels which, in turn, is believed to spur consumer spending.
Consumer spending represents 70% of the U.S. economy.
As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher.
Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.
Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.
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A “Short Sale” is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.
By way of example, a Short Sale may be appropriate for someone Selling a Home in Blairsville whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000. Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.
Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan. Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.
For this reason, Short Sales are sometimes considered “the economical alternative” to default.
The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start. And sellers should be aware of how a Short Sale on their credit can impact future borrowing.
Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.
Click Here to see a Home For Sale in Blairsville that I currently have listed as a Short Sale. If you are facing a hardship such as your home’s value being less than what you owe on your mortgage, or if you are possibly facing Foreclosure, I may be able to help, but you need to call me at 706.994.8686 before it is too late.
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Foreclosures stories dominate the national housing news. It seems at least one foreclosure-related story makes its way to the front page or the nightly news every week.
But for as much as the foreclosure filing statistics can be astounding — over 300,000 homes were served last month alone — the prevalence of foreclosures depends on where you live.
As reported by RealtyTrac, just 4 states accounted for more than half of the country’s foreclosure-related activity last month.
1. California : 22.7 percent of all activity
2. Florida : 14.9 percent of all activity
3. Arizona : 6.7 percent of all activity
4. Illinois : 5.7 percent of all activity
The other 46 states (and Washington D.C.) claimed the remaining 49.9%.
However, just because foreclosures are concentrated geographically, that doesn’t make them less important to home buyers in Ellijay, cabin buyers in Blue Ridge, and other places around the country. There’s been more than 1.4 million foreclosure filings in the last 12 months and that’s a figure that can’t be ignored.
Distressed properties now play a role in one-third of all home resales.
Therefore, if you’re in the market for a foreclosed home, here’s a few things to keep in mind.
1. Properties are most always sold “as-is” and may not be up to living standards. Be sure to physically inspect the home before buying it.
2. Buying a home from a bank is rarely as streamlined as buying from an individual homeowner. Be prepared for delays and long closings.
3. Foreclosures aren’t always listed for sale publicly. Contact Me for access to our complete foreclosure inventory here in the North Georgia Mountains.
In order to use the federal home buyer tax credit, you must be under contract for a home by April 30, 2010 and closed by June 30, 2010. That doesn’t leave much time to find a bank-owned home and make it to closing. If you’re serious about buying foreclosures, it’s probably best to start your search soon.
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