The Risks of a Short Sale

For a seller, a short sale is a success! It means you were able to sell your home and amicably negotiate a resolution with your lender, which may have included full or partial debt forgiveness, and other benefits.

The largest risk for a seller is being taken advantage of in a mortgage assistance scam. However, it is very possible to attempt a short sale and completely avoid that risk. For those sellers, the only risk is that the sale won't go through, and the property will be lost to foreclosure. That is a big risk, but for most sellers, BEFORE they start the short sale process they realize this is where they are headed unless they can intervene.

For buyers, there is significant risk.

* How much time will you lose? As a buyer, you don't really know how long it will take for the seller's lender to approve the sale; or worse, NOT approve the sale. If there is only one loan, we're seeing 6-8 weeks as the normal time frame for approval now. This is WAY down from 6-8 MONTHS a year ago.

* How will you compete with other buyers? I see listing agents who advise their sellers not to ratify an offer at all until the lender approves one. Some listing agents submit offer after offer to the lender without even responding to buyers to acknowledge the offer. I have seen listing agents who advise their sellers to ratify multiple offers as primary contracts - with the caveat of the 3rd party approval requirement. Their theory? The lender will only approve one contract. So, MANY buyers, an infinite number of them, may be sitting, waiting months to learn that their offer was accepted, or may never get a response at all.

* The lenders control the clock. Once approved, they expect you to settle quickly - usually in less than 30 days. If you can't, you must have the sale "re approved".

* Sellers disappear! Sellers have very little to lose and often feel hopeless about the situation - especially if it doesn't appear that the bank will be approving the sale. Believe it or not, we're seeing cases where the bank approves the short sale, and the sellers are no where to be found... and the sale can not be completed without the seller. In both cases, if the buyers deposit is in escrow, it is difficult to get it back. There's a process, but it is time consuming and frustrating.

These and many other situations are commonplace in todays market. In fact, they are quickly becoming the most frequent type of transaction in the Dulles region (Fairfax/Loudoun County). And, keep in mind that short sales are realitively new to the marketplace, and many agents are still extremely unfamiliar with the process. So, before entering this market, make sure your agent knows the market and all the various Types of Sales Seen in Today's Market.

A buyers agent's advice about how to structure an offer should vary dramatically for a short sale or an REO. Ask your agent about the differences.

Inflation Is Coming! Inflation Is Coming!

Can it get any worse?  YES.

Okay, so your 401K has retired without you.  You're so underwater in your house that you're thinking of turning the place into a house boat.  And, hopefully, you don't get hit by the next round of layoffs.  

Seriously, it has to get better.  But, could it get worse?  Well... yeah... if you don't watch yourself.

I don't like to be the one screaming the sky is falling.  But, what I have learned is that the more I keep my predictions to myself the less chance I have of forewarning people of what I see coming straight at us, like a speeding locomotive.

At the moment, it's inflation.  It's not here yet, but it's coming, I can hear it.  It will be here before you know it.  The fed is spending money like crazy - make the most of it and take what you can for yourself.  Whether you get any benefits or not, you'll be paying it back.

So, how can you make the most of things?

---If you're lucky enough to have cash to spend, check the Stimulous package to see if you might qualify for some additional tax breaks.  It just so happens I will probably need a new heating system in the next 2 years, and if I buy one this year, I get an extra tax break.  I plan on taking advantage of that. It's a shame I bought all new kitchen appliances last December, but that is the way it goes.  There are tax incentives for many things you do to improve the energy efficiency of your home, as well as incentives for major purchases of things like homes and cars.

---If you're thinking about buying your first home, don't put it off.  The combination of low interest rates, availability, and the extra government incentives (up to $8000 in tax credits) for buying this year are incredible.  So, do it, and close by 12/1/2009, so you get the tax credit.   

---Many finance companies will offer you FREE "job loss protection" insurance... this applies to new homes, mortgage loans through Bank of America, and even many loans on new cars when you buy at the dealership.  These programs will actually make your monthly payments for you if you do get laid off.   So, sign up, but make sure you know how long it's free; most require you to cancel before a deadline or you have to pay. 

---If you have a high fixed rate on your existing mortgage or are in an ARM, consider refinancing (even if you're underwater there are some options for you - Click HERE to learn more).  Get yourself positioned for rising interest rates.  When they start rising, it will go fast.

---Work on paying down your credit card debt or variable interest rate/revolving credit lines. Again, when interest rates are rising, you aren't going to want to pay 20-30% interest on something that used to be 8%  it will eat into your paycheck.

The upside, and there always is one, is that when inflation kicks in, all interest rates will be higher - including what you are collecting at the bank.  As consumers, we never quite get the same margin of profit as the banks and other professional lenders out there, but we do get benefits.  

Remember, inflation IS coming.  You can not stop a runaway train.  All you can do it get out of it's path.

What Do I Get For Paying My Mortgage On Time?

I hear it time and time again... consumers who may their mortgage on time consistently, but are feeling the pain of this market all the same. There is bailout after bailout for banks, insurance companies, and there's talk of loan modifications and debt forgiveness for those that are behind in their mortgage... but what about the rest of us that are doing the "right" thing?

Obama to the rescue!

Believe it or not, the Housing Affordability and Stabilization Plan (HASP) actually provides a little bit of something for you! Perhaps because of these changes you can refinance and take advantage of these unprecedented interest rates... maybe even if you're upside down. It's true.

If your loan is backed by Fannie Mae or Freddie Mac, you are eligible to do a refi under HAS. The maximum loan amount can be up to 105% of the current value of the home, and it can subordinate another loan. The real power here is that second part - it can subordinate another loan, and it works for investment properties, too!

Also, if your current loan is an FHA loan, then you can likely refinance with a Streamline FHA - regardless of your credit, debt to income ratio or even the ratio of your current property value to loan amount, so long as you've been paying your mortgage on time.

I encourage everyone to look at their current loan and decide if they should refinance. With the way the government is spending money, we are bound to see increases in the interest rate. And, when it starts, they are likely to rise quickly. So, take advantage of the options available to you. Make sure you're in a strong, fixed rate product at a comfortable level before the inevitable happens.

Interested in learning more? Contact me to register for a presentation by one of our strategic partners, Bank of America. Can't attend in person? Join us by phone! Email me to register.

Virginia Home Owners Alliance

There is an exciting new service provided by REALTORS® specifically for homeowners in Virginia.

While REALTORS® have always represented the interests of their clients as individuals, until now homeowners have never had a voice to represent their interests as a group. Recently launched, the Virginia Homeowners Alliance is that voice. Automobile owners have AAA, and retirees have AARP. Finally, homeowners in Virginia will have the Virginia Homeowners Alliance to represent and serve their interests.

What is the Virginia Homeowners Alliance?

· The Virginia Homeowners Alliance (VHA) is an exciting new service provided by REALTORS® to help homeowners protect their most treasured investment, their home.

· It’s not an organization with boring meetings and a bunch of bureaucracy. It’s an organization comprised of a free, online one-stop-shop (http://www.vahomeownersalliance.com/) for improving the value of your home and keeping up with local government decisions that affect your home, your community and your quality of life.

· By joining VHA, you can stay informed of all the latest news relating to real estate taxes, property assessments, new residential and commercial developments, transportation, school construction and a host of other issues affecting your home, family and neighborhood.

What other features can you find on http://www.vahomeownersalliance.com/?

· Easily contact local government bodies including your City Council, Board of Supervisors, School Board, Planning Commission, and Housing Authority to name a few,

· Lawn care and other valuable home maintenance tips,

· Local school report cards,

· “Kids’ Room” where children and parents can access practice SOL tests and learn more about the Commonwealth of Virginia.

How do you join the Virginia Homeowners Alliance?

· Visit http://www.vahomeownersalliance.com/ and register as a new member. It’s that easy! And, tell them that Vicky Chrisner sent you! (I am in a little competition with some fellow REALTORS to see who can sign up the most people.)

As a REALTOR®, I am dedicated to looking out for your best interests and to serving as your most trusted advisor when it comes to your real estate investment. I hope you will take advantage of the tremendous benefits offered by the Virginia Homeowners Alliance, stay tuned to my blog, and contact me anytime you'd like to talk about your specific situation. I am hear to help!

First Time Home Buyers

First time home buyers are starting to learn about the new tax credit of up to $8,000, and it is exciting them! It's evident in the online chats and at the water coolers across the nation. Combining that incentive with the incredible interest rates available today (many are under 5%), and the supply of available homes, it's a combination difficult to resist. Homes are more affordable today than they have been in a very, very long time.

And, first time home buyers are doing more than just chat. Here in Loudoun, they are taking action. In March, approximately 45% of the home purchases in the market were done with FHA and VA loans, most of which are first time home buyers.

Sales activity is up, again, in the region. In a year over year comparison, Loudoun's activity level has exceeded the prior year's activity for 10 straight months.

The result is that in the lower price points, inventory is declining. Buyers are finding that there are far less homes available than they anticipate, and the purchasing process can be very competitive, with contract prices often exceeding the list price.

Once they enter the market, first time home buyers are sometimes surprised at the amount of time it can take to find the right home and then successfully negotiate a deal. Short sales and REOs make for a complicated and turbulent process, and competent representation from a strong knowledgeable real estate consultant is required. With the tax credit set to expire December 1^st, home buyers interested in taking advantage of this credit should start talking to real estate professionals and lenders very soon.

----------------------------------------------------------------------------------------------------------------------------

Buyers interested in learning more about the local real estate market in Loudoun and the Dulles area can contact me at vchrisner@kw.com.

First Quarter, Washington DC Region: Market Activity Remains High

MRIS, the local MLS company servicing the Washington DC Metropolitan area, is reporting high activity levels again in March 2009, for the 4^th consecutive month, in year over year comparisons. This area includes most of Maryland, Northern Virginia, all of Washington DC and the panhandle of West Virginia.

The Affordability Index is now at 156, nearly 50% higher than two years ago. This means that the median family income is now 156% of the required qualifying income for the median home price. In simple terms, this indicates that most area households more than qualify to purchase a home in the area where they live and work.

Continuing fallout from the foreclosure mess is holding prices down in most areas of the region, but there are many indicators that the local market has reached a level of stabilization.

The first time home buyer credit of up to $8,000 is coaxing first time home buyers off the fence…and even trade up buyers are braving the market because of the amazing prices and interest rates, now putting the cost of their dream homes within reach – even considering the reduction in the value of their current homes.

Despite reports that show high numbers of days of marketing activity, actual experience in the market indicates something very different. In fact, at some price points, there is very little inventory, despite the appearance of available homes when searching the MLS. This is a direct result of how distress sales are being handled. REOs (bank owned/post foreclosure properties) often have active listings for several days, perhaps a week or longer, after they've verbally accepted an offer. Short sales often have multiple offers submitted to the bank awaiting approval for several weeks or months, all the while showing as available listings in the MLS system. So, buyers entering the market, after investigating via online searches, are very shocked to find that much of what they saw online was actually phantom inventory.

While regional reports give some insight, real estate remains a very local business. Within the DC Area are many submarkets and even mini- or micro-markets defined by geography and price points.

Many reports are available to the general public at MRIS.com – click on News and then on Market Statistics – reports here can be run by county or zip code for each month. However, as pointed out in this post, remember that statistics don't always present a thorough picture of the market… contact a local REALTOR today.

I service the Dulles region – a suburb of Washington DC, which includes Fairfax and Loudoun counties and part of Prince William County. Contact me now for information about these markets, or for a referral to a knowledgeable professional in your market.

Need Help with your Mortgage? Watch Your Back!

As a real estate professional, I get calls from people that are struggling to pay their mortgage, or concerned because they have to sell, and they owe more than their homes are worth. Many in my profession have been recommending services from "professional negotiators". These are companies that brag about large success rates and large volumes of completed transactions - either in loan modifications or short sales, or both. But, these "professional negotiators" cost money - anywhere from a few hundred dollars to several thousand. Most of their fee is not contingency based, and it's often required to be paid up front. Many of these companies are SCAMS. (Click here to see the CBS Articles on these scams and how the government is working to stop them.) No, I do not believe that the agents who are referring these companies recognize they are scams... I think they've been duped like everyone else. I think these agents and loan officers want to help the consumer, but they simply don't know where to send troubled homeowners to get the assistance they need. Here's the straight truth: There are different groups of consumers, with different needs, and each should be seeking the type of help they need from different types of professionals. So, WHO YA GONNA CALL? Some homeowners want to stay in their homes, but are struggling to make ends meet. These people need to be talking to their lenders, particularly if the reason they are struggling financially is a temporary hardship which will be resolved in the foreseeable future. When homeowners are overwhelmed or unsuccessful they can ask for help through HUD approved loan counselors who do not charge a fee to the consumer for their services. The reality is very few loan modifications have been done, and of those that were completed, many homeowners are delinquent, AGAIN, despite the temporary reprieve. So, they may have to find a way to sell or allow the bank to foreclose. Some owners MUST sell - perhaps because of a job relocation, divorce, or other life change, but they owe more than their homes are worth. These people need to be talking to a real estate agent they trust and working on a short sale to avoid a foreclosure. Real estate agents will charge a commission, and the fee is usually only paid if there is a successful sale. Some agents will require the use of a professional negotiator. If that negotiator's fee is a large, upfront, non-refundable fee to the seller... run. If the negotiator charges a fee to the seller, the buyer, the agent, the buyers agent, the title company and anyone involved in your transaction- run, run, as far as you can, as fast as you can. These are definately scam artists - and if they are going to require that everyone who is involved in the transaction pays a fee, then your house's chance of successfully selling is significantly reduced. Some very busy real estate agents may think it makes sense to hire professional negotiators to assist them with getting the sale from contract to close. If the agent is paying for this, and it is included in their fee, then I think this is okay - it would be the same as if the agent was hiring more administrative help to support the increased work load. I also think it is fair when agents charge more for a short sale than another type of transaction. But, commissions are negotiable, and any consumer (and agent) involved in a transaction needs to know that the bank - who is ultimately paying the commission - will have to approve the commission expense, so it must be within certain limits. [Fannie Mae issued a guideline that a maximum of 6%, with a small administrative fee is acceptable.] Still other owners are comfortable paying their mortgage and may or may not have equity, but want to take advantage of programs that are available that may help make them more comfortable - forgiving part of the debt, lowering payments, whatever is available. These people need to make friends with a good loan originator who stays up on the current trends and can tell them when there is an incentive or a loan program that will benefit them. Loan officers do get paid for originating any loan that is successfully closed, but again, only if they are successful. Consumers - watch your back. Many people out there see you as vulnerable, and they will take every last dollar you have. The government has made free help available to you, and true professional loan officers and real estate agents will be skilled in helping you navigate the ins and outs of today's market - for selling or refinancing.