The Long and Short of a Short Sale, Part 2

Since the homeowner is the one who initiates the short sale process, let's look in more detail at the selling side.

In this post, I will talk about who should and should not consider a short sale; and WHEN they should take action.

Why consider a short sale? Anyone who thinks they may end up allowing a home to go into foreclosure should seriously consider this option.

• CREDIT: With a short sale, your credit is damaged, but not nearly as badly as it would be if the home went into foreclosure.
• LIVING SITUATION: With a short sale, you are not evicted (like you could be if your home was foreclosed), and you look like a better prospective tenant to future landlords if your credit shows a short sale, rather than a foreclosure and eviction, on your record.
• PRIDE: You are cutting your losses and controlling the damage....making the best of an otherwise uncomfortable situation. Your neighbors and co-workers probably already know you owe more than your house is worth - so do they... but you're showing them that you are the kind of person that works with everyone involved to find a satisfactory resolution; that you are responsible.
• SECURITY CLEARANCES/JOB REQUIREMENTS: Especially true in the Washington DC Market, many people have security clearances required for their jobs. In these cases, foreclosures can be very difficult to explain, and short sales are are considered much more favorably, especially when they are coupled with a true hardship (see below). Foreclosures can put your current or future job options in jeopardy.
• DEBT FORGIVENESS/AVOID BANKRUPTSY: In most cases, you can negotiate debt forgiveness as part of the package; and therefore, do not have to worry later about collection activities, which otherwise could force you into bankruptsy to protect the assets you do have.

Why should an owner NOT consider a short sale?

• NOT ENOUGH TIME/LENDER WON'T AGREE: If any of lenders advises the owner that there is not time before the foreclosure, or that for other reasons they will not work with the owner in a short sale process (this is increasingly rare, but it happens).
• TOO COSTLY: If the homeowner has so many layers of liens and mortgages against the property that professionals are telling you that it is not likely to be approved and/or they will only attempt it with a large, non refundable deposit or fee. (Small non-refundable fees are reasonable, especially if your case is a complicated one. A small fee is a couple hundred dollars - not thousands.)
• DON'T NEED TO: When the owner CAN continue to make payments as agreed for the duration of the loan; even if it is uncomfortable. Or, when the owner would prefer a loan modification and the lender has indicated a willingness to work with the owner for a loan modification.

A short sale should be the last alternative to a foreclosure, not a knee jerk reaction to falling real estate values and overleveraged homes. With each short sale request, the lender will require a "hardship letter". This is a letter that explains why you, as the homeowner, have a hardship and why they, as the lender, should work with you and forgive part of your debt.

Hardships include:

• Involuntary job loss or unexpected loss of substantial income that prevents you from making payments or from making the full payment.
• Involuntary change in family situation due to death, divorce or other unexpected changes, like becoming the Octo-mom.
• Involuntary relocation (i.e. military relocation).
• Medical situation/disability that either results in a decrease of income, and significant increase of expenses, or the need to move elsewhere, or a combination of these things.
• You could never afford the mortgage in the first place, and you can show that by the continual use of your savings (which is rapidly declining or depleated) and credit lines (which are rapidly increasing or maxed out) to pay the mortgage.

What is NOT a hardship:

• You pulled all the equity out of your home to purchase another piece of real estate which you still own, free and clear from any liens or mortgages. (Cure: sell that second property and pay down your current mortgage; or sell the primary property and take a mortgage on the second property to pay the deficit on the first property.)
• You like going out to dinner every night and shopping at the best stores and that makes it hard to pay your mortgage...besides mom said you can live with her for free.
• You don't really want to work anymore.
• The value of your property declined, like everyone else's, and you don't think you should have to suffer that loss.

While it is true that in some (non-recourse) states, like Nevada, you may still get a short sale approved even if you do not have a hardship.... most of the time, banks are looking for your sob story here. Give it to them.

When do you throw in the towel?

Going through this process is very difficult emotionally. Let's face it, when you started this journey, you had a very different outcome in mind. This was to be your home; or the investment that was going to solve your future financial woes. Now, those dreams are not being realized and you're suffering a very real financial loss and that goes hand and hand with emotional loss.... not to mention that this hardship is generally because of another hardship (like job loss or divorce). Given that, you are likely to go through all five stages of grief:

• Denial (we can do this);
• Anger (if the real estate agent/lender/spouse/child/etc. hadn't...fill in the blank.... I wouldn't be in this situation);
• Bargaining (maybe if we...);
• Depression (it's hopeless);
• Acceptance (OK, let's move on).

You should call the a real estate agent and perhaps an attorney or financial advisor when you are in the "bargaining" stage, assuming (at that time) that you are still current on your mortgage. That's when we can help you examine options. Talk to consultants that you trust, who have your best interest at heart and who are not charging you for their advice at this stage of the game. Be wary of their interests - if they get paid only if you do one thing, expect them to want you to do that one thing; especially if they are pushing you very hard rather than trying to help you. For example, respect a real estate agent who asks you if you've attempted to have your loan modified so you can stay in the home.

DEFINATELY call a real estate agent no later than when you realize you can not make the next mortgage payment. The further behind you are in your payments the harder it is to have a successful short sale, and you may have eliminated other options at that time, too.

******

In the next posts, we'll talk more about the selling side - about what the ingredients are for a successful short sale, and about about the role of the real estate agent, attorney or third party negotiator in the short sale process. Then, we'll talk about the buying side, and what risks buyers have and the countermeasures they should take to reduce risks. Stay tuned!

If you are wondering if you should consider a short sale, call me. I am happy to provide a free consultation any time.

Vicky Chrisner, Keller Williams Realty

Ofc: 703-669-3142

Email: VChrisner@KW.com

www.VickyChrisner.com

The Long and Short of A Short Sale, Part 1

In general, the following is the process of a short sale. There are many variables due to specific lenders, particulars of the parties involved and the heavy influence of third party negotiators and/or the involved real estate agents. * Regardless of the path taken to get to this point, the sellers eventually decide that attempting to negotiate a short sale with their lender(s) is their best option. Lenders will not approve a short sale until there is a contract in hand. * The homeowner contacts a real estate agent. Not sure how to screen an agent for this process, the homeowners generally pick the first person who says they can help. Sometimes this works out fine; other times it does not - but we'll cover that in a later post.

* Because there is often a race against a clock to prevent foreclosure, the agent should see this as a firesale and market the property agressively, at a price they hope will quickly attract buyers; but the agent should be careful not to market the property too low, as the goal is to procure an offer that the lender will approve. * An offer, or multiple offers, are received. The agent should assist the sellers with reviewing and negotiating the contract, and should be sure to include a contingency addendum that provides for "third party approval", namely approval of the lenders. * An offer should be ratified. * Contract now in hand, the listing agent and sellers put together the required information for the seller's lender, and forward the package to the bank. This package includes seller's financial information, bank statements, paystubs, tax returns, a "hardship letter" explaining how the seller got into this mess, and why they need help getting out of it, the ratified contract to purchase the home, a Comparable Market Analysis of the property estimating fair market value, and other things that may help to persuade the bank to approve this short sale. * The bank receives the package, distributes it to the right department, and the file is assigned to a negotiator at the servicing bank. * The negotiator reviews the package, and may return it in its entirety to the seller because it is incomplete or the seller does not meet the requirements to qualify. Or, the negotiator will move it to the next phase. * A BPO (Brokers Price Opinion), appraisal, or both, are ordered for the property. * Once received, the bank has a third party's impression of the fair market value of the property. The negotiator can "counter" the offer on the table (if they feel the ratified contract is too low), can reject it, or can recommend it for approval. * Once the negotiator can recommend the package for approval, it is submitted for another layer of review, where it goes through a similar process. If it is not approved, then it will be sent back to the negotiator with instructions to counter or reject the offer on the table. * This negotiating process may include negotiating the sales terms (usually price) and/or negotiating for additional payments from the seller, either at the table or over an extended period of time, post sale. * There may be multiple layers of approval, especially if losses are significant for the bank. Also, many times the servicing bank is not the investor. So, once the servicing bank makes a recommendation for approval, the investor(s) will also need to make the same recommendation. They may or may not request additional BPOs or appraisals. Each additional layer of review increases the time the process takes. Each item that must be negotiated also increases time frames. Once the bank agrees to the short sale, a letter is sent to the seller outlining the terms of the sale that have been agreed to. Then, and only then, can settlement take place. For buyers, this process is a big "hurry up and wait" experience, and then more rush to get to the closing table. Generally, banks require closing must happen inside of 30 days from the date of their approval. Because of the time involved, many buyers fall out. They become disenchanted with the process and move on to another home. For this reason, many short sale listing agents prefer to have a few back up offers in place. The trick here is getting the back up offers to have the same price and terms as the original. Also, if primary buyers drop out because of lack of interest, you can be certain that secondary buyers are even less attached to the home. In my next posts, I will break down concerns buyers and sellers face and how to minimize risks and make the most of these types of sales. Stay tuned.

Update on the Market: Washington DC Area (VA/MD/WV/DC)

Delta Associates is a well respected authority within the housing market, but their reports are rarely public, until now. MRIS (The Metropolitan Regional Information System), which is the local multiple listing service, now offers reports to the public through their web site each quarter. The video below explains how to view some of the information, offering highlights from the 2nd quarter reports for 2009. The Washington DC metropolitan area includes Northern Virginia, most of Maryland, and the panhandle of West Virginia, and (of course) DC.

For more specific information or assistance interpretting what this data means to you - as a potential home buyer, home seller, renter or property owner - please don't hesitate to contact me. I am happy to be a resource for you!

Also, you can run an automated report showing sales information for YOUR NEIGHBORHOOD, by clicking this link.

No Matter How Unique

No matter how unique your situation or your needs, please remember I am here to assist you and your friends, relatives and colleagues with all your real estate needs! To remind you of this, I wish to share with you this video, found on You Tube: http://www.youtube.com/watch?v=erPLr16Zzjc While these homes are found who-knows-where, with your help, I'd like to put together a photo collection of the strangest homes/buildings in Northern Virginia. Send me a photo of the funniest most unique home you can find, by August 31st, for each picture of a home that is used in our video, you'll be paid $100; for commercial buildings, you'll earn $50. And, remember, your business is important to me, and your referrals are the lifeblood of my business. Call me today with any real estate questions!

Vicky Chrisner

Keller Williams

703-669-3142

VChrisner@KW.com

Money Trees Are Almost Bare!

FREE MONEY!! The FHLB Money Trees are almost bare! If you don't know what I am talking about, please read my previous post: http://therealestatewhisperer.blogspot.com/2009/06/free-money-for-your-home-purchase.html One of my lenders still has some funds left. This is a 5:1 matching program; for every $1K you put in, FHLB adds another $5K to it. Yes, they put in 5 times what you do! Income do limits apply. Contact me right away for more details! Please hurry!! As you can imagine, free money goes quickly; and the money trees are almost bare!

Free Money for your Home Purchase!

Would you like to receive an extra $10,000 towards your home purchase? Move quickly. Special funds are available for qualified buyers (income must be below 80% of the median income for the area). The fund will match your contribution 5:1. That means if you put in $500 (the minimum investment), the fund will contribute $2500. If you put in $2000, the fund will contribute $10,000. The only catch is that you must own the home for 5 years or you will have to pay these funds back. Once you own the property for 5 years, the debt is forgiven. As you can imagine, this money runs out quickly; and only select lenders have this fund available to them in LIMITED quantities. Please note this is in NO WAY tied to the tax credits being offered by the federal government right now, although there are some great programs allowing bridge loans to use those funds up front, as well. Please call me for details.

Vicky Chrisner

Keller Williams Realty

www.VickyChrisner.com

703-669-3142

No More Houses For Sale?

On the 10th of each month, MRIS (the MLS for the Washington DC Metropolitan Area) publishes market statistics by region, county and zip code.

Each month, I pull them up, review them, and sometimes incorporate information about the market into my blog. Recently, however, I haven't done that so much. That's because I don't feel like the stats really show what's going on. There's one exception: Listings.

The number of listings is DOWN. Way down. Our inventory is so low right now. At some price points (generally, under $400,000 except for the condo market), it's creating a feeding frenzy among buyers. First time home buyers, investors and relocation buyers are chomping at the bit to get into a nice affordable home here in Northern Virginia.

Stastics like Days on Market, or Available Inventory are very misleading. This is because of how distress sales are being handled in the marketplace.

REOs are frequently on the market for a few days, maybe a week or 10 days at most, and then the bank will choose an offer and "accept it". At that point, the home is no longer available to new potential buyers. However, the contract is not ratified, it's still in process. Therefore, the home still shows like it is available on web sites and in the MLS. But, it's not. It usually takes 1-3 weeks before you see these listings updated as "under contract" in the MLS system. It results in the MLS showing the number of marketing days as 14-30 days when really it was 7-10.

Short sales are even worse. Many times, they are not marked as under contract until the bank has approved an offer. This can take months - several months. Meanwhile, the seller has a ratified offer, and often has several back up offers sitting on their desk; and the home isn't really available for purchase by a new buyer. I mean, would you want to be the 10th back up offer?(Learn more about short sales: http://therealestatewhisperer.blogspot.com/2009/04/risks-of-short-sale.html) This results in the MLS reporting 90-200 days of marketing time, when in fact, the seller had 2 or 3 offers within a week.

When these two things are happening in half of the sales in the market place, it creates misleading information. So, it makes it difficult to report with accuracy.

Some days I am pouring through the listings, looking for homes to show to buyers that are "really" available. After scouring through 20 or more listings, reading through all the comments and calling the listing agents for more information, I sometimes come up empty handed. I have actually had to call buyers and say that there are no available homes that fit their criteria.

Imagine that! The national news media is saying that it's a buyers market, and their real estate agent is saying there are no more houses for sale?

If you own a home that should sell for $200,000-500,000, and you've been wanting to relocate or move into a larger home in this area, the time to consider this is NOW. At higher price points, there is still more inventory. So, you can sell your $300,000 house in Loudoun and move to a $500,000 home in the very same area and take full advantage of the seller's market and the buyer's market.

* * * * * *

Curious what you're home should sell for? You can get an idea by ordering a free automated snapshot at http://www.20175homesales.com/; which will tell you what homes in your neighborhood are selling for, but pay no attention to the "days on market" or even the list price - look at the sold prices.

Even better, call me and let me prepare a personalized market analysis for you. We really need more houses to sell, so I do hope to get your call soon!

Vicky Chrisner

Keller Williams Realty

703-669-3142

VChrisner@KW.com

VHDA's Got Your Down Payment - The Time to Buy is Now

The Virginia Housing Development Authority has rolled out a new program allowing qualified buyers to use their expected tax credit (max of $8,000) toward the down payment or closing costs when they purchase a new home. The program is called VHDA FHA Tax Credit Plus. This potentially could mean no money down loan options for some.

Buyers must meet all requirements for the VHDA FHA loans, including the income and sales price limits imposed on all VHDA loans, which means a household of 3 can not have income that exceeds $100,000; and the sales price of the home can not exceed $408,000.

The buyers must also qualify for the First Time Home Buyer tax credit which will be in the amount of 10% of the purchase price up to a maximum of $8000. A reduced tax credit is available to buyers whose income exceeds $75,000 (single filers) or $150,000 (joint filers).

The use of the tax credit will actually be done as a 2nd trust. It will be payment, interest and penalty fee for the first 12 months. If not paid by that time, the trust will convert and be amortized over the remaining 29 years at the same interest rate as the primary trust; with no penalty. With this program, VHDA is actually making it optional to pay the second trust off or just starting making the 2nd mortgage payment.

Please note the tax credit expires November 3oth, if you are thinking of buying, now is the time!

For more information about how to take advantage of today's real estate market, please contact me.

Vicky Chrisner

Keller Williams

703-669-3142

vchrisner@kw.com

http://www.vickychrisner.com/

* * * * * * * *

Special note: This is different from earlier guidance received. For practioners, please note that the funds MAY be used toward the down payment (not just closing costs as previously thought). This is because VHDA is a qualified non-profit, and is therefore exempt from the mortgagee letter that required maintaining the minimum investment of 3.5% on all FHA loans.

Use Your $8000 Tax Credit at Closing!

About a week and a half ago, there was a ruling allowing home buyers to use their First Time Home Buyer Credit (a max of $8000) toward closing costs. Today, VHDA (the Virginia Housing Development Authority) rolled out their plans implementing this program, and here are the highlights:

* The buyer's primary loan must be a VHDA FHA loan. There are income limits associated with obtaining VHDA loans, but the loans are generally below market rate. The income limits are adjusted based on family size, but for a 3 person household, the maximum income is $100,000.

* VHDA will basically "front" the buyer the tax credit - up to $8000 - to be used toward closing costs. (Note: Buyers must still invest 3.5% of the sales price as a down payment, and the tax credit can NOT be used to cover that minimum investment.)

The "fronting" of this money will be in the form of a second trust (aka a mortgage) which will be interest free for the first 12 months, allowing the buyer plenty of time to file for and receive their tax credit check, which should then be applied to pay off this loan.

* To claim the tax credit, buyers must CLOSE on their home no later than November 30th... so time is wasting! Take advantage of this loan program today.

It's a great new option for FHA buyers that qualify for a VHDA mortgage. For more information on this or other loan programs, call or email me. I am not a lender, but have alliances with several different lenders that offer different programs; and happily will refer you to the right loan counselor.

================================================================

Cindy Fox with SunTrust Mortgage provided this "Breaking News" to me this evening, allowing me to pass it on to you. She's a fabulous loan counselor familiar with all the government loan programs and options available to first time home buyers.

Yes, Virginia, There Is A Way To Buy With No Money Down

Yes, Virginia, there are still some ways you can buy a home without a down payment. Take the Veteran's Administration loans, for example - if you've never served in the military, then this option is not available to you; but it's a great program for those that have served. In fact, this is exactly how my husband and I purchased our first home back in the early nineties. The official web site is: http://www.homeloans.va.gov There's also the "VHDA PLUS" which is a second trust option available to moderate income families in Virginia. In Northern Virginia, the sales price/loan limit is $408K; and a family of 3 or more must have an income of $100K or less. Learn about this program: http://www.vhda.com/vhda_com/Template_a.asp?VHDA_COM_PAGE_NAME=Eligibility_Requirements In some counties - like Loudoun - there are also second trust loan options available for households with more reduced incomes, adjusted by family size. These loans can be used to purchase foreclosures, market rate homes or ADU homes. Learn more: http://www.loudoun.gov/Default.aspx?tabid=2120 So, yes, although the options are more limited in scope and are targeting specific household types, there are some programs still available. These are just a few examples. If you're in the market to buy a home, contact me. I am happy to help you investigate these and other options to see what the best program for you is.

REO's - The Addendum

Three or four times a week I get an email inquiry from consumers who have read my prior posts on buying REO's. (See the most popular of these posts at:

http://therealestatewhisperer.blogspot.com/2008/08/reos-everything-you-need-to-know.html or http://therealestatewhisperer.blogspot.com/2008/12/types-of-sales-seen-in-todays-market.html). Specifically the email requests are for an addendum that I reference.

I am always hesitant to give it directly to the consumer. Laws vary greatly from location to location, and I don't want to be accused of giving real estate advice in areas where I am not licensed. Each bank addendum is different, and therefore the addendum should reflect the language specific to the rest of the contract. The addendum is intended to serve as an example, and not a form that should be used carte blanche in all REO transactions.

Then, I feel bad when I tell a consumer to have their agent contact me directly to obtain the addendum. I feel worse when I am overwhelmed carrying for my own business and drop the ball and fail to send it for them; and I confess that I've done that a couple of times inadvertently. I fear it will be more common, as I've switched primary computers and it is a difficulty for me to go to the other computer to forward the addendum. You see, I am using the addendum less because in our local market, traditional sales are returning (Hip, Hip, Hooray), short sales are becoming more successful and I am simply working less in REOs.

I currently have one REO listing - hits the market today; but all of my deals that are under contract for the moment include contracts for purchase in traditional sales or new home sales. A new day is dawning in Northern Virginia.

In any case, I think I've come up with a solution; as I know some areas are just now being hit by floods of REOs and you really, really need this! I found a place where I can store this addendum online and make it available to you. Here it is:
http://docs.google.com/Doc?docid=0AWPfdTb2RWFGZGYyY3JzNWpfM2R2ZzNta3Zr&hl=en

Remember, reading blogs and educating yourself is great, but does not replace competent real estate or legal representation - ever. There are just too many variables; and a blog can not possibly address them all. However, the information you get from my blogs, and others, should serve to stimulate educated discussions between you and the professionals you are choosing. You SHOULD NOT know more than your agent. If you do, you should get another one. I firmly believe the value of an agent is advice. Sure, there are service related conveniences - access to listings, lockboxes, forms, affiliated companies that may offer free or low cost services, etc. But, what a Real Estate Agent should bring to the table, above all else, is their knowledge.

Now, go forth and purchase!!! And, if you are in my area - look me up! I'd love to serve as your chosen real estate consultant. http://www.vickychrisner.com/ 703-669-3142 VChrisner@KW.com

Giving Where We Live

In recognition of the first KW RED Day, several shifts of real estate agents and their associates from Keller Williams Realty in Leesburg invaded the ReStore in Purcellville on Thursday, May 28th to help with cleaning, stocking, displaying merchandise in the store and preparing online ads to increase sales. KW RED Day was organized on an international level to recognize the 72nd birthday of Mo Anderson, Vice Chairman of the Board of Keller Williams International, and her amazing commitment to community service. The leadership of Keller Williams International firmly believes in giving back to the communities each office serves and has many programs in place to encourage this. RED is an acronym for Renew Energize and Donate; and the motto for the day was “Giving Where We Live”. You can read more about Keller Williams Realty, and about RED Day at www.kw.com/REDDay. The ReStore in Purcellville recently opened and is located on Main Street. It is owned and operated by the Loudoun Chapter of Habitat for Humanity and proceeds from all sales benefit local Habitat for Humanity projects. The store carries new and used doors, windows, shutters, hardware, lighting, plumbing and electrical supplies, flooring, building materials, office furniture, and more. Volunteers are needed on a regular basis, especially during the week; and donations are accepted during regular operating hours. Learn more about the ReStore at http://www.loudounrestore.org/

The photo above includes the morning shift of volunteers. See more photos from the day at: http://www.kodakgallery.com/ShareLanding.action?c=tzzir41.as7qcvhx&x=0&y=hr84v4&localeid=en_US

=========================================================

Keller Williams Realty boasts a consistent record of holding the highest market share in real estate sales in Leesburg; and provides all types of real estate services. For more information please contact Vicky at 703-669-3142 or email her at vchrisner@kw.com.

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.

What I learned about 203Ks

I finally had a buyer that used an FHA 203K loan to purchase a home. We closed on Friday. The entire process was exhausting, and the buyer will be continuing to deal with this through the next few months as renovations are done. Now that I've had this experience, I want to share with you some things that I learned:

1. All FHA loans have a minimum down payment requirement of 3.5%. It is an easy calculation when you are considering a straight purchase, but when you are doing a 203K, it is 3.5% of the total acquisition and renovation cost. Ask your lender to break that down in detail for you.

For example:

203K loan: $200K purchase price + renovation budget ($15k) + contingency reserve ($1500)+inspection fees ($1000) +mortgage insurance = $221,306 total acquisition/renovation cost x 3.5% = $7746 down payment requirement; when cash is tight, the extra $746 you might not anticipate paying at closing can be a tough hurdle.

As I learned, you can't count always count on the loan originator to remember to add in those "extra" costs when estimating your down payment... so ask lots of questions.

2. Cost Consultant: For a 203K, a HUD approved cost consultant must be involved for several reasons: (1) To ensure that post renovation, the home will meet the minimum FHA standards; (2) To ensure that you are hiring competent contractors and the contractors are doing renovation according to applicable codes; and, (3) It's an effort to reduce fraud - otherwise, FHA may be insuring loans for people who are claiming they will do renovations to a "fixxer upper" and the home may not need the repairs and/or the renovation funds may not be spent as the lender and FHA anticipate.

Remember it is FHA that is requiring this person be involved, and regardless of what anyone tells you, that cost consultant is NOT there to protect you, they are required to protect FHA's investment in the property. Allowable fees for cost consultants increase based on the amount of renovation... so, buyers beware - plan to advocate for yourself. If your cost consultant is trying to persuade you to do renovations his way, speak up. This is your home. Set a budget and priorities, and stick to it. And, beware if you are using contractors referred by the cost consultant. A good systems of checks and balances will protect you, so use unrelated parties if you can.

3. Processing Time before closing: Any government loan right now will take at least 30 days, however, for a 203K, you need a minimum of 45 days, maybe more depending on the types of renovations. As soon as you ratify a contract, talk to the contractors you plan to use and start getting proposals. Once you have these estimates, they need to be blessed by the cost consultant and lender before you can close. This likely will include needing to provide copies of their contractor license and a certificate of liability insurance, so ensure all contractor's you are working with are properly licensed and insured BEFORE you spend time with them getting estimates.

4. Renovation Funds: This could potentially be the most important thing. When will you get your funds? The lender we were working with initially said the funds would be available 10 days after closing, then, he later said 2-3 weeks. The day OF closing, we learned that it would be 6 weeks before the buyer got the first dollar for renovation; and that is not guarranteed. In the future, I will not use Sandy Springs Mortgage, as I now know this is specific to their loans; but I will REQUIRE a copy of the escrow management agreement from the lenders well before closing. That agreement should spell out how dispersements (sometimes called draws) will be managed.

I hope sharing this information with you is helpful and will help you avoid potential unexpected events in dealing with this type of loan for the first time.