Great News for 

Home Prices!!

Home deliquencies are down in the majority of the country.  New England is a major exception. 

Deliquency translates into sellers behind in monthly mortgage payments.  These payments could be 1st Lein Home Mortgages and/or 2nd Lein/Equity Line Mortgages.  

Serious deliquent is typically defined as home owners that are 6 month or more behind on making timely mortgage payments.  Thus the 45% reduction in Virginia of home owners seriously delinquent translates in to substancially smaller pool of home owners that will be foreclose upon or seek to sell his/her home as a short sale.

If a home is in a market with sharply lower deliquencies, the values of the home rises.  Any market tends to rise as the drag of short sales and foreclosures on home prices lessens.

It is safe to say, in most of the country, the drag of short sales and foreclosures has lightened quite substancially.

Thus, your home's value is moving up again!!! 

It may seem never too soon to you.  Yet, in the big picture, this reduction in Serious Deliquencies bodes well for 2014 home prices and home sales.

Distressed Properties....A Disappearing Phantom

Since 2008, Foreclosures and Short Sales have been the cause of much pain and suffering for home owners.  Lately, it has been the bank suffering from Government and Private lawsuits over the handling of all the foreclosures and short sale properties that have been taken over.

It has been just plain ugly.   Yet the news is so good.  In most state, foreclosures and short sales are become like a disappearing phantom of pain.   A number of states are under 1% distressed properties:  Virginia, you are one of the lucky states!!!!

The source of the data is CoreLogic that has been tracking the results relentlessly! 

Check out the map below!!  

Short Sale: Fear or Plunder?

Short Sale

          Like a storm rolling in

With the uncertainties of:

   *   Home bought "As Is"

   *   Earnest Money tied up for months 

   *   Home Inspection...with NO  REPAIRS

   *   Waiting 3 month or maybe 6 months for Bank Approval

   *   Unable to purchase with contingency of selling the your

            present home

   *   Missing a better home while waiting for Bank Approval

    YET

         The Short Sale could be paradise

      Imagine:

           *    Best Value in Neighborhood--Lots of Equity!!!

           *    Knowledge of Short Sale Process opens

                   up options on selling present home

           *    Hunting for more homes will waiting on bank

                    and KNOWING you can get the house YOU

                    Want

           *    Depositing Earnest Money WHEN Bank Approval

                    is received

          

Knowledge of the process is key!!  A Realtor experienced with

Short Sales and Foreclosures may not be able to make it a day at the beach.  But the storm clouds won't be as ominious!!!

HAVE NO FEAR!!!!     

Fiscal Cliff helps Underwater Home Owners

FISCAL CLIFF NEGOTIATIONS HELP SOME UNDERWATER HOMEOWNERS IN 2013 Courteay of Al Clark's Home Action Newsletter

Topic Summary:  Five years ago, at the start of the housing crisis, Congress passed a law called the Mortgage Forgiveness Debt Relief Act.  The MFDRA would prevent homeowners from having to pay federal and state tax on the amount of any debt forgiveness provided.  ( see IRS Resource) This provision was set to expire, as designed, on Dec. 31st.  It was extended for one more year. This means that homeowners who get underwater workouts this year will not be liable for paying taxes on the amount of forgiven dept.  A few editions ago we covered the issue. Many readers chimed in with the new HomeActions MEMBER VOICE advocacy tool. In a few seconds homeowners got  guaranteed message delivery to their elected officials and were able to see what other readers thought. Click the image below and you can see how it worked.  Several weeks ago, 43 state Attorneys General crafted a request letter (pdf) to Congress, asking that the extension be made. They said that if the relief was not extended, it  would hurt the $25 billion robo-signing settlement they negotiated with the largest mortgage companies, forcing the companies to offer homeowners principal reductions. The thought of IRS and State tax leans may make a homeowner cautious of the workouts that may be available. How does the tax provision work? Without the tax measure, a homeowner who owes $400,000 on his mortgage and sells his house "short" for $300,000 would owe income taxes on the difference of $100,000, the amount that's forgiven. The $100,000 would have been considered regular income by the Internal Revenue Service and in many states. The reason being, many state tax income sources the same way as the IRS.   FULL ARTICLE SAVE ARTICLE EMAIL ME SHARE THIS Your Comments   Is this article valuable to you? Yes No Maybe Is this item worth sharing with other friends? Yes No Maybe Can you see this item helping you with homeownership? Yes No Maybe Comments:

Mortgages Do Matter..So Do Home Sales

As with the entire recovery, not everything comes in a straight line.  Jim Belote in his "Mortgage Matters" notes that improving real estate market continues. Yet, it depends on, as he points out from various sources, whether we are talking new home starts(up), prices(still lagging) or unit sales(not addressed specifically but in Hampton Roads increasing every month).


So what to do??  Focus on the good news!!!  


           Prices Awesome


                Mortgage Rates Spectacular


                     Fewer Short Sales and Foreclosures 


                          Builder Confidence....MORE NEW HOMES!


Note the important reports planned for the upcoming week!


Always the SMART MOVE!

Keeping you updated on the market! For the week of  February 13, 2012 MARKET RECAP Last week we were a little down on the latest spat of housing data, which showed home prices in many burgs resorting to old form –that is, falling.  CoreLogic, Zillow and Case-Shiller all posit that home prices in many metropolitan regions had slipped a couple percentage points in the fourth quarter of 2011.   For the past half-year or so, we've been saying that the bottom is at hand, if it hasn't already been passed.  In many areas of the country, that is the case: prices are moving higher.  Real estate markets, we are quick to note, are local markets.   When speaking of bottoms, there is actually more than one: there is a bottom for prices, a bottom for starts and a bottom for sales.  These bottoms won't necessarily occur simultaneously, but there must be some synchronization.  If you are a homebuilder, you are not going to add to inventory if you think prices remain in a downtrend. If you're a buyer, you're not going to buy if you think a cheaper price may be available down the road.   Because their livelihood is tethered to prices and demand, homebuilders are worth watching. On this front, we like what we see.  Sentiment is improving, and Bank of America analysts expect residential construction to increase 15 percent this year, bumping average annual starts up to 710,000 units.  You don't ramp up production if you think prices are in a downtrend.   Of course, homebuilders must contend with shadow inventory, REO and foreclosed properties, which many pundits expect to hold price increases in check.  It's worth noting, though, that many shadow properties were sold to subprime borrowers and many have been abandoned for a considerable amount of time –to the point where they are reclamation projects for only the handiest of handymen.   Many of these homes will likely just go away.  In fact, 300,000 homes are lost through neglect, abandonment, natural disaster and demolition each year.  We wouldn't be surprised to see that number rise as we get farther away from the subprime meltdown years of 2007 and 2008, thus we'll see more supply removed from the market.   Despite the current price travails, we remain convinced that residential real estate will be a top performing asset class over the next decade.  Bubbles that pop produce a lot of value.  Technology stocks are a recent example.  Had you purchased technology stocks a couple years after the Internet bubble burst in 2000, you would be sitting in very high cotton today.       Unlike stocks, real estate can be readily mortgaged. Given today's multi-decade low mortgage rates, many buyers are better off financing rather than paying cash for their purchase.   The mortgage market has been driven by refinances over the past couple years.  We would like to see more of it driven by purchases.  The good news is we expect that to be the case in 2012.  Economic Indicator Release Date and Time Consensus Estimate Analysis Retail Sales (January) Tues., Feb. 14, 8:30 am, et 0.9% (Increase) .Important.  Consumers are increasing their borrowing and spending, which reflects growing economic optimism. Import Prices (January) Tues., Feb. 14, 8:30 am, et 0.5% (Increase) Moderately Important. A strengthening dollar is holding down consumer price inflation.   Mortgage Applications Wed., Feb. 15, 7:00 am, et None Important. Lower rates are again fueling refinances, but purchase activity is also inching higher.     Home Builders Index (February) Wed., Feb. 15, 7:00 am, et 26 Index Important.  Improving homebuilder sentiment points to a stronger housing market in 2012.  Housing Starts (January) Thurs., Feb. 16, 8:30 am, et 690,000 (Annualized) Important.  The five-month average is moving closer to 700,000 annualized units. Producer Price Index (January) Thurs., Feb. 16, 8:30 am, et All Goods: 0.6% (Increase) Core: 0.3% (Increase) Important.  Producer prices are increasing at a rate that could translate into higher consumer prices.  Consumer Price Index (January) Fri., Feb. 17, 8:30 am, et All Goods: 0.3% (Increase) Core: 0.2% (Increase) Important.  The expected CPI gives the Federal Reserve leeway to continue its low-interest-rate policy. Properly Understanding Market Risk One of the hang-ups in housing these days is that too many people view the market as risky.  They read news on falling prices and they remain on the sidelines. They think that because prices have fallen prices will always fall. They extrapolate the present indefinitely into the future.   It's impossible to call a market bottom, but no gets in at the bottom or gets out at the top anyway.  The fact is the housing market today is far, far less risky than it was six year ago.  It just doesn't feel that way, because the sting of yesterday is still felt in the market today.   Risk isn't buying a home and then seeing its value drop 2 percent the first year after you've purchased it.  Real risk is the unseen.  Real risk is buying a Las Vegas home in 2006 after prices had doubled over the previous five years, and then, when no one was expecting, see prices fall 60 percent over the subsequent five years.   Real risk –massive, fast-paced, and destructive– is always and everywhere underpriced.  Perceived risk is the opposite: it's always overpriced.  If everyone perceives the same risk, little risk resides in that perception.

Is It Really A Strategic Move????

Strategically Defaulting: Is this something you should consider?

Many Americans, and especially Arizonans, are asking themselves if it is best to walk away from their home rather than to continue to divert significant family funds toward excessive loan payments.  Slumping home values and spiking mortgage payments are showing that more Americans than ever are willing to walk away from their underwater homes.  While this is a personal decision, current economic times and the expected length of time it will take for the real estate market to recover are important factors to take into account.  If you own a house that is worth a lot less than you owe on it, you may want to consider astrategic default.

Strategically defaulting is defined as a decision made by a borrower to stop making mortgage payments (ie defaulting) on the debt despite having the financial ability to make the payment.  The home owner is making a deliberate decision to use this financial strategy after analyzing the costs and benefits of defaulting rather than continuing to make payments.  In essence, the home owner is deciding to walk away and cut their losses.  A strategic default is different from involuntary non-payment due to a loss of job, divorce, disability, etc. 

According to a recent MSNBC poll, 78% of people in this country are willing to walk away if it makes financial sense.  If 78% of Americans are willing to walk away, where does that leave you?  Americans lost $1.7 trillion in home values in 2010 and $1 trillion in 2009 according to Zillow.com.  Given this data it appears that most people either have, are currently doing so, or will be strategically defaulting in the future.  Where does that leave our real estate market?  The market will reset and actually begin to recover faster as more people make this decision.

Consequences to Consider

There are a number of factors to take into account when determining if strategically defaulting is right for you and your family.  Below are the factors that arise most frequently:

Financial:  Will you be responsible for any of the difference owed between what the property is worth and what you owe on it?  This is a tricky question and can have different answers based on your specific situation.  In most cases (not all - there are a list of requirements that have to be met), the debt will be forgiven.  Arizona is an anti-deficiency state which means lenders cannot sue a person personally for any losses on a home after foreclosure.  The property must be on 2.5 acres or less and a single family residence or duplex.  Certain other requirements apply so it is important to seek legal, taxation, and Realtor advice prior to assuming that you qualify under this statue.

Taxation:  The IRS has the ability to tax on what is considered "phantom income" - income that you never actually received but is taxed.  For example, if you owe $300,000 on a home that is only worth $175,000 now, the IRS may consider the difference ($125,000) to be phantom income and may tax you on that income, in addition to your household income, at your individual tax rate.  There are ways around this, primarily through the Mortgage Forgiveness Debt Relief Act (MFDRA) or via a claim of insolvency.  The MFDRA allows for borrowers to discharge debt on their principal residence through 2012 and up to $2M in forgiven debt.  The debt owed normally must be "purchase money debt" which means the outstanding loans on the property have to be the loans that were put into place when the property was purchased.  The loans may not qualify if the home was refinanced.

Insolvency is another option for people who do not qualify under the MFDRA.  To claim insolvency the debtor must be able to prove that at the time the property was lost the debtors liabilities were larger than their assets.

Again, it is important to speak with your team of trusted professionals to determine how your debt will considered by the IRS.

Credit:  Strategically defaulting will affect your credit score but by how much is impossible to say.  Credit is complicated to understand let alone compute.  The three credit bureaus have not released their "formulas" on computing credit.  Credit not only takes into account major impacts such as a foreclosure but it will also report on late or missing mortgage payments.  In addition, other credit lines, such as credit cards, car payments, etc, may help to keep the score higher if those line items are reporting positively.  It is important to speak with a credit expert prior to making a decision to strategically default to make sure you understand what may happen and to mitigate the negative effects as much as possible in the beginning.

Ethical Dilemma?

In addition to the logical considerations, many people also struggle with an ethical dilemma.  Is it irresponsible?  Amoral?  Possibly, however what is your family's best financial interest in the long run?  Is a homeowner not allowed to take a business approach when making a decision like this -after all a home is also a long term investment.  Also, consider this.  In the contractual agreement between a borrower and the bank it specifically states what the repercussions would be to the borrower should they default - surrender of the property.  The borrower is not escaping that consequence, they are adhering to what is outlined in the contract.

Another interesting tidbit.  The Mortgage Bankers Association of America, one of the entities that has continually encouraged home owners to do everything possible to continue to make payments, sold some of its real estate for a considerably lower value than what was owed on it.  Its real estate holdings had dropped and the organization determined it was in their best financial interests to remove the bad debt from their books.  If big businesses in the industry, who are supposed to be leading by example, are strategically defaulting then why not you?

Making the Decision

If you do decide to strategically default you have a few different options on how best to complete the process.

Short Sale - A short sale is when the seller lists their home for sale with a Realtor and negotiates with the bank to accept an offer that is less than is owed on the property.  The greatest advantage to doing a short sale has to do with credit.  Typically the seller's credit score will not be as negatively affected as it would with a foreclosure and they will be able to qualify to buy another home in 2-3 years.  The seller can live in the home without making payments up until when the house sells.  The process will take months (if not over a year) to complete and will require patience and paperwork, however most sellers find that this is their best long term option.

Foreclosure - A foreclosure is where the seller walks away from the home without wanting to put any effort into other options.  Similarly to a short sale, the seller can live in the home without making payments up until the house sells at county auction.  The negative impact of a "foreclosure" being reported on the sellers credit report can have an extremely detrimental effect on credit score as well as the ability to qualify for anything credit based.  In addition, the reporting of a foreclosure on a credit report will typically keep the seller from being able to buy again for 5-7 years.

Deed in Lieu of Foreclosure - A deed in lieu of foreclosure is where the bank allows the seller to basically "give back" the property to the bank and avoid foreclosure proceedings.  Unfortunately in our market most lenders are not accepting deeds in lieu, they would prefer for the seller to attempt to short sale the

Strategically defaulting is a personal decision that should be based on one's financial situation and their opinion of the economic times and the real estate market.  It is always important to remember to consult with an attorney, accountant, and real estate professional before determining your best course of action with the least exposure for the future. 

Thanks to Alyssa Samuelson, CDPE, CRS, ABR, SFR, GRI  Scottsdale, AZ for sharing what is happening in Arizona.   

Give me a call if you are concerned...walking away isn't really a sound strategic move!!

On the Hunt: INVESTORS

Have you heard??

            Investors are snapping up foreclosures and short-sale homes in record numbers in the past 30 - 60 days.  Though experiencing the uptick in investor interest in these properties personally, the numerous reports from CNN, NAR(National Assoc. of Realtors) and Rismedia among others regarding this developing phenonomen is wonderful to see.   Like the buds on trees in March, the investors interest in homes is a good indication of the future.

Real Estate investors have been on the sidelines for over two years as financing and their own financial dilemmas hampered their taking advantage of the price-sensitive market.  But with the improving financial markets, REITS and individual investors are finding the funds to begin diving into the market.

Yet, more imperative, they have the CONFIDENCE to make the dive.  This confidence is more important than the finances as it is the fuel behind the willingness to spend the money. And spending they are in both Commercial and Residential Real Estate.

Thus, if you are a home owner wondering if the time is right to move

                               or

                 an apartment dweller wondering if the prices have bottomed so you can delve into buying a home

                                  or

                       an investor wondering if it is time to diversify into rental inventory or like

YOU HAVE TO ASK YOURSELF, 

"SELF, IF THE PROFESSIONAL INVESTORS ARE JUMPING INTO THE POOL, WHY AM I STILL STANDING ON THE SIDE OF THE POOL WATCHING THEM HAVE ALL THE FUN?

Just think if you dive into the pool with all the investors and non-investors alike, you may be part of the solution.   Every time a home sells the real estate market improves.  

              So if you can be part of the solution and make out like a bandit financially, what in the world are you waiting for??

If you need to know how to make it happen, call me at (757) 580-6546 or email at bcerny@roseandwomble.com.   

Just the Facts, Ma am

Chris Pendleton, a Tuscon Realtor, just posted this note on Short Sales and Foreclosures.   

Though you may have read similar notes on this blog earlier this year or elsewhere, confusion still reigns among the general public...thus it bears repeating!!

Important Facts BEFORE Deciding Between Foreclosure and a Short Sale

The impact and the consequences of a foreclosure, compared to a short sale can be devastating, so investigate the facts before you make this tough decision.  

  

Let's face the facts, it's inevitable that you are going to lose your home...but do you still have options? And which path is the best road to take? A licensed professional realtor, lawyer and tax professional can give you timely advice on the pros and cons of a foreclosure vs. a short sale after considering all of your specific details, but here are some differences you need to consider.

Let's start off with a definition of these two procedures.

A foreclosure is when the mortgage holder, usually a bank or a mortgage company starts a legal proceeding to take over ownership of your home, due to your mortgage payments being behind, usually by 3-6 months or more. The bank will foreclose on the note and mortgage, with the ultimate goal being to get control of the property, so that they can sell it for as much money as possible. Sometimes homeowners will sign a Deed in Lieu of foreclosure which results in the homeowner voluntarily turning the house over to the lender, so that the legal proceeding and related costs associated with it can be avoided.

A short sale, is a process where the homeowner wants to avoid a foreclosure, and also sell their home for less than what is owed on the mortgage. Paperwork must be filled out by the homeowner and given to the mortgage holder to demonstrate the homeowner's financial hardship. The lender researches the homeowner's situation and verifies it. If approved, the lender can opt to forgive the remaining loan balance owed on the property, and other expenses associated with selling the property. 

While both of these options result in you losing your home, the short sale penalty is usually for a shorter period of time, usually 3 to 5 years, than with a foreclosure, which is usually on your credit report for up to 10 years. Consult with a tax specialist, because the IRS may view any debt which you are forgiven in the short sale event, as taxable income to you.

If you are a police officer, in the military, CIA, security, or have aspirations to work in an employment position which requires a security clearance be careful. Being a party to a foreclosure can ruin your chances for employment, and can even result in your termination from a position you are currently holding, citing the foreclosure as grounds, for terminating or revoking your security clearance. A short sale, on the other hand, does not usually have as much negative impact on security clearances, current, or future employment.   You should check with your current employer if you have a security clearance already.

In every state in which the bank has the legal right to claim a deficiency judgment, the bank has the ultimate control to look to you to collect it, if your property sells or is auctioned for less than the amount owed on the mortgage. While Arizona is an Anti-deficiency state - there are still many situations in which the bank can pursue a deficiency.  In a short sale, the lender will most likely waive their right to collect the deficiency from you.

These decisions can be difficult to make by yourself. Consider hiring a licensed, professional realtor, who is experienced in short sales, to help you negotiate with the lender, and locate a buyer for your home.

Another Good Month of Home Sales

Great News!!!   Though you may have heard snippets on the news or in the paper, here is a detailed breakdown on how January home sales went. 

 It is great when results beat "Market" expectations!!!!!!!!!!!

Existing-Home Sales Rise Again in January

Washington, DC, February 23, 2011

The uptrend in existing-home sales continues, with January sales rising for the third consecutive month with a pace that is now above year-ago levels, according to the National Association of REALTORS®.

Existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3 percent above the 5.09 million level in January 2010. This is the first time in seven months that sales activity was higher than a year earlier.

Lawrence Yun, NAR chief economist, said the improvement is good but could be better. “The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence,” Yun said. “The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.”

A parallel NAR practitioner survey² shows first-time buyers purchased 29 percent of homes in January, down from 33 percent in December and 40 percent in January 2010 when an extended tax credit was in place.

Investors accounted for 23 percent of purchases in January, up from 20 percent in December and 17 percent in January 2010; the balance of sales were to repeat buyers. All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010.

“Increases in all-cash transactions, the investor market share and distressed home sales all go hand-in-hand. With tight credit standards, it’s not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes,” Yun said.

All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was 20 percent in 2009, rising to 28 percent last year.

The national median existing-home price³ for all housing types was $158,800 in January, down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the median price is being dampened by unusual market factors. “Unprecedented levels of all-cash purchases, primarily of distressed homes sold at deep discounts, undoubtedly pulls the median price downward,” Phipps said. “Given the levels of inventory we see today, we believe that traditional homes in good condition have held their value.”

Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale, which represents a 7.6-month supply⁴ at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply.