Short Sale Buyers face difficulty closing purchases quickly

I was reading an interesting article posted by RISMedia Inc. today in regards to this very topic. (Yes, I borrowed the title from them).

As the article eludes to, many buyers are finding their dream homes. It just so happens those dream homes happen to be short sales. So, they go through the arduous task of preparing an offer, submitting it to the bank, and waiting. And waiting. And waiting. And, well you get the picture. As you might expect, these buyers get upset at how long it takes the bank. The contact their agent and demand answers not knowing the agent has been demanding information behind the scene from the sellers agent.

Who is to blame? Nobody will provide an updates. Nobody will provide the buyers or their agent with any information. Frustration sets in as many buyers decide perhaps its time to withdraw their offer and move onto another property. Only this time, this property isn’t their dream home. They are settling for a home that is not exactly what they want because somebody won’t provide them any information. Again I ask you. Who is to blame?

The answer is probably the system. As a sellers agent that represents many short sales, I feel the same frustration. I have the same goals as the buyers and the buyers agent. My goal is to get the home sold. If I don’t get the home sold then I have let both my clients and myself down. My goal is to help my client avoid a foreclosure on their record. My goal is to help negotiate a sale with the bank that achieves this end result. My goal is to get the buyers that are patient and want this home into the home. And of course, my goal is to get compensated for all of the hard work I have done. When the stress of a short sale sets in, and buyers withdraw it can be emotionally draining.

The system is tradition. Banks are funneling through millions of files at once. Let me say that one more time. Any given bank doesn’t have a “handful” of short sales. They don’t have hundreds of short sales. The smallest banks and credit unions might have thousands. The medium sized banks might have tens of thousands or even hundreds of thousands. The larger banks have millions and millions. Fannie Mae and Freddie Mac own nearly half of all mortgages in this country. So when Wells Fargo, Chase, Bank of America, National City, and any other large lender has a short sale, they only take care of their files. But nearly all of their files are owned by the aforementioned entities.

I have had weeks on end where I try to get some sort of update from the bank. Some news I can pass along. I am not even necessarily looking for good news, just some news. In a current transaction for example, the bank sent over a letter outlining the terms they would accept based on the current offer. The buyers agent worked with the buyers and they decided the banks terms were acceptable, so they adjusted their offer to be exactly what the bank wanted. At the time of writing this article the bank has had the updated offer for over 2 weeks and has yet to provide me a single update.

The buyers are getting very frustrated and the pattern sets in. Who can blame them? I understand exactly what they are feeling. Every buyer thinks if they can talk with the bank, they can get an answer faster. The problem is, that’s not the case. You can’t bully banks. The federal government recently tried that and it back fired. The banks keep this country afloat whether we like it or not. I know without the consumers they would be nothing. But they have built a society where paying cash is frowned upon. Nearly every person in this country manages their money through a financial institution. The only way to solve it is to live conservatively and pay cash for all of your purchases. Without financing, lenders would lose a small portion of the control they have over us.

Short sales are a great deal. The ones I work with in Utah are excellent values. Banks know what values are and are willing to provide excellent purchases to buyers. But, you must be patient. If you find that perfect home, and if you can get your offer into the bank, you have a very good chance of getting your offer closed. But patience will be required.

The article I mentioned at the beginning of this post speaks about buyers worrying about the tax credit. If you wish to take advantage of the tax credit and you want to buy a short sale, you realistically only have about 2 maybe 3 weeks left in which to write up an offer in hopes of getting it accepted by the deadline (and subsequently closed by the June 30th deadline).

If you see a home you know is a short sale that you want to buy. Contact me, I will help you write up an offer and work with the sellers agent to get your offer accepted as soon as possible.

Posted in Buyers/Renters, Foreclosure/Short Sales | View Comments

What does the future hold?

It is hard not to get caught up in the sharp ups and downs of the real estate market in the last few years but what does it look like in the future. Say, 20 years in the future. According to Chris Nelson at University of Utah’s Metropolitan Research Center, Utah will be the fastest growing state in the nation adding 1.5 million residents to the 2.7 million already here. The demand this will put on future housing needs can not be understated. Just the Wasatch Front will need 450,000 additional units and 1.1 billion square feet of commercial space. This adds up to a tremendous opportunity for builders and investors.

One of our primary responsibilities as your realtors is to keep our finger on the pulse of the market–short term and long term. If you have any questions about the real estate market or investment strategies, please give us a call.

Posted in Economy, General Real Estate | View Comments

FHA making sweeping changes

The Federal Housing Administration will increase insurance premiums, tighten downpayment requirements and reduce seller contributions. It also plans to step up its pursuit of mortgagees that operate outside FHA guidelines.

Borrowers who make a 3.5 percent down payment in connection with an FHA-insured loan will be required to have a credit score of at least 580. Credit scores less than 580 will require a 10 percent down payment.

Posted in Buyers/Renters, Financing, General Real Estate | View Comments

Rules of thumb for the 2010 U.S. Census

Every 10 years the U.S. Census Bureau performs a national census. This census is important as it tells the federal government what resources to allocate to each area of the country based on population and more. With the Census process beginning, the BBB offers some important advice on how to avoid getting scammed by those fraudulent people looking to take advantage of consumers by posing as Census agents.

Eventually, more than 140,000 U.S. Census workers will count every person in the U.S. The big question is – how do you tell the difference between a U.S. Census worker and a con artist?

U.S. Census workers have a badge, a handheld device, and a Census Bureau canvas bag. Ask to see their identification badge before answering any questions. As a safety precaution, never invite anyone you don’t know into your home. Currently, Census workers are only knocking on doors to verify address information, so if you are asked for any information outside of the address, decline to answer. The Census bureau has decided not to work with ACORN, so do not provide any information to any ACORN workers claiming to represent the Census Bureau.

The U.S. Census Bureau (USCB) will be sending out packets in the mail to verify information on name, genera, age, race, ethnicity, relationship, and whether you own or rent. If you provide your answers via mail as requested, you will be through. However, if not, then the USCB will begin going door to door between April and July to obtain this information. Every household will be part of the census.

What the USCB does NOT ask:

• Will never ask for your Social Security Number.
• Will never ask for your banking information.
• Will never ask for credit card information.
• Will never ask for donations to any charities or organizations
• Will NEVER CONTACT YOU BY EMAIL.

Email scams are the easiest to fall victim to. The USCB does not operate via email, so do not answer any questions via email.

For more information about 2010 Census, visit http://www.2010census.gov

Posted in General Real Estate | View Comments

Home Buyer Tax Credit Explained

The Basics of the 2009/2010 Home Buyer Tax Credit

As part of a plan to stimulate the U.S. housing market and address economic problems, Congress has passed some legislation allowing for first-time home buyers to take a tax credit of up to $8,000 as well as a $6,500 tax credit to current home owners buying a new or existing home.

Some consumers and media outlets don’t have a clear grasp of just how this program works, so please allow me to provide a basic overview.

Who Qualifies for the Extended Credit?

First-time home buyers (e.g., someone that has not owned a home in the past 3 years) who purchase a home between November 7, 2009 and April 30, 2010.

Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for FIVE CONSECUTIVE YEARS within the last eight.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000. The maximum allowable credit for current homeowners is $6,500.

How is a Buyer’s Credit Amount Determined?

Each home buyer’s tax credit is determined by two factors. The first is price. The homes purchase price can not be for more than $800,000. The second is income. Income can not exceed $125,000 for a single income, or $225,000 for a married couple.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit. The credit decreases as income increases. However, if the income exceeds $145,000 for a single income, and $245,000 for a combined income, the buyer(s) are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

Hopefully these answer the most common questions in regards to the tax credit. If you have more questions about whether you qualify or not, please contact our office and we will be glad to help you figure out your credit amount and how it can benefit you in the purchase of your next home.

Posted in Buyers/Renters, Financing, General Real Estate | View Comments

Tenant Rights With Foreclosures

In this economy, I get questions all the time about tenant rights when comes to foreclosures. Usually it goes something like, “My landlord is about to be foreclosed on. I need to find a new place to rent.”

Well, not so fast. The recent increase in foreclosures prompted Congress to look into the rights of tenants who remain in the property after a foreclosure. It used to be that a foreclosure sale would extinguish any current lease and the occupants would be “tenants-at-will”, and given or subject to a 5 day vacate the premises notice.

Now, with a new law passed by Congress this May, residential tenants who have entered into a bona fide lease, prior to the notice of foreclosure, is not a relative of the owner, and continues to pay rent, the occupant may stay on the property for the duration of the lease PLUS 90 more days. If it is a verbal, or a month to month lease, then the tenant may stay 90 days after the foreclosure sale.

If the lease was entered into after the notice of foreclosure, the lease may be considered void.

Since we are a full service broker that does both property management and real estate sales (including short sales and pre-foreclosures), we are uniquely positioned to help you with such issues. If you are on either side of this equation, give me a call and I can get you the basics. If your situation doesn’t fit in the normal box, I can refer you to a competent attorney to help you with your case.

Posted in Buyers/Renters, General Real Estate | View Comments

To refinance or not to refinance?

I get a lot of people asking me if it makes sense to refinance. Rates have been teasing into the 4’s again and many want to take advantage of the super low rates. Rates are unquestionably awesome and the question should not be whether better rates will come along, but whether to refinance or not to refinance. So is now the time? Obviously it depends on the individual situation but here are a couple of guidelines.

1. Percentage drop from current rate. This is the one people think about the most. The general rule of thumb is if the rate drops by more than one percentage point, it is good to refinance. Point drops of less than a point can often cost the barrower more in fees than they will save over the their life of the loan.
2. Loan amount. This is an important exception to rule #1. If the loan amount is high even a drop of a half a point may make perfect sense. For example, the principle and interest payment on a $500,000 mortgage at 6% is $2997. At 5.5% the payment drops by $158. If it is a low cost or no cost loan, then go for it.
3. How long are you going to keep the loan? People are often surprised when I talk them out of refinancing because they plan to be in the house only another year or two. The extra interest paid in that short period will not overcome the cost of the new loan.
4. 30 Year or 15 Year loan? Often the 15 year loan is a better rate, but my advice to most people is to get the 30 year loan and make the 15 year payment. The 30 year loan will be slightly higher rate, but it gives some payment flexibility if times get tough. If I’m giving the advice to someone who has a very low debt to income, I’ll suggest the 15 year note. The payment will be a bit higher, but the savings in interest will pay dividends in the long run.

Obviously this is just a start and there are many factors to consider. If you are wondering if the time is right for you to refinance, give me a call, and I can walk you through all of your options.

Posted in Financing | View Comments

Homebuyers Tax Credit extended through April 2010, existing homeowners to receive credit too.

On Friday, President Obama signed an extension that passed the Senate and the House by a large majority. The bill, which included extending unemployment benefits as also largely aimed at extending the first time homebuyers tax credit. Originally, this credit expired if the homes purchase was not completed by November 20, 2009.

This new bill extends the tax credit to homes that are closed by June 30, 2010. The caveat is that your purchase contract must be agreed to by all parties on or before April 30, 2010 in order to take advantage. This is fantastic news for those waiting out the slow winter months in order to buy a home in the spring. With interest rates at record lows and home values in area’s of Salt Lake holding steady, and in some cases going up, it appears the bottom of the crash may be over in Utah and that with all the incentives currently in place, now is the best time to buy.

On an even better note, the bill also allowed existing home owners the opportunity to take advantage of a $6,500 tax credit if they choose to buy a new home. “New” doesn’t mean new construction, it means sell their existing home and purchase a home that is “new to them”. If a homeowner has owned a home for at least 5 years, you can now sell your home, cash out equity, and upgrade into a larger, newer, more affordable home and get a tax credit to boot.

If you would like to know more information or want to see what your options are, call me today. Here is a link to a Wall Street Journal article about this bill.

Posted in Buyers/Renters, General Real Estate, Homeowners/Sellers | View Comments

Keeping Track of your Personal Finances

One thing that many people struggle with is keeping track of their personal finances. Software such as Microsoft Money or Quicken can make it easier. However many people don’t find they have the time to sit down daily or even weekly to reconcile their spending. The fact is, every night prior to going to sleep, you should plan 15-20 minutes for going over your daily spending. What have you spent today? What bills are due upcoming? What bills do you need to pay today? What bills have charged to your credit card? The list goes on.

Reconciling your financial software with your bank can be tedious. However, thanks to Web 2.0 it’s easier than ever to keep your financial spending trends under control. I have been using two different services side-by-side for the past few months and find they are both fantastic. They are free and secure.

Both of these services sync directly with your financial institution and help you track your spending habits. It only takes 5 minutes to update all of your spending. They also have mobile applications (for iPhone) and mobile web site versions (for other mobile devices) so you can see live balances anywhere and input your spending as it happens.

I would highly recommend looking into one of these services. They are both secure and your account numbers, passwords, security answers etc.. are never displayed once you enter them. So even if someone somehow cracked your account, all they could do is see where you spend your money. They couldn’t initiate transfers or do any damage to your money. Unless of course they put in some fake transactions in your register requiring you to put some extra work in next time.

Here are the two services, hopefully you find them useful.

Mint.com Quicken Online

Posted in Financing, General Real Estate | View Comments

University of Utah to Offer a Masters Degree in Real Estate

This is kind of cool news. KSL is reporting that the University of Utah will begin offering a Masters degree in Real Estate. That’s big news. For those of you who aren’t aware, currently to get your license in Utah, you simply have to attend 90 hours of schooling (That’s not 90 “credit hours”, that’s 90 “Classroom hours”. That’s less than 1 quarter of a school year). Once they are done with their schooling, they take a state approved test about the local and federal real estate laws. The class covers mainly those laws and a few other misc. items.

Most of the “real estate” that real estate schools teach isn’t used very often. There are no sales skills, negotiating skills, people skills, life skills or experience skills provided through real estate schools. Once you get your license, it’s up to you to find the right broker to partner up with that will help you develop those skills. I was very lucky in that I chose a great broker that had great support. While there, I met my current broker who was an agent at the time. After several years of working together and expanding all of our core skill sets, we set off to create our own brokerage. Through lots of hard work, we have “mastered” the skills necessary to be successful in real estate and provide our clients with the best service possible. However, most agents don’t have that luck.

Real Estate is a fantastic career choice, even when the market is down. Not only do I get to experience marketing along with all my previous skills, but it allows you to become a great problem solver. I am confident that the University of Utah’s Masters Degree in Real Estate will help mold future generations of agents into experienced capable agents right out of school. This will close the gap on inexperience and assure that the public has better options and more security when choosing their agent.

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Economists see recovery beginning

According to an AP article posted by the Salt Lake Tribune, more than 80% of economists surveyed from the National Association for Business Economists believe the recession is over. They feel that recovery has begun, but that it will be a long process.

“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said NABE President-elect Lynn Reaser, chief economist at Point Loma Nazarene University.

Trying to wade through the article above can be painful. There is nothing worse than trying to understand economic jargon and percentages that you have nothing to compare against. Here is the takeaway message from the article:

The economic outlook looks good for the next year to year and a half. But unemployment rates, federal deficit, etc… will remain high. This will be mainly due to the fact the employers remain cautious about hiring as people are holding onto their money and not spending because they are worried about jobs. It’s kind of a vicious cycle, that will only be broken when either consumers start feeling confident and spend money triggering employers to hire, or when employers feel confident about consumer spending and hire, triggering the very consumer spending they are hopeful for. Someone needs to “cook or get out of the kitchen” as the old slang saying goes.

This recessions is the worse since the 1930’s (Great Depression for those history buffs), but it is improving (as the great depression did eventually). One of the reasons for this growth is the housing sector. In fact, in 2010 the housing sector is expected to contribute to overall growth for the first time since 2005. For those of you keeping track, that would be back when everybody was buying homes and the market was confident.

That is great news for everyone. Values will become stable, possibly increase at least at the rate of cost-of-living. Financing restrictions will be loosened as banks feel confident in people ability to pay and the pricing stability, and interest rates are expected to stay low until then.

Now is a great time to buy. Interest rates are at all-time lows, and banks are easier to work with. It sounds like this trend will continue for at least the next year allowing some stabilization in an over-saturated market. Just don’t full yourself, the “good homes” still sell in a week, so don’t expect to have your “pick of the litter” if you plan on shopping for a long time.

Have any thoughts? Let me know, feel free to post them below.

Posted in Buyers/Renters, Economy, General Real Estate, Homeowners/Sellers | View Comments

Should you still consider a home an investment?

Dave Carpenter published a great article this morning for the Deseret News called Home Sweet Investment? Sure, in the long run. What a fantastic article. So many people have come to the belief that a home is strictly an investment and should only be viewed as such. I will explain my thoughts on those in a few moments. In the meantime, for those of you that believe that, his article hits the nail on the head. It’s a couple of pages long, so buckle up if you are going to read it. If you don’t have time, here is a quick synopsis.

Since 1968 the National Association of REALTORS has been tracking home valuation information. Home prices have risen an average of 6% every year. That doesn’t mean that next year your home will be worth 6% more and that last year your home was worth 6% less. It means that when you take any given block of time, say, 10-15 years and calculate the average appreciation, it will be about 6%. In laments terms, your house will slightly outpace inflation, which is a good thing.

In the mid to early 1990’s housing was booming. People bought homes as fast as they could get their hands on them, and then the market crashed. This crash wasn’t anything like the crash in the 2000’s. A crash that magnitude hasn’t happened since the great depression and probably won’t happen again. But the market WILL crash again, there is no doubt about it. Why? Because history tells us it will. In a supply & demand society when there are good deals people will go out and get them, as they become less available people will start paying a little more and a little more. In the long run, the price goes to high, and then there is no demand for the supply, so the price will go down to correct.

For those folks that bought their home in the 90’s for $130K just to watch their values fall to $90K a few years later, they aren’t complaining one bit. Especially if they still live in that same home today. Why? Because today their home is worth $375K, nearly three times what they paid for it. In the end, they made a lot of money. As an investment, a home is a great idea in the long run. But you must be willing to wait 10 years or more before you try to cash in on your investment.

My opinion on personal homes as an investment? I ask my clients to view a house as their home, not as an investment. If they do think of it as an investment, I ask them to view it as an investment in their future. Not about dollars and cents as much as what it will allow you to accomplish. Living in a home for a long period of time, say 20 years, will allow you to be able to pay for college, or set up your retirement. Why? Because if you pay your mortgage responsibly for 20 years you are practically paying into a forced savings. If you take no equity loans, then you have the power to borrow against your equity for important life costs such as college or retirement. Please don’t ever get a home equity loan for a vacation to Europe. As fun as that sounds, you will be paying for the vacation for a very long time and you might be sacrificing some of your nest egg to do it.

It’s a great article and brings up great debate. I see pros and cons to viewing homes as an investment. The pros outweigh the cons, I simply prefer people to remove the “investment” thinking from their purchase in case the home should decline in a year or two. This way they don’t feel like they made a bad investment. The fact is no matter what the market does, in 10 years you will be just fine.

Posted in Buyers/Renters, General Real Estate, Homeowners/Sellers, Investing | View Comments