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Hurry, Because It is Going Fast!

by TeamForYOUrDreams

There have been so many false predictions of the recovery of the real estate market that every bit of good news is greeted with scepticism.  Oh, yeah, hurry because it is going fast!  As a result, many buyers are sitting there being sceptical while the market takes off and leaves them behind.  Or, they could look at the numbers and react to the reality while there is still time.

Across the nation, we used to have many to many homes for sale compared to the number of properties that were actually purchased.  If the sales continued at the same pace, it would take years to work through the inventory.  Now, ProTech Valuation Services May Home Forecast shows that there is a 6.3 month supply of homes for sale.  That means that if sales continue at the same pace, the current inventory will be sold in 6.3 months.  This is the lowest level since 2006.

All real estate is local.  In Raleigh, Durham, Chapel Hill and the rest of the Triangle, the inventory is down and the number of sales are up.  As a result, the prices are starting to rise.

I enjoy the buyers agents I deal with who try to justify their outrageously low offers for homes in Raleigh, Cary and the Triangle by trying to reference the poor real estate market.  That is about as believeable as trying to convince Mrs. Lincoln that she and Abe had a wonderful time at the play at Ford's theater. 

The market still has some areas that are slower to recover.  However, the numbers show it is starting to change.  So, you should change to keep up with what is happening now. 

More Short Sales in the Triangle Means Less Foreclosures

by TeamForYOUrDreams

The more Short Sales in Raleigh, Cary, Wake Forest and the rest of the Triangle area of North Carolina the fewer foreclosures. Every Short Sales is one less foreclosure.   I hope we can do the same in every neighborhood in the United States.  My method to spread the message is to send a video to my friends, neighbors and clients asking for them to help save their neighborhood from foreclosures.  I hope they tell anyone they know who is in trouble about short sales.  I used this video http://www.youtube.com/watch?v=LBRaB6U_PTE on YouTube.  There are a lot of people in trouble do not know how much Short Sales can help them out of trouble.  Without this knowledge, they let their home head toward foreclosure.  For certain people, the video gets a better reaction as it presents the information more personally than my Short Sale website www.ShortSalesR.us .  The Short Sale website works for the people that prefer to study Short Sales in detail.  On the other hand, the video provides a face to face presentation.  The new short sale procedures are easier and faster, so they work better.  If you tell anyone you know who is in trouble, the real estate market will improve more quickly and America will recover faster.  Thank you for helping.

Raleigh Amphitheater "Gets Around"

by TeamForYOUrDreams

Raleigh's Downtown has gone through a renaissance with the creation of the Convention Center, new hotels and my favorite spot, the Raleigh Ampitheater.  It is a small outdoor venue that takes advantage of Raleigh's southern weather.  Preferred seating is in chairs close to the stage while at the back there is an elevated lawn where you can spread out your beach towel.  There is not a bad seat in the house, as it is an intimate venue.  The Ampitheater is in easy walking distance of more than a dozen restaurants from Italian to Barbecue.  The site has all the parking for the convention center, with three major lots within a couple blocks, so getting in and out of the Ampitheater is easy.  Judy and I went to Tuscan Blu restraunt in The Depot nearby and just walked from there.  By the way, Maurizio Privilegi, the owner of Tuscan Blu, is delightful with his Italian accent and wonderful stories.  The Beach Boys were playing at the Ampitheater, the perfect music for this aging surfer who grew up on the beaches of Southern California before moving to North Raleigh in 1996.  Since many people have relocated to Raleigh, I was not the only aging surfer who moved to the Triangle area.  However, I was surprised that most of the audience was young as they danced, sang and cheered.  Here is a video of the performance that shows the PNC Center with its condos on the upper floor (the tall tower with the pointed antenna), the Progress energy building (taller brown building) and the Convention Center with its high tech mural made of LEDs. The Raleigh Amphitheater will Get Around, just like the Beach Boys song.   Click on the video below and you can watch the beach balls fly throughout the audience. Who is that woman who smiles at the end of the video?

 

Remember when you could get any kind of a loan that you wanted if you had a credit score of 700?  Now, the average credit score for the loans made in the last six months was 750.  When you consider that the highest possible credit score is 850, you can see how incredibly high this is.  It is even more astounding when you consider that the average credit score required to get a loan increased by 10 points in the last six months.  Many people thought that the problem with the real estate market is that the lenders would not provide loans for anyone to buy a home.  Now you have the statistics to prove it.

Did you think the credit score was the only stringent requirement?  Remember when a 20% down payment was plenty to get any loan.  The average down payment for approved loans in the last six months was 24%, which increased 3% in the last six months. 

The other factor in making a loan is the debt to income ratio i.e. the amount of your fixed debts divided by your income.  For decades, you looked for a "front end" ratio of 28% and a "back end" ratio of 36% to 50%. Front end is household expenses and back end is total fixed debts including credit cards.  So, what do you need to get a loan now?  An average front end ratio of 23% and a back end ratio or 34%.  To visualize this, the total debt of the average approved borrower is about one third of their income.  In other words, you need to have two thirds of your income that you can save.  

So, with these nearly perfect applicants, the lenders could process them quickly, right?  After all, it used to be normal to be able to get a loan fully processed in 30 days.  Now it takes 44 days, and the time to get the loan approved increased by 10% in the last six months.

What did it take to get your loan turned down?  The average credit score of someone rejected was 699 i.e. one point below what used to give you any loan you wanted.  To get turned down, your down payment averaged 17% and your debt to income ratios of 27% and 43%. 

The Origination Insight Report by Ellie Mae gives the statistical information needed to answer the question "Why is the real estate market failing to improve even though home prices are low, interest rates are at record lows, employment is increasing and more people are moving to the area?"  The asnwer is that lenders are not loaning to mere mortals, they only loan to the super humans. 

So, you can not only thank the lenders for getting us into this mess, but for keeping us there. 

 

Help! The Lender Wants More Money From Your Short Sale

by TeamForYOUrDreams

What if the bank demands more money from your Short Sale?

If you have a contract to sell your home in Raleigh, North Carolina for $200,000. You might feel that the sale is hard enough to face when you consider that it was once worth about $215,000 .  When the mortgage is larger than the money you will get from the sale it is a Short Sale. You submit the package to the lender who says they are going to disapprove the Short Sale because your sale price is way below their opinion of the market value for the home.  Maybe your lender believes your home is worth more than a similar size home in Cary.

What went wrong?  The bank wants to aviod giving the property away, so it gets an appraisal or a broker price opinion (BPO).   Many times that price is too high.  This was such a big issue in California that they had to pass a law that makes it a crime for a real estate agent to intentionally put too high a price on the property.  Why was this necessary?  The BPOs are frequently created by the real estate agents who will be the ones to sell the property if it is foreclosed.  In other words, if these agents caused the short sale to fail with a high value in BPO, these agents could get to list and sell the home. 

What do you do now?  Don't lay down and play dead.  Nearly every lender has a way to dispute the value in the appraisal or BPO.  Let's look at the method that Fannie Mae uses.

The standard Fannie Mae messages from their Valuation desk says that the Realtor needs to submit a package to the loan servicer and they say


"Complete packages includes a completed Submission form in Excel format and agent documents which may prove a lowered FNMA value. The qualifying criteria for a value dispute is as follows:
When disputing Minimum Net Reserve, at least one of the following documents must be included in the submission for review:
-Appraisal or Buyer's BPO (BPO that the Servicer did not order)
-CMA Report (w/ comp photos and descriptions), Listing History & Realtor Comments
-MLS Sheets of 3 to 6 Comps, Listing History & Realtor Comments
-Inspection Report with photos of repairs needed
-Detailed Contractor's Estimate with photos of repairs needed."

The real estate agent who has the property listed for sale will submit any one of the above items.  If the house is in bad condition, the simplest thing is to get a contractor to bid the cost of the repairs.  Appraisals are costly, so real estate agents typically submit a Comparative Market Analysis (CMA) with a history of the listing and some analysis by the real estate agent.  As an example, I have a Short Sale in Durham that is being reviewed by Wells Fargo.  The sales price in the contract is $100,000 and Wells Fargo believes the value is $115,000.  So, I sent them six comparable properties, three of which were sold in the last six months and the other three are for sale.  I included the showing service report of all of the times that the property was shown to a prospective buyer.  At one time, I had the property listed at $115,000, and  we had virtually no showings.  Every Realtor knows that if no buyer will even take a look at the property at that price, it will not sell for that much.  While real estate agents understand this, it is takes a little education to get a loss mitigation negotiator to believe it.

So, if your lender says it wants a higher price because its BPO indicates a higher value, that is not the final answer.  You challenge the value by furnishing the facts and figures like you see in the Fannie Mae procedure.  Then, you hope that the mistake will be corrected and your Short Sale will be approved.

For a more complete discussion of correcting BPO values in a Short Sale, go to http://shortsalesr.us/short-sale-dos-and-donts/bad-bpo-creates-a-bad-short-sale-decision/

The more Short Sales that get approved in the Triangle area of North Carolina, the less number of foreclosures and the faster the market will recover.

Is the Real Estate Market Going Up or Down?

by TeamForYOUrDreams

Which way is the real estate market going, up or down?  That depends on whose statistics you believe.  The Case Shiller index says the market has gone down in value for the last five months straight.  It is not surprising that the Case Shiller index is favored by the default servicing industry, those that see the glass half empty.  In other words, if you are selling in Raleigh, Cary or Morrisville, North Carolina it is a buyers market.   On the other hand, John Burns Real Estate Consulting says that their analysis is outdated.  That firm conducted its independent research in 97 markets across America and found that prices were rising in 90 of them.  From January to March, 2012, the real estate consulting firm says that the average price increased by 1.1%   They say that in the last month, prices are up in 93 of the 97 markets.  These folks see the glass half full.  In other words, if you are selling your home in Wake Forest, Garner or Holly Springs, North Carolina, it is a seller's market.

How do you explain the different conclusions?  They collect the data differently.  Case Shiller takes its information from closed sales.  Most sales take 30 to 60 days to close. Then, it takes 30 to 60 days to collect the data.  The John Burns Real Estate Consulting survey uses properties at the point when the sales contract is signed.  The consulting firm claims that their data indicates what is going on currently, while the other studies review past history.  The consulting firm says that the housing market recovery is under way, but it could turn at any moment, particularly if the media publicizes the Case Shiller index's pessimistic view of the market.

So, if you are selling in Raleigh, Cary or Knightdale, North Carolina, you want to believe the John Burns Real Estate Consulting survey.  If you are buying in Wake Forest, Garner or Holly Springs, North Carolina, you want to refer to the Case Shiller index to support your offer.  Who is right?  It depends on who you believe and whose method of collecting data is more reliable.

 

Short Sales Should Speed Up with Lawsuit Settlement

by TeamForYOUrDreams

Triangle Short Sales Will Become Shorter

One of the difficulties with short sales in Raleigh, Cary and the rest of the Triangle area is that the buyer of a Raleigh, Cary or other Triangle home has to make an offer then wait and wait for the lender to agree to accept a short payment.  In other words, the thing that is short about a short sale is the payment to the bank not the time for the sale to be reviewed. There is a lawsuit brought by the Attorneys General of most of America's states that is being settled with all the major banks.  The lawsuit was brought because of claimed violations of foreclosure procedures by these banks.  One fortunate sidelight of the settlement of this lawsuit that was mainly brought to correct the sale of bank owned properties (REOs) is a requirement that will make short sales faster for sellers in Wake Forest, Holly Springs and the rest of the Triangle area.  The faster the approval, the more buyers will see the process though to completion and there will be an increase in the number of short sales that close.

The following is a quote of the article in Realtor Magazine that picked up a feed from Real Estate Daily News

 " As part of a settlement with state attorneys general, the five largest mortgage servicers are adopting new requirements for short sales, which is expected to speed-up what has been known as a lengthy process.

Here are some of the new requirements for servicers under the settlement: 

  • Servicers must provide borrowers with a decision within 30 days after receiving a short sale package request. 
  • Servicers will be required to notify a borrower, also within 30 days, if any necessary documents are missing to process the short sale request. 
  • Servicers must notify a borrower immediately if a deficiency payment is needed to approve the short sale. They also must provide an estimated amount for the deficiency payment needed for the short sale. 
  • Servicers are also required to form an internal group to review all short sale requests. 
  • Banks will be considered in violation of the settlement requirements if they take longer than 30 days on more than 10 percent of the short sale requests. Violations can carry fines of up to $1 million and $5 million for repeat offenses." 

This report is good news. The biggest problem with short sale's loss mitigation departments is that the departments are understaffed, so the overworked employees have a hard time handling their big case load.  With penalties of $1 million to $5 million, these banks should greatly increase their staffing to spend the money on negotiators who will get more accomplished for their firm instead of paying penalties. Since a lender makes between 20% and 30% more from a short sale than a sale of the same property after foreclosure, this increase in the loss mitigation department will be a huge benefit the lenders because there will be more short sales and less foreclosures.  Meanwhile, it will benefit sellers in Chapel Hill, Durham and the rest of the Triangle area who will get faster approvals, buyers who will get new homes more quickly and Realtors who will have a shorter processing time and an increase in closings. 

This sounds great to me.  What do you think?

Short Sale Rules for HAFA Just Changed

by TeamForYOUrDreams

HAFA Short Sale Process Just Changed Again

The US Treasury issued Supplemental Directive 12-02 on March 9, 2012 to revise the Home Affordable Foreclosure Alternatives (HAFA) Short Sale program.   What does that mean for the HAFA Short Sale process?  More sellers will qualify for HAFA and more sales with junior liens will close.

A HAFA short sale applies only to a seller’s principal residence, so investment properties are not allowed.  The Treasury regulations that were first adopted for HAFA required the owner to occupy the home in order to qualify for HAFA. Every rule has an exception, and a HAFA Short Sale was allowed if the owner had moved over 100 miles within the last 90 days to get a job.  Later, this exception was modified to be that the owner was allowed to move within the last 12 months for any reason.  The latest revision says “There are no longer any occupancy requirements for HAFA eligibility.”   The home still needs to be the owners principal residence under Section 121 of the Internal Revenue Code, that requires the owner to live in the property for two years during the five years before the date of the sale.  You have to enjoy the complexity of an IRS rule, right?.   The directive does not discuss whether HAFA still requires that the seller must not have purchased another principal residence in the year before the sale, but I assume that is still applicable

What does this do?  More sellers will qualify for HAFA.  I did a short sale of a townhouse in Raleigh where the seller had moved out and took a new job, but she had not moved over 100 miles.  With the regulations that were in effect at the time, this Raleigh Short Sale did not qualify for HAFA.  With the current regulations, this Raleigh Short Sale would not have been eliminated on this basis.

Second and third loans are called junior lien holders because they are loans recorded against the property after the first loan.  The example that most people know is a Home Equity Line of Credit (HELOC) that is put on the property as a second loan.  The former rules limited the payment to all junior lien holders to $6,000.  Now, the regulations increase the amount allowed for these lien holders to $8,500.  This is the total allowed for the sum of the payments to all of the junior liens.  So, if you have a Cary Short Sale with a first, second and third loan, the total that can be paid to remove the second and third liens from the Cary Short Sale property is $8,500.

Do you agree that governmental regulations are sometimes odd?  The structure of HAFA qualifies for humorous.  HAFA is a program to allow Short Sales of the first loan on the property.  This HAFA policy restricts what can be done with second loans.  The lenders who own second loans do not have to follow these rules.  This is about the same as expecting the people who are driving in one state to obey the traffic regulations for the next state.  While it may be humorous, this change in the rules will permit the lenders who have first loans to pay more money to the lenders who have second loans.

What does this do?  More HAFA Short Sales will close on homes in the Triangle area of North Carolina because more money means more lenders will accept the proposed offer.  So, if you have an Apex Short Sale with a second lien of $80,000 and a judgment for $5,000, you may be able to get the junior liens to agree to your Short Sale in Apex with an offer of $8,000 to the second loan and $500 to the judgment because most junior lien holders will settle for 10% of the amount owed.

A HAFA Short Sale seller gets a relocation incentive of $3,000 paid at closing.  How do you get a Wake Forest Short Sale seller who is broke to move out of the house?  Provide some money to pay for the expense of moving  The new amendment to this policy allows the relocation incentive payment only if the borrower or a tenant is living in the property and they are required to move out when the Short Sale closes.   This change in regulations makes sense.  You pay for relocation only if someone has to relocate.   The result is that the lenders who approve the Short Sale will get more money in these situations.

What does this do?  The incentive to do a HAFA Short Sale just became less.  There might be a few Short Sale sellers in the Triangle who were encouraged to do a HAFA short sale by the $3,000.  Those owners of Triangle real estate might make a different decision.

There are less exciting changes to the regulations for monthly payments that allow the borrower to make the full payment during the Short Sale and the there is a change in the reporting of a HAFA Short Sale to the credit reporting bureaus. 

Is this good for Triangle Short Sales? Yes.  More sellers will qualify for HAFA, more sales with junior liens will close and the lenders pay relocation benefits only when someone relocates.

If you want to have a complete understanding of the entire HAFA Short Sale processs from start to finish, look athttp://shortsalesr.us/short-sale-how-to/how-to-hafa-the-process-from-start-to-finish/

Should a First Time Homebuyer Buy a Short Sale

by TeamForYOUrDreams

Should a first time home buyer make an offer on a property that is a short sale?  Short sales can be complicated, so some first time home buyers in Raleigh and the Triangle area of North Carolina sometimes avoid them.  Let me explain why.  A short sale has all the elements of a normal sale where the buyer and seller have to agree on a price and all the other terms. In addition to that, the agreement has to be approved by the bank that has a loan on the property i.e. the seller's lender has to agree to the deal.  More specifically, the lender has to agree to take the net proceeds of the sale.  The buyer is asking that lender to allow the sale to close in return for a "short" payment instead of a full payoff on the loan. While the payment is short, the time it takes to get the banks approval may be long.  As a result, many Raleigh and Cary first time home buyers do not want to wait for the approval.  If you want more detailed information on short sales, visit another of my websites at www.CreateAShortSale.com.

In addition to the delay in getting the approval, the approval is not a sure thing.  Across the nation, only 27% of short sales get final approval.  So, if you believe in following the national averages, you have a bit over a 1 in 4 chance of getting your Triangle short sale approved.  Instead of applying the national averages, you should look at the success rate of agents in Raleigh, Cary and other parts of the Triangle, as our listing agents are better trained so that more of the short sales are approved in the Triangle.  The buyers and their agents need to focus on the agent who represents the seller, called the listing agent.  That agent is the biggest factor in determining whether the short sale gets approved.  In other words, a first time home buyer in the Triangle needs to find out who has the property listed, because that agent is responsible for processing the short sale with the lender.  For example, you can count the number of short sales where I have not been able to reach an approval on your fingers.  So, I ran out of time to get the sale approved in less than 10 sales.  There are some other agents like me who get nearly all of their short sales approved.

Buying a short sale give a Triangle first time home buyer the opportunity to buy a home at a price that is usually below the market price.  In order to be successful with the purchase of a short sale property, the first time home buyers in the Triangle area of North Carolina need to analyze more than the property when they are deciding whether to make an offer on a Triangle short sale.  They have to first look at the property.  Then, they need to find out the success rate of the listing agent in getting short sales approved.

Instead of listening to me analyze the situation, listen to Rang, a Triangle first time home buyer who just bought his first condominium.  Feel free to let me know your ideas about short sale properties being purchased by first time home buyers.

http://www.youtube.com/watch?v=wW2GR35E0JQ

Fannie Mae and Freddie Mac loans were exempt from the HAFA short sale program that was put into effect by the Treasury on April 5, 2010.  Fannie Mae has just created its own version of HAFA with regulations that you can find at http://shortsalesr.us/FannieMaeHAFA.pdf.  Similarly, Freddie Mac has created its version of HAFA with regulations you can read at http://shortsalesr.us/FreddieMacHAFA.pdf.

Does this addition to HAFA make you happy?  In general, the terms are similar to the Treasury's short sale program that is supposed to expedite the review and approval of short sales by pre-approving the seler for the short sale and establishing the amount the lender will accept at the time the Short Sale Agreement (SSA) is entered into.  In other words, you qualify the seller and get the amount needed from the sale at the time you list the property.  However, there is a difference with Fannie and Freddie.  With the Treasury's program, the lender considering the short payoff may tell the Realtor how much they will settle for.  For those of you who do a lot of short sales, they will specify the amount they want to be paid at closing as shown on line 504 of the HUD.

In the Fannie and Freddie program, the servicer is prohibited from telling the seller, buyer and Realtor what this amount is.  Instead, the servicer will establish an asking price based on the condition of the market in the area.  Who is better at setting an asking price: (1) the Realtor who works there every day or (2) a Loss Mitigation negotiator with files from all over America?  When the contract is submitted, you hope that this asking price results in the Minimum Acceptable Net Proceeds (MANP).  If you do HAFA short sales, you have to love the acronyms :-) .  

Having the Broker Price Opinion or appraisal already done at the time the offer is presented is a benefit, and the servicer does not tell the Realtor what the acceptable net proceeds are in most of the non-HAFA short sales (except for FHA short sales where you know to the penny).  So, in this manner the program gives a benefit of the BPO already being done and the same result as the old fashioned short sale where you play "guess again" on the amount the lender wants.  But, it could have been better if Fannie and Freddie followed the Treasury's lead.

The other bad news is that the servicer tells the Realtor how to market the property, and supervises the marketing plan.  Again, who knows better what will work (1) the Realtor who has developed an effective program or (2) the loss mitigation negotiator who just took the HAFA training course.   The guidelines mandate that the marketing program includes " a "For Sale" sign, Multiple Listing Service(s), flyers, print ads, open houses as well as appropriate usage of the internet;"  Few will argue with a for sale sign and putting it in the MLS, but open houses work less than 2% of the time according to NAR statistics.  Print ads have dramatically fallen because they are not that effective.  However, if you want to comply with the Short Sale Agreement you will do these things, because the agreement can be cancelled if you violate it.

Another problem is that a seller cannot be considered for a Fannie or Freddie HAFA short sale if a foreclosure is pending that could sell the property in 60 days, or if the state laws would allow a foreclosure in the next 60 days.  States like Texas can go from a dead start to a full foreclosure in less than 60 days, so does that mean you cannot do a Fannnie or Freddie HAFA short sale in those states?

There are some great benefits.  The servicer must respond to an offer within 10 business days.  That beats the months of waiting we do now.  The servicer must allow at least 45 days to close the sale after approval, with a maximum of 60 days.  Also the foreclosure must be postponed during the sale period, wich is at least 120 days. 

The financial incentives are similar. The seller gets $3,000 in moviing assistance.  The servicer gets more under Fannie and Freddie than the Treasury by receiving $2,200 for an approved short sale, as opposed to $1,500 for the Treasury. 

So, like everything else in short sales, there is some good news and some bad news.  But, at least there is a program that provides some tools that a savy Realtor can use to help a borrower in trouble.

If you need an encyclopedial of information on short sales, go to www.ShortSalesR.us and for the complete  Fannie Mae guidelines go to http://shortsalesr.us/FannieMaeHAFA.pdf and for the Freddie Mac guidelines go to http://shortsalesr.us/FreddieMacHAFA.pdf

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