Can You Separate Fact From Fiction?
December 15th, 2009 categories: Market Trends, Real Estate News, Relocating
As I was skimming this morning’s New York Times headlines, when a piece on “Mega Content” sites caught my eye. The article’s emphasis centered on the the quality, or lack thereof, of ”Content Sites” like Answers.com The bottom line is, that while these sites are rich with content, and are quickly attracting viewers, maybe we need to consider what the quality of the material found there is? In other words, there’s mounds of information, but is it any good? Is it worthwhile? Is it TRUE?
During the past year or so, I’ve had the opportunity to teach a reoccurring Real Estate Technology class. The class briefly reviews the shift we’ve seen in the methods, tools and practices in our profession during the past few years, and examines how Realtors, by leveraging these recent tools, and social media platforms, can improve productivity and their business. One point of emphasis we touch on during the class is the use of Real Estate blogs as a means of learning the business. Blogs, and their collaborative structure, are a free classroom. And an interactive one at that. And there are loads of them. Whether it’s foreclosures, luxury homes, mortgage issues, best ways to showcase a property, or just about any other subject related to the business of real estate, or homes, there’s a blog for it. Best of all, as I say again and again during class, they are FREE. Classes we used to pay for are now on the web, and at our fingertips, for FREE. So, we really have no excuse for being uninformed, right? But, having said that, what about the content? How much substance is there in the information we’re taking in. What credibility does the particular author, and real estate subject “expert” have?
When absorbing information, it’s a good idea to check your sources, don’t you think? Have you ever wondered why the Federal Drug Administration (FDA) requires certain labels or notices on food and drug containers? Do you think it’s important to know a drug is poisonous BEFORE you take it? Have you ever looked on the label to see what’s in that jar of jelly you’re about to open? Well, what about Real Estate information you’re consuming? Is that article on Short Sales written by a practitioner who is a qualified expert in that transaction? Does that individual teaching you Ethics actually have any background in the practice, or is their “expertise” a matter of having been convicted in court of lying or something worse? Who knew?
One the painful truths of growing up is that most of us have to learn from our own mistakes since we fail to learn from the mistakes of others. Another is that, the older we get, the smarter our parents seem to be. I don’t know about you, but my parents tugged on my ear a few times in my youth telling me not to believe everything I hear. And, you know what, they were right. With today’s abundance of online information, let’s try and be as discriminating with what we read, as well.
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Is Permanent Relief Too Good To Be True?
November 30th, 2009 categories: Real Estate News, Relocating
Today’s announcement that the Obama Administration plans on forcing mortgage companies to permanently reduce monthly payments for troubled homeowners was met by a mixed reaction. While the action’s sponsor, the White House, said one thing, many others took a more realistic wait and see attitude.
The Department of Housing and Urban Development’s (HUD) new initiative is part of the Administration’s efforts to provide relief for homeowners who are laboring to pay their mortgages, and is another piece of the effort to stabilize the housing market. The initiative, according to HUD, wants to extend to those already receiving trial modifications to their home loan, a permanent modification to their mortgage. In simple language, what does that mean? A lower payment.
While borrowers have understandably embraced the new program, mortgage lenders aren’t nearly as willing. To ensure their participation, the Administration outlined steps to hold their feet to the fire.
Servicer Accountability
As part of the Administration’s ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:
- Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae “account liaisons” are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.
- Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.
- The December MHA Servicer Performance Report will include the data on permanent modifications as well as the number of active trial period modifications that may convert by the end of the year if all borrower documents are successfully submitted, sorted by servicer and date.
- Servicers will be required to report to the Administration the status of each modification to provide additional transparency about situations where borrowers face obstacles to moving to the permanent phase.
While the new initiative is certainly welcome by homeowners whose mortgages have become a greater burden than they can bear, its viability is only as good as the rules it is guided by. The process is riddled by paperwork, and paperwork and the U.S. government sometimes don’t mix too well. Additionally, while the gov’t plans on using a carrot and stick approach when dealing with lenders, only time will tell how well their daily monitoring works in practice.
Former Chief Credit Officer for Fannie Mae, Edward Pinto, calls the new initiative’s goals “a pipe dream”. What do you think? Is it simply eyewash? Or, is the initiative good for homeowners and the economy?
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More Good News
November 23rd, 2009 categories: Real Estate News, Relocating
Invariably, in the course of conversations with friends, one of the topics that normally arises, is the subject of the homes. Usually, the mention comes in the form of, “How’s the housing market?”
Other than the dramatic shock to financial markets during the year following the height of the housing market and subsequent rapid fall in home prices, the sales market has been fairly predictable. Once lenders got a grip on the deluge of foreclosures and short sales, and this glut of properties began to be adequately handled by them (O.K…so, they’ve still got problems with Short Sales, but they’re getting there), the housing market has been relatively stable.
Today’s latest news on the surge in home sales isn’t news to those of us in the business. As one prospective home buyer in the latest USA Today article mentioned, the market is “insane….I’ve never seen a market like this before.”
That, after having finally securing a home following unsuccessful offers on 20 Las Vegas homes. And, while the rush to “get in” and take advantage before the First Time Home Buyers tax credit offer expired can partly be credited with the robust sales numbers, it doesn’t hurt that home prices, in many locations nationwide are 30-50% less than they were in 2005, or that interest rates are rock bottom.
Many believe that home prices have stabilized. But, with more foreclosures and Short Sale properties landing on the market weekly, we may not have seen the bottom quite yet. With extension of the tax credit, and mortgage rates in a low holding pattern, the surge in home sales numbers may, if we’re fortunate, become a trend instead.
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It’s The Simple Things
November 22nd, 2009 categories: Real Estate News, Relocating
Do you have a favorite season of the year? While many of us like something about each of the four seasons, Fall, or Autumn is probably the one I enjoy the most.
It’s cool mornings and evenings, beautiful natural colors, and inkling of the coming holidays, seems to invigorate a sense of better things yet to come. Around Stafford and Fredericksburg, for many, it’s jacket weather (for others, coats), and the stunning colors are second to none.
How about you, what is your favorite season?
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Home Buying and Selling Help From Uncle Sam
November 9th, 2009 categories: Real Estate News, Relocating
In times like these, all of us appreciate a bit of assistance. Fortunately, the government has taken steps to extend a couple of programs designed to assist home sellers and buyers. The first is the Housing Assistance Program (HAP) for military personnel selling their home, the second is the First Time Home Buyer Credit, specifically for those purchasing property.
The Department of Defense’s (DoD) HAP offering is designed to provide financial assistance to its personnel who have to move, and will lose money upon selling. Due to the dramatic decrease in home values in recent years, this program was originally designed to provide financial relief to those required to move due to DoD’s Base Realignment and Closure (BRAC) initiative. It expanded to include those DoD personnel whose reassignment or military move was further than what’s categorized as commuting distance. A brief summary of guidelines and what HAP offers can be found here: http://hap.usace.army.mil/Eligibility.html
The original deadline for eligibility was the end of November, 2009. As you might imagine, eligible members were scrambling to get their applications in, and to get their home on the market. Fortunately, the deadline was extended.
Here’s the official announcement of DoD’s Processing and Extension of the HAP Program. It’s got the details, including an extension through Sep 2012. You’ll find the info here, http://tinyurl.com/y8d99pv
Another piece of good news for those in the home market, was this week’s expansion of the First Time Home Buyer’s Tax Credit.
Not only was the tax credit of up to $8000 for qualified first time home buyers extended, but the expansion also offered an additional credit for repeat home buyers. The beauty of the original credit was their definition of a first time buyer; any prospective purchaser who has not owned a principal residence during the three year period prior to the new purchase.
The additional, or expansion of the program included a $6500 tax credit for move-up or repeat home buyers purchasing a home. There are specific details that you need to examine before you assume you qualify for the program’s benefits.
While we can’t always count on the federal government to assist us, it is refreshing to discover their helping hand in times of need. Amid the existing economic downturn, Uncle Sam not only decided to come to the aid of military home sellers whose home values have decreased, but also to help those in the market to buy a home. Let’s hope the prospective beneficiaries of both these offerings are well aware of what’s available, and are taking advantage of them. Who knows when we’ll see this type of assistance again.
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Cleaning Up the Short Sale
November 5th, 2009 categories: Market Trends, Real Estate News
Have you ever been in an uncomfortable position or arrangement that you couldn’t get yourself out of? If your answer is no, then lucky you. Most of us have run into these predicaments a time or two. So, what’s the solution? What steps can you take to try and improve a difficult situation you might be stuck in. And, no, divorce is NOT an option.
Let’s be honest, the “Short Sale” isn’t going anywhere. I know what you’re thinking, “Of course it isn’t going anywhere(in other words, no action by the lender!)”, but, what I mean to say is, they’ll be here for a while. In other words, we’ll be seeing plenty more of them in the the next few years. As long as the economic downturn is with us, there will be homeowners in states of distress who are unable to pay their mortgages. So, how do we turn this lemon into lemonade? (And, believe it or not, it takes more than a lot of sugar!)
Earlier this week, a few local Brokers and Instructors had the opportunity to sit down with Lem Marshall, the Special Counsel to the Virginia Association of Realtors(VAR), to discuss ways the Realtor community can improve the short sale process. By improve, we mean, enhance the chances of a successful short sale. During his presentation, Lem volunteered some helpful hints at how Realtors can maximize their chances of succeeding in dealing with Short Sales.
He began by reminding us that on average, about one in four short sales transactions, nationwide, are successful. While the real estate community doesn’t control all the variables involved in the process, there are a couple of items we do influence. It is those items or factors, if handled and executed properly, that can sometimes mean the difference between success and failure. While Lem conceded that lenders are the main short sale players doing most of the transaction decision making, Realtor’s decisions and actions, if done incorrectly, doom the transaction.
The starting point for Realtors in any transaction, but especially in Short Sales, is competence, according to Mr. Marshall. Understanding the process involves an appreciation for all the moving parts. To begin with, the agent must know what they are doing, and what they’re dealing with. Agents will consider and interact with four main participants in this transaction; the other agent, the property, the client, and, most importantly, the third party, or lender. Let’s begin by looking at the importance of understanding the first two.
THE OTHER AGENT
Since a short sale is a special type of real estate transaction, understanding what’s required takes more than a license to sell real estate. Being aware of what the agent on the other side (especially the Listing agent) of the transaction knows about short sales is important in considering the likelihood of success. If they know what they’re doing (proper valuation of the property, good communication with the lender’s representatives, etc), then chances for success – all things being equal – are probably fairly decent. If they don’t know what they’re doing and are unfamiliar with what’s required, then watch out! You’ll be doing a lot of hand holding (with the other agent, as well as your client), but may be doomed from the beginning.
It’s unfortunate, but until specialized training in short sale procedures is mandatory for all agents handling these transactions, many agents will be unprepared to properly handle what’s necessary. The Certified Short Sale Professional (CSP) course provides agents a comprehensive examination of the requirements of the entire process, and what is required for success. Other than actually handling a short sale transaction, it’s about as good as it gets in preparing agents for dealing with the short sale of a home.
But, as mentioned earlier, if you’re dealing with an inexperienced agent, and that simply means, in this case, one that is inexperienced with short sales, that’s not been trained, then the chances of success are minimal. Why? Because, it is imperative that the Realtor is aware of the specific ins and outs of this unique process. To begin with, the listing agent must be able to properly price the property to be sold.
PROPERLY PRICING THE PROPERTY
Absent a proper valuation of the short sale property, the lender has little incentive to consider any proximate offers on the property by prospective buyers. Real property is worth what someone is willing to pay, nothing more…or less. Believe it or not, lenders are aware of this.
Determining what price a home should be marketed for, whether a regular home sale, or a short sale, depends upon the use of accurate comparables. In other words, what are like or similar properties in the area selling for? Successful Short Sale Specialists advise that these properties be priced just below ($10,000-$15,000 below) the lower price range of similar homes on the market. Remember, lenders WILL be appraising these homes, or ordering a Broker Price Opinion (BPO), at the least. Lenders aren’t going to give these homes away, they’re trying to limit their losses while getting the property out of inventory. So, accurate pricing by the listing agent is a must. Banks, like any normal home reseller, will be asking for market value, or maybe, a little less. That doesn’t mean 20-50% below market value, despite what you might hear from uninformed experts.
Improving the success rate of short sales involves an understanding of what’s required, and the successful completion of the necessary steps by all the parties involved in the operation. For Realtors, not only must they know what’s needed in order to succeed, but it also helps to know what the other side of the transaction knows, as well. With a good idea of what the other agent and their listing have to offer, agents will be better able to communicate effectively and accurately with their client(s) and the third party that’s involved. Those are just the initial steps on the path towards completion of a winning short sale.
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