Written By: Kristin Duff

If you have recently pondered selling your home, you must know at this point that there have been many foreclosures and short sales in your area. These homes, priced aggressively, have a direct effect on your homes market value. When selling a home, the asking price is based on comparable homes in the area, to include recent short sales and foreclosures. Your house is not necessarily worth more just because you can continue to make your payments. As rediculous as this sounds, it’s a hard, sad truth that needs to be realized. The under cut prices of today’s market make it hard for anyone able to make their mortgage payments to sell their homes due to the deflation of the market. Homeowners with a $300,000 loan on their property are looking at selling for far less than their loan ammounts and are finding themselves upside down in this market. Unfortunatly, these bank owned homes have become a staple in the market and they are very competatively priced.They are your competition and you have to price your house for sale in accordance with the current market value for your community. Pricing is a very important part of trying to sell yuor home and if you do wish to sell in this economy, you will find it difficult to sell your home if the price you are asking is too steep in comparison to the other homes for sale in your community.

Written By: Kristin Duff

We’ve all seen today’s adds about the housing market. As listing agents become more desperate for buyers, they have come up with colorful ways to say “it’s really not as bad as it looks!” but the question on all of our minds begging to be asked is “is it really worth my time and effort?” some listing agents have taken it too far and their creative verbiage, meant to strike curiosity in the viewers, has become an outright lie. There is a difference between a home needing a little TLC and a home needing extensive repairs. Some Realtors have even gone so far as posting old pictures of their listings in which the house was in a better condition. THIS IS A LIE! And it is blatantly unacceptable. Let looks at a particularly popular phrase “A diamond in the rough”. A diamond in the rough folks, is a lump of coal. Phrases which truthfully display a mental picture of a property for the buyer while optimistically trying to display the positive aspect of the property can be a very good opportunity for those who naturally can’t see the potential, but when does pointing out the ups outweigh the need to disclose the downs? The right answer? Never. But the honest answer is that it’s happening everyday to more people than can possibly be ethical. The sad truth is that a lot of potential buyers are looking for a deal and they are finding that some of the neglected, abandoned bank owned properties on the market are way beyond the normal person’s ability to fix. The cost of renovations could very easily exceed the price of the “steal of a deal” home they had hoped to purchase. This is not to say that all agents have been using creative verbiage to sell houses that were beyond the capability of the buyer to fix, or that all bank owned properties aren’t worth the trouble of trying to fix, but the predicament that some of these buyers have been put into still exists. Let’s be honest with our buyers. If a bulldozer would be a mercy killing then saying “needs a little TLC” is an understatement.  Let’s call it for what it is …Land value only.

What is a Certified Distressed Property Expert

Written by Noel Padilla

http://activerain.com/np1000

Before we can define what a Certified Distressed Property Expert is, we need to define what a distressed property is. A property can become distressed for a variety of reasons but the most common is a foreclosure. Any situation that has caused a property owner to have difficulty making mortgage payments or even selling the property is said to be in a distressed state. Basically any property which has foreclosure looming.

Now that we have defined a distressed property, what is a Certified Distressed Property Expert (CDPE)? This is not only a designation earned by a licensed Realtor but it is also an acronym that signals to the public that the person displaying it has gone through extensive training to successfully mitigate a foreclosure. This can be done by negotiating mortgage terms, helping to negotiate a refinance or the most likely-help sell the property.

Sometimes these properties have lost significant value either by physical damage, changes in the zoning, lack of curb appeal or host of other factors one of which occurring today is market conditions. If the value of the property drops below what one could sell the property for then the property is said to be short and any sale would be considered a “Short Sale“, which has become very common lately. Negotiating a short sale is where a CDPE really shines.

These transactions are extensively time consuming and tedious. They require diligent follow-up, tons of paperwork and detailed analysis. Not to mention all the work that goes into drafting market reports and gathering all the information to convince the bank to accept a sales amount that will net them less. Not an easy task. Some of these sales can take anywhere from 3 to 12 months to close, depending on the complexity of the transaction.

All this is done in addition to the normal marketing efforts required to sell the property. You can see why less than 1% of Realtors nationwide have the training and knowledge to successfully negotiate a short sale. I am one of those in the less than 1% that has dedicated my time, effort and finances to educate myself in this sector of the market.

In March of 2008 50% of all homes sold were in some sort of distressed state…….Half! If you have a distressed property you can’t chance your home sale on someone who doesn’t have the tools to get things done. This market is going to be here for sometime. Experts predict 2 to 3 years, I predict closer to 10 years which began in 2006 so we are 2 years in to the 10 year cycle.

Buyers are not immune to the phenomenon. They are getting great deals on these distressed properties but guess what, if they are dealing with someone who doesn’t know the mechanics of a short sale, the deal will fall apart after waiting months. It is equally important to buyers and sellers of distressed property to use a person who can get these transactions to the closing table.

Thank you Noel Padilla for allowing me to post this on my webpage.

In our continuing efforts to keep you up-to-date on the latest developments on the Stimulus Package and how it will affect homeowners, we are now providing you the highlights of the latest guidelines on loan modifications.  There are actually more details than we are providing in this edition of “Success Tips” but these provide the basic components to help determine if a distressed homeowner is eligible.  This is a Governmental trial program and will be reevaluated in 90 days. 

The trial loan modifications consistent with these guidelines may be offered to homeowners as of March 4, 2009 and may be considered for acceptance into the Home Affordable Modification Program with other conditions upon completion of the trial period.  These guidelines, however, do not constitute a contract offer binding on the Department of the Treasury.

PROGRAM ELEMENTS DESCRIBED IN GUIDELINES:

Monthly Payment Reduction Cost Share:  The Treasury will partner with the financial institutions to reduce the homeowners’ monthly mortgage payments.  The lender will have to first reduce payments on mortgages to no greater than a 38%.

Front-End Debt-to-Income (DTI) ratio.  The Treasury will match further reductions in monthly payments dollar-for-dollar with the lender/investor, down to a 31% Front-End DTI ratio for the borrower.

Servicer Incentive and Pay for Success Fees:  Servicers will receive an up-front Servicer Incentive Payment of $1,000 for each eligible modification meeting guidelines established under this initiative. Servicers will also receive Pay for Success Payments for as long as the borrower stays in the program, with further incentives up to $1,000 each year for up to three years.  Similar incentives will be paid for Hope for Homeowner refinances which should motivate lenders who have been reluctant to participate in this program before now.

Borrower Pay-for-Performance Success Payments: Borrowers are eligible to receive a Pay-for-Performance Success Payment that goes straight towards reducing the principal balance on the mortgage loan as long as the borrower is current on his or her monthly payments.  Borrowers can receive up to $1,000 for Pay-for-Performance Success Payments each year for up to five years.

Current Borrower One-Time Bonus Incentive: One-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers will be provided for modifications made while a borrower is still current on mortgage payments.  The servicer will be required to maintain records and documentation evidencing that the Trial Period payment arrangements were agreed to while the borrower was less than 30 days delinquent.  The servicer must comply with any express pooling and servicing contractual restrictions for modifying current loans.

Program Payment Conditions:  No payments under the program to the lender/investor, servicer, or borrower will be made unless and until the servicer has entered into the program agreements with the Treasury’s financial agent.  Servicers must enter into the program agreements with the Treasury’s financial agent no later than December 31, 2009.

ELIGIBILITY REQUIREMENTS:

Pooling and Servicing Agreements: The program guidelines reflect usual and customary industry standards for mortgage loan modifications contained in typical servicing agreements, including pooling and servicing agreements (PSA’s) governing private label securitizations.  Participating servicers are required to consider all eligible loans under the program guidelines unless prohibited by the rules of the applicable PSA and/or other investor servicing agreements.  Particular servicers are required to use reasonable efforts to remove any prohibitions and obtain waivers or approvals from all necessary parties.

Origination Date of Loan Subject to Modification:  The mortgage to be modified must have been originated on or before January 1, 2009.

Program Expiration:  New borrowers will be accepted until December 31, 2012.  Program payments will be made for up to five years after the date of entry into a Home Affordable Modification.  Monitoring will continue through the life of the program.

Qualification Terms:

• The home must be owner-occupied, single family 1-4 unit property including condominium, cooperative and manufactured home affixed to a foundation and treated as real property under state law.
• The home must be a PRIMARY RESIDENCE verified with tax returns, credit reports, and other documentation such as a utility bill.
• The property may NOT be investor-owned.
• The home may not be vacant or condemned.
• Borrowers in bankruptcy are not automatically eliminated from consideration for a modification.
• Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.
• First lien loans must have an unpaid principal balance (prior to capitalization of arrearages) equal to or less than $729,750 for one unit, $934,200 for two units, $1,129,250 for three units and $1,403,400 for four units.

In Foreclosure Process:  Any foreclosure action will be temporarily suspended during the trial period, or while the borrowers are considered for alternative foreclosure prevention options.  In the event that the Home Affordable Modification or alternative foreclosure prevention options fail, the foreclosure may be resumed.

Current Loan-to-Value (LTV) Ratio:  There is no maximum or minimum LTV ratio for eligibility purposes.

Loan Type Exclusions: Loans can only be modified under the Home Affordable Modification program once and only once.

Subordinate Financing: Subordinate liens are not included in the Front-End DTI calculation, but they are included in the back-end DTI Calculation.

Solicitation to Borrowers/Incoming Inquiries: Service Providers should follow any existing express contractual restrictions with respect to solicitation of borrowers for modifications.

UNDERWRITING ANALYSIS:

Front-End DTI Target: Front-End DTI is the ratio of PITIA to Monthly Gross Income.  PITIA is defined as principal, interest, taxes, insurance (including homeowners insurance and flood & hazard insurance) and Homeowner Association Fees.  Any monthly mortgage insurance premiums are excluded from the PITIA calculation.  The Front-End DTI target is 31%.  The Standard Waterfall step that results in a Front-End closest to 31% without going below 31% will satisfy the Front-End DTI target.  There is no restriction on reducing Front-End DTI below 31%, however any portion of the reduction below 31% will not be covered by the Payment Reduction Cost Share.

Property Value: The service provider may use, at its discretion, either one of the government sponsored enterprises (GSE’s) automated valuation model (AVM) provided that the AVM renders a reliable confidence score or a Broker Price Opinion (BPO).  The consensus is that in most cases the servicers will be utilizing BPO’s most often.  With whatever pricing model that the servicer uses in the modification, the valuation may not be more than 60 days old.

Income and Asset Validation:  The borrower’s income will be verified by requiring a signed Form 4506-T (Request for Transcript of Tax Return) and obtaining the most recent tax return on file for each borrower on the note.  For wage earners, the two most recent pay stubs for each wage earner on the note will also be required.  For self-employed borrowers or for non-wage income, the borrower’s income will be verified by obtaining other third-party documents that provide reasonably reliable evidence of income.  Borrowers must also represent and warrant that they do not have sufficient liquid assets to make their monthly mortgage payments.  The Hardship (SAD) letter will be very important here.

Monthly Gross Income:  The borrower’s Monthly Gross Income is the amount before any payroll deductions includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance policies, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income.  Monthly net income can be used for preliminary screening and qualification.  If used, the servicer will need to multiply net income by 1.25 to get an estimate of the Monthly Gross Income.

Back-End DTI:  The Back-End DTI is the ratio of the borrower’s total monthly debt payments (such as Front-End PITIA, any mortgage insurance premiums, payments on all installment debts, monthly payments on subordinate liens on the property, spousal/child-support payments, car lease payments, aggregate negative net rental income from all investment properties owned, and monthly mortgage payments for second homes) to the borrower’s Monthly Gross Income.  The servicer must validate monthly installment, revolving debt and secondary mortgage debt by pulling a credit report for each borrower or a joint report for a married couple.  The servicer must also consider information obtained from the borrower orally or in writing concerning incremental monthly obligations.

Borrowers who otherwise qualify for a modification under this program, but who would have a post-modification Back-End DTI greater than or equal to 55%, will be provided with a letter stating that they are required to work with a HUD-approved counselor and the modification will not take effect until they provide a signed statement indicating that they will obtain counseling.

Reasonably Foreseeable/Imminent Default: Every potentially eligible borrower who calls or writes to their service provider in reference to a modification must be screened for hardship.  This screen must ascertain whether the borrower has had a change in circumstances that causes financial hardship, or is facing a recent or imminent increase in the payment that is likely to create a financial hardship (Payment Shock).  If the borrower reports a material change in circumstances, the sevicer must ask about current income and assets, and current expenses as well as the specific circumstances relating to the claimed financial hardship.  Each of these elements must be verified through documentation.  Again the Hardship (Sad) Letter will be very critical in this process.

If the servicer determines that a non-defaulted borrower facing a financial hardship is in Imminent Default and will be unable to make his or her mortgage payments in the immediate future, the servicer must apply the NPV Test (Net Present Value).

A standard NPV Test will be required on each loan that is in Imminent Default or is at least 60 days delinquent under the MBA (Mortgage Bankers Association) delinquency calculation.  This NPV Test will compare the net present value (NPV) of the cash flows expected from the modification to the net present value of the cash flows expected in the absence of modification.  If the NPV of the modification scenario is greater, the NPV result is deemed positive.  If the NPV Test result is negative and Home Affordable Modification is not pursued, the lender/investor must seek other foreclosure prevention alternatives, including alternative modification programs, deed-in-lieu of sales and short sales programs.

COMMENTS & CONCLUSIONS:

There is much more information available on this program which you can find by going on www.hud.gov.  What you can conclude is that this program has placed a much greater emphasis on such instruments as a Broker Price Opinion and the Hardship (SAD) Letter.  This has also placed a greater emphasis on your role as a Consultant to your client. 

Good Luck & please let us know how we can help you.

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

Real Estate Slideshows from CNBC.com

While your clients may want you to tell them what they want to hear, they are paying you to be the professional and tell them what they need to hear to buy or sell in today’s market.

It’s much easier and doesn’t take a whole lot of skill to go on a listing appointment and simply tell the seller what they want to hear about price, marketing, and what it will take to get their home sold. 

Many agents do this because it’s obviously much easier in many cases.  But, let me ask you, when you go to an attorney for legal advice or to a doctor for medical advice, do you want them to tell you what you want to hear, or what it will take to properly handle your circumstance?  I would venture to say that 99% of you will agree with the latter.

In today’s market, price is one of the biggest factors in whether or not a home will sell, if not THE biggest factor.  Being honest with the seller about true market conditions and property values is critical when on a listing appointment, and when working together from that point forward. 

In my experience of selling an average of 50 to 70 homes a year, even in this market, I am finding that price is something that must be looked at on a consistent basis.  If the house is in good condition, in a good location, and is not selling, price is the issue.  You must have the courage to tell the seller the truth and stand up for the price it will take to actually get the home sold.

It doesn’t matter how much marketing you do or how many open houses you hold, if the price is not right the home will not sell in this market.  Have the courage to tell the sellers this instead of painting the bed of roses that you and your marketing plan can get the home sold.

Be prepared with your market stats ahead of time and take this on the listing appointment with you the first time around.  Going in as prepared as you can the first time around is always best.  Guys, let’s face it we don’t get a second chance to make the first impression, so why not go in fully intending to take the listing and get the contract signed at the price it will take to sell the home the first time around?

Besides why on earth would you want to go back to the house 2 and 3 times when you can simply go in once and take the listing? 

Yes, the market is finally starting to pick up a little in most locations.  However, don’t make your seller feel like we’re suddenly in a seller’s market again, because we aren’t.  In fact, if the truth be known it will probably be well into next year at this time before we’ll see the market really begin to recover.  Have the courage to let your sellers know this.

With buyers, tell them the truth about what to expect when making offers on foreclosures and HUD properties.  It’s a long drawn out process with long response times and extended closing times due to the volume of competition that’s out there and all the red tape that you have to go through. 

Can you get a good deal? Yes, of course you can.  And again, simply have the courage to tell the buyers what to expect up front.   Don’t paint the bed of roses and forget to be honest about what they can expect.  Many of my coaching clients have had deals in the last 6 months become quite sour from the buyer having unrealistic expectations on these so called deals.

Educate your buyers as well up front about the market conditions before you even go out.  Let them know ahead of time and show them market stats to back it up, that while the market is still a buyer’s market, the list to sale price ratio’s in many markets are still fairly decent.  While the media is reporting that you can expect to get steals on property right now, that really isn’t the case in many markets. 

Studies have shown that many sellers just aren’t willing to take the ridiculous low ball offers that buyers want to make right now.  Having the courage to educate your buyers up front on all this will save you time, frustration, energy and make it a much smoother experience for the both of you.

I believe in educating both the buyers and sellers UP FRONT about as much as we can.  I believe it’s best to tell them from the very beginning that you want to make sure they understand all the options, all the steps that will need to take place, what we as the agent will be doing, and what we need them to do, in order to have a successful transaction together. 

Talk about the market, pricing, market trends, the home inspection, the loan application, the closing process, the waiting periods, the things that can possibly come up and go wrong, the moving plans, the contracts and paperwork that they’ll both have to sign.  Tell your sellers up front that no contract is a done deal until they get their check. 

Don’t lead them to believe that just because you got a contract signed that the deal will close.  We all know this is the last thing from the truth.  Again, have the courage to tell the truth in all areas.   Our clients don’t know what they don’t know and our job is to educate them, protect them, and properly represent their best interests.  It commands honesty and integrity.

Instead of being caught off guard when handling objections and questions in this challenging market, be prepared.  Write down the most common objections you are facing right now and come up with some honest, scripted answers.

Ok, so we talk about the differences between pre-foreclosure and foreclosure all the time. Lets clarify the definitions before we go any further.

A pre-foreclosure is when the owner of a property still has time to either catch up on their payments or sell their home before they loose whatever equity they have. Usually, the grace period is around 30-90 days. Some states are longer but that is the average.

A foreclosure is when the bank has given the allotted time and the owner can not come up with the needed money to get caught up on the payments or sell. This is when the bank takes over and the owner is given notice of eviction and must vacate the property if they are currently living there. The bank then tries to sell the property to cover the losses taken by the foreclosure on the original loan.

So how does California work? Lets take a look at the laws here in California. The bank will give you ample notification that your loan will go into the foreclosure process. So you dont have to worry that you will all of a sudden get an eviction notice one day in the mail. Look over your terms of agreement in your loan. The fine print in some lending institutions agreements says that even if you make payments but are consistently late, the bank has the right to give you a notice of default due to late payments. There is really no way around this one as they arent looking for you to get caught up. They just dont want to have to keep getting late payments.

California law says that you have 90 days for the notice of default to take place. In other words, the bank will give you 90 days in the state of California to get your payments caught up or for you to sell the property and settle the entire loan. This will give you ample time to decide the course you want to take and then do what you need to do. As a buyer, this is the period of pre-foreclosure that you would want to take advantage of. It is a win-win situation for both parties.

After 90 days, California says that the bank can then put your home up for sale. This is called a trustee sale and they have 30 days to sell your home. If this happens, you are officially in foreclosure. The notice usually goes on record at the local courthouse. If you look in your local paper, you will see notice of trustee sales periodically. That is how the buyer can find a good deal after the property enters into foreclosure.

So now you know the nuts and bolts of California law and the foreclosure timeline. The best deal for both parties is the pre-foreclosure, obviously. However, banks will usually try to get what they can and hope for fair market value on a foreclosure. But their main goal is to dispense of the property all together. So do your homework and, hopefully, you will come out on the better end of the deal.

The two most common questions that seem to be asked in regards to auctions are

Do I need a realtor to bid on an auction, and

How do I go about auctioning my home?

Let’s deal with the first one. No, you do not need a realtor to bid at an auction. However, it is wise to ask a realtor who specializes in real estate auctions what the best deal is on a particular listing. There is nothing worse than to get carried away in the moment of an auction only to find out that the property is not worth what you have paid for it. Be careful with your bidding. Make sure what you are bidding on is what you want. And remember, an auction is “as is”. So take a good look around.

If you are interested in putting your home up for auction, for whatever reason, feel free to contact me. I would love to show you the advantages of an auction. They are quick and painless. And you don’t have to worry about keeping your house in tip top shape for someone to come see it at any time. The best part is that you can watch people bid on your home. This will allow you to see that the one that gets your home really does love it.

An auction should be fun for you no matter which side of the auctioneer you are sitting. If you are interested in either side, I suggest that you go and watch a couple of auctions, both at an auction house and an onsite auction. This will give you a feel for how things work. Hope you enjoy the experience. Feel free to contact me at (916) 729-1333. I am more than willing to talk to you regarding any questions you have.

Still on the fence about whether you should auction your home or not? Well here are the top 10 reasons why an auction might be the route for you to go with your home.

1. You only have to show your house twice. Think of the time it would save you in cleaning and there will be no unexpected showings.
2. You dont have to worry about going back and forth with the buyer on price. That is what the auctioneer is for.
3. You will have your home sold that day. No more wondering how long it will stay on the market.
4. There will actually be a bidding war. Imagine that in the market of today?
5. The buyer pays all the closing costs. This saves you commissions.
6. A large cash down payment increases your ability to get to closing.
7. There are no contingencies. The house is bought as is.
8. You can set a minimum bid to ensure you get what you want for your investment.
9. You dont have to worry with people coming in and breaking or taking anything as you can pick and choose what is left in the house as opposed to living there and not wanting to put away your favorite decorations.
10. And the best reason to auction your home is knowing that you will be out from under the mortgage sooner than later!

So call me and lets talk about the advantages of auctioning your home and letting the buyer pay for my services. Cant get a better deal than that!

Have you ever been to an auction? If you havent, you are missing out. They are a blast and you can find some really unique pieces. From a buyers prospective, you can get some really good deals if you are lucky and the timing is just right. But from a sellers prospective it can just make life easier. Lets look at an example of a recent situation that could have benefited from an onsite auction format. (more…)