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Buyer traffic is definitely up in the last 90 days. Whether the market has bottomed out is anybody guess. The old adage is: the only way we will know we are at the bottom is when it is passed us. Many buyers are seeing the advantages of first time buyer tax credits, mortgage rates of under 5%, an abundance of home inventory, and prices down 20 to 25% below 2006 level as a sign it is a great time to buy.
Here is a link to Current Real Estate Market Trends in Fernandina Beach
http://www.trulia.com/real_estate/Fernandina_Beach-Florida/
Sunday, May 17, 2009
Wednesday, February 4, 2009
Explaining short sales
What is a short sale?
When the sellers owe more on their mortgage(s) than the value of their home, the sellers are in a shortage situation if they decide to sell. There will not be enough money to pay off the loan(s). The seller would need to come to the table with proceeds to satisfy the lien(s). That is not the same as being able to justify a short sale where the bank determines that the seller is worthy to be allowed to sell the home at less than the outstanding lien(s), and the bank will accept as their loss the shortage. In order to be considered for short-sale eligibility one would have to have a hardship such as divorce, medical expenses, job loss, death of family member or some similar life catastrophic situation. In addition, the sellers’ expenses must exceed his/her/their assets/income, they are behind on their payments and have no way to repay the bank. Simply owing more than the home is worth yet wanting to sell regardless of a lack of hardship is not a reason to apply for a short sale.
Let’s assume there is a hardship as stated above. What is the process for the agent/seller to follow?
“List the property at a price based on a detailed market analysis. The agent needs to be sure that they make other agents in the MLS aware that it is a possible short sale and that ‘all transactions including the amount of compensation, are subject to bank’s approval.’ The fact is that even if a home is listed at market value and a buyer comes along and makes an offer commensurate with that value, the bank may not accept the sale. There are cases where the bank’s price opinion may be higher than the offer on the table, and the bank may counter or refuse the offer if it does not conform to what they believe is accurate. I often suggest that the agent take a video of the home to truly document condition as some appraisals are done without a full walk through. Without documentation it may be difficult to make the case to the bank about why the home is not worth what the bank’s appraiser determined. Agents should always meet the bank’s appraiser at the property and provide them with comps. They may not use the agent’s comps, but the documentation could come in very handy if a conflict ensues. This is not to be taken as gospel that any bank will debate with either an agent or an attorney. Some will, others will not.
What are the banks looking for relative to a buyer’s qualifications?
In the vast majority of the time, the bank does not want to negotiate contingencies. Buyers who have another sale pending and need the proceeds from that sale in order to close on the next purchase are not likely to be considered. Banks take a dim view of buyers requesting concessions. Sales are always as is with no repair credits, except under very, very rare instances. While buyers can have inspections done, it is for their consideration only and not for negotiating any issues that may surface. I had an incidence where during the processing of the short sale, the house suffered a freeze-up. I went back to the bank and renegotiated for the purchasers. We had to document the problems and estimate the cost of repair. That is the kind of rare occurrence I would consider presenting to the bank.
When the sellers owe more on their mortgage(s) than the value of their home, the sellers are in a shortage situation if they decide to sell. There will not be enough money to pay off the loan(s). The seller would need to come to the table with proceeds to satisfy the lien(s). That is not the same as being able to justify a short sale where the bank determines that the seller is worthy to be allowed to sell the home at less than the outstanding lien(s), and the bank will accept as their loss the shortage. In order to be considered for short-sale eligibility one would have to have a hardship such as divorce, medical expenses, job loss, death of family member or some similar life catastrophic situation. In addition, the sellers’ expenses must exceed his/her/their assets/income, they are behind on their payments and have no way to repay the bank. Simply owing more than the home is worth yet wanting to sell regardless of a lack of hardship is not a reason to apply for a short sale.
Let’s assume there is a hardship as stated above. What is the process for the agent/seller to follow?
“List the property at a price based on a detailed market analysis. The agent needs to be sure that they make other agents in the MLS aware that it is a possible short sale and that ‘all transactions including the amount of compensation, are subject to bank’s approval.’ The fact is that even if a home is listed at market value and a buyer comes along and makes an offer commensurate with that value, the bank may not accept the sale. There are cases where the bank’s price opinion may be higher than the offer on the table, and the bank may counter or refuse the offer if it does not conform to what they believe is accurate. I often suggest that the agent take a video of the home to truly document condition as some appraisals are done without a full walk through. Without documentation it may be difficult to make the case to the bank about why the home is not worth what the bank’s appraiser determined. Agents should always meet the bank’s appraiser at the property and provide them with comps. They may not use the agent’s comps, but the documentation could come in very handy if a conflict ensues. This is not to be taken as gospel that any bank will debate with either an agent or an attorney. Some will, others will not.
What are the banks looking for relative to a buyer’s qualifications?
In the vast majority of the time, the bank does not want to negotiate contingencies. Buyers who have another sale pending and need the proceeds from that sale in order to close on the next purchase are not likely to be considered. Banks take a dim view of buyers requesting concessions. Sales are always as is with no repair credits, except under very, very rare instances. While buyers can have inspections done, it is for their consideration only and not for negotiating any issues that may surface. I had an incidence where during the processing of the short sale, the house suffered a freeze-up. I went back to the bank and renegotiated for the purchasers. We had to document the problems and estimate the cost of repair. That is the kind of rare occurrence I would consider presenting to the bank.
Friday, January 23, 2009
Should you sell first or buy first opinions
In a buyers market like we have now, people who are looking to sell their current home and purchase another have a tough choice to make. Should they sell their current home, or purchase their next home first? There is no one-size-fits-all answer, but here are a couple of scenarios to consider:
A. Sell Home 1, Then Buy Home 2:
In this market, you have a lot of control over the purchase of your home. If you sell Home 1 you will know exactly what you have to work with financially as you approach the purchase of Home 2. You will also get a better price on both homes. That is because you will not be under any pressure to sell Home 1, therefore you will not be tempted to jump at a low offer. You will get a better price on Home 2 because you will be working with a definite timetable, and will not need to make your offer contingent on the sale of your home. A seller who has to deal with a sale-of-home contingency will, almost by definition, expect more money for the sale of their home. Sellers look for two things when they are selling their home: top dollar and security in the sale. Which would you rather give them?
B. Buy Home 2, Then Sell Home 1:
This option is often the most comfortable one for people who want to move up. There is something that is difficult about selling the home you live in when you don't know where you are going to go. Finding your new home first gives you the motivation to sell your current home. The whole process falls together better in your mind when you go out and purchase a home first. The risk of this option is that you will lose out on Home 2 because you are not able to sell Home 1. This is a significant risk in a market where there is a 7-month supply of homes on the market. Also, as I noted above, you will have to give the seller more money if you use a sale-of-home contingency, and you will feel significant pressure to sell Home 1 as quickly as possible, putting you in a position to take less money for it. This pressure will come from the knowledge that you could lose Home 2 at any time because of the "kick out" clause in the contingency. This allows the seller to kick you out of the sale if a non-contingent offer comes along and you are not able to remove the contingency because your Home 1 has not yet sold. This possibility is heavy on people's mind after they spend significant time, money, and mental energy to work out the purchase of Home 2 (ie. negotiations, home inspection, and planning for the future in Home 2).
C. Buying Home 1 First Without a Sale-of-Home Contingency:
This is only an option for people who can afford to carry mortgages on both homes. For a seller to accept a contract under these circumstances, they will require proof that you are able to carry both mortgages. In a sellers market, a move-up buyer could prove their ability to do this--sometimes only with a high-interest loan they could qualify for, but would not actually want to take. This strategy worked for people in a sellers market because they would turn around and sell Home 1 the following weekend, then be able to qualify for a more favorable loan on Home 2. The worst case scenario of not selling Home 1 was extremely unlikely. In the current buyer's market, someone using this strategy is very likely to end up with an unfavorable loan or at best paying two mortgages for a while. Of course, those who have the financial means to carry two loans, and to qualify for two loans that are of a reasonable interest rate may choose to buy first and hold onto both home as long as they need to. Another option is to get a bridge loan to hold both houses until you can sell House 1. If finances are tight for you this will put a lot of stress on you, and may put you in a desperate position when you are negotiating with a person wanting to buy your home. For most people, I recommend getting Home 1 sold before you put a contract on Home 2. You should go out and see what is available for you to purchase before you put your home on the market. This will give you an idea of the types of homes available to you. It will also give you the motivation you need to get your current home sold.
Thanks to Jeff Royce, Realtor in Fairfax, Va for this blog.
Blog Reference: http://www.ourfairfax.com/2009/01/22/whenmoving-up-should-you-sell-first-or-buy-first
A. Sell Home 1, Then Buy Home 2:
In this market, you have a lot of control over the purchase of your home. If you sell Home 1 you will know exactly what you have to work with financially as you approach the purchase of Home 2. You will also get a better price on both homes. That is because you will not be under any pressure to sell Home 1, therefore you will not be tempted to jump at a low offer. You will get a better price on Home 2 because you will be working with a definite timetable, and will not need to make your offer contingent on the sale of your home. A seller who has to deal with a sale-of-home contingency will, almost by definition, expect more money for the sale of their home. Sellers look for two things when they are selling their home: top dollar and security in the sale. Which would you rather give them?
B. Buy Home 2, Then Sell Home 1:
This option is often the most comfortable one for people who want to move up. There is something that is difficult about selling the home you live in when you don't know where you are going to go. Finding your new home first gives you the motivation to sell your current home. The whole process falls together better in your mind when you go out and purchase a home first. The risk of this option is that you will lose out on Home 2 because you are not able to sell Home 1. This is a significant risk in a market where there is a 7-month supply of homes on the market. Also, as I noted above, you will have to give the seller more money if you use a sale-of-home contingency, and you will feel significant pressure to sell Home 1 as quickly as possible, putting you in a position to take less money for it. This pressure will come from the knowledge that you could lose Home 2 at any time because of the "kick out" clause in the contingency. This allows the seller to kick you out of the sale if a non-contingent offer comes along and you are not able to remove the contingency because your Home 1 has not yet sold. This possibility is heavy on people's mind after they spend significant time, money, and mental energy to work out the purchase of Home 2 (ie. negotiations, home inspection, and planning for the future in Home 2).
C. Buying Home 1 First Without a Sale-of-Home Contingency:
This is only an option for people who can afford to carry mortgages on both homes. For a seller to accept a contract under these circumstances, they will require proof that you are able to carry both mortgages. In a sellers market, a move-up buyer could prove their ability to do this--sometimes only with a high-interest loan they could qualify for, but would not actually want to take. This strategy worked for people in a sellers market because they would turn around and sell Home 1 the following weekend, then be able to qualify for a more favorable loan on Home 2. The worst case scenario of not selling Home 1 was extremely unlikely. In the current buyer's market, someone using this strategy is very likely to end up with an unfavorable loan or at best paying two mortgages for a while. Of course, those who have the financial means to carry two loans, and to qualify for two loans that are of a reasonable interest rate may choose to buy first and hold onto both home as long as they need to. Another option is to get a bridge loan to hold both houses until you can sell House 1. If finances are tight for you this will put a lot of stress on you, and may put you in a desperate position when you are negotiating with a person wanting to buy your home. For most people, I recommend getting Home 1 sold before you put a contract on Home 2. You should go out and see what is available for you to purchase before you put your home on the market. This will give you an idea of the types of homes available to you. It will also give you the motivation you need to get your current home sold.
Thanks to Jeff Royce, Realtor in Fairfax, Va for this blog.
Blog Reference: http://www.ourfairfax.com/2009/01/22/whenmoving-up-should-you-sell-first-or-buy-first
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