When a owner is in trouble with making payments on a property, he/she may try to sell the property to avoid foreclosure. Typically in these times there is a first loan on the property and a second loan. There also may be unpaid property taxes and penalties on their missed payments. Usually the owner has to submit to the lenders a “Hardship Letter” to the lender(s). Then the lender makes the decision whether to allow the sale. The lender(s) would have asked the owner to hire a Realtor to do a “Brokers Price Opinion” (BPO)and submit it to the lender(s). In current times, the value of the property is often less than the combined loans, back taxes and penalties. The lender(s) would then agree on an offer price that they would accept and the Realtor would begin to market the property. Once an offer was received it would be sent to the lender for final approval.
Recently, maybe because there are so many short sales coming up, or there are owners and Realtors who may be unsure of what the process is, the property is put on the market before doing the previous steps. Offers are received and then they are all sent to the lender hoping one will be approved. This is why you might hear from someone who put an offer on a short sale 4 months ago and they still haven’t heard anything.
These are the things you need to know when thinking about making an offer on a short sale:
1. Ask your Realtor if a hardship letter was presented to the lender(s) prior to the time the property was put on the market
2. Ask your Realtor if a BPO was done and approved
3. Ask your Realtor to find out the amount of the current loans on the property
4. Have offers been received and how long have they been at the lender waiting for approval
I might be going out on a limb here, however, my experience tells me that if the first 2 steps were skipped the process will take longer. The lender(s) will “sit” on the offers until they receive one that more closely covers the current loan amounts. If they have to lose money on penalties, those are just paper loses to them, however they might approve an offer if they still may get the whole principal owed.
For example, there is a property listed for sale at $790k. it’s a s short sale. The two loans on the property are 560k and 140k respec tively. With the back taxes, penalties and the commission for selling the property the purchase price will closely cover most of the debt. Buyers are able to get their offer approved and close escrow. The owner is able to walk away without a foreclosure on his credit report. The Realtor was smart and knew how the process worked to get good results for his seller.
Another case, which is more common, is when the loans, penalties, property taxes all amount to more than the property is valued at. And the owner did not start the process with the lenders. The owner puts the property on the market with a not so informed real estate agent who markets the property below market value. Offers are received and sent to the lenders for approval. The purchase price may cover the lender who is in first position; and then they’re happy. But the lender who is in second position may not get the whole amount due or may end up getting nothing. They are not happy, they hold up the approval of the sale. Both lenders have to agree on releasing the loans in order for the property to be sold. This is why the offers can sit in someone’s “In-box” for months. Eventually, if the owner is lucky and his real estate agent gets smarter, an offer is finally received that is closer to the amount of both loans and the offer gets accepted and closes escrow. The buyer(s) are happy, the owner is happy, he has avoided foreclosure.
Saturday, August 14, 2010
Friday, March 19, 2010
So, you want to live in your house while it's on the market......
If you intend to live in your home while it’s on the market it’s going to take a lot of commitment on your part. Being a Realtor, I will tell you talk to a Realtor, but not any Realtor. Find a Realtor that can give you expert advice about what you need to do to present your property in the best possible light. Find a Realtor who is honest and will not be hesitant to tell you what to do. You will need at the minimum three weeks to get all this done. Moving out, unless you already have someplace to go, and staging is expensive.
With your Realtor, go through your home and let her tell you how and what you need to do. You also might want to go around to Open Houses that are staged to get ideas of how your home should end up looking. You can make it appear staged without actually going through the expense and having to move out while it’s on the market.
First you will have to de-clutter. Prospective buyers have to imagine themselves living there with their stuff, not with your stuff. Hopefully you will be moving soon anyway and if you do all this right you will be. So put all those tchotchkes in a box tape it up and start stacking them in a storage area. This means pictures too. Anything that personalizes the property as yours pack it up! If it’s an item that reminds you of a person, place or thing, pack it up! If you have books on bookshelves take 2/3 of them away. Keep the pretty ones. The rest are too personal. Pack ‘em up! Leave room on the shelves. The less you have laying around the easier it will be to keep it clean and spotless (I will get to that later) Once the clutter is all picked up you are ready for the next step.
Take a good look at your furniture. Is any of it looking shabby? Do you have a futon in that back bedroom that the slipcover is slipping off? Are the cushions on the couch and chairs saggy and worn? Can you have the covers dry cleaned or washed? Will just turning them make it look better? Do this with your Realtor, you need an objective eye when making these assessments. Now, what can you put in storage to make the rooms look more spacious? If you have furniture that is too big for the room it is especially important. If it’s a large sectional, get rid of one of those sections. For instance, in a living room you only need a sofa, a chair, a coffee table, an end table and a lamp and possibly a floor lamp. Buy a few new throw pillows, keep it neutral.
Do the same for the bedrooms. One bedside table with a lamp is enough. One dresser or bureau might be allowable if the room is big enough. Pack the clothes in boxes, label them carefully and add them to your storage area. Nothing should be left on the surfaces. You will need to purchase a new bed set; duvet, pillow shams, a couple of throw pillows. Ask your realtor for advice.
If you have a home office again, de-clutter, only the essentials get to stay. Pack it up label the boxes carefully and put them in your storage area in case you need something from them.
Now the kitchen, this is usually the one a lot of people have the most trouble with. Because home means comfort and comfort is centered on food and the place where it is prepared and eaten. It’s the heart of the home. First of all, the kitchen has to be cleaned. Tooth brushed clean. Walls cleaned, floors are spotless. If you have linoleum on the floor and it’s worn it needs to be replaced. You might have to hire some very obsessive compulsive cleaning person to help. All the fronts of the cabinets have to be spotless and cleaned. If you have cabinets with glass doors take out 2/3 of the stuff. Again, pack and label the boxes put in your storage area in case you need something. Hanging pots need to be put away, it’s too much clutter and again it personalizes the property too much. Prospective buyers have to imagine themselves living there with their stuff, not with your stuff. Counter tops should be bare with the exception of maybe a couple decorative neutral pieces. While you are living there, it will need to be devoid of cooking odors.
Bathrooms have to be spotless. If you have a shower curtain replace it. Buy a new set of towels to put up for Open Houses. If the vanity is old and worn replace it. You don’t have to remodel the bath and you don’t have to spend a lot of money. Just go to Home Depot and buy a new sink or vanity that is more current. If you need a new mirror get that too! This is all easy stuff and fun! A handy man can install them for you or you can do it yourself. It’s not hard.
If you own a single family house rather than a condo you may have to consider having the exterior painted. Again, have your Realtor give you an honest assessment. And don’t go crazy with some color scheme. Realize you are not going to be living there; it won’t be your home anymore. You need to make it neutral so buyers can see themselves owning the property. This sounds like a huge investment, but it has a huge return on your investment.
If you can have all the rooms re-painted then you should definitely do it. The smell of fresh paint has a psychological effect on buyers. Fill all the nail holes where pictures were hanging. If you recently painted, like within the last 2-3 years, you can go around the house with a paint brush and the paint from each room and lightly feather over any spots, dings, gouges and nail holes that you patched. You could hire a handyman to do this. Your Realtor should know someone. On all the baseboards, door and window casings do the same thing with the trim color on any dings or paint chips. If you don’t have the trim color you can take a sample to any paint store and they will match it.
Now for the cleaning. You might want to hire someone to do this but it has to be someone that knows how to clean a property for the market. Windows need to be washed, preferably both inside and out if possible. Windows are very important. They have to be free of any paint on the glass if the room has been painted recently. Floors need to be spotless. If they are carpeted, the carpet needs to be cleaned. If the carpet won’t get clean then you have to replace it. If you have hardwood floors they need to be cleaned and shiny. If they need a coat of urethane to make them that way, then have it done. It’s a small expense with a bigger return on your investment.
Now your house is almost ready! Now you can put a very few accent pieces and hang a couple of pictures on the walls. Don’t go crazy. They still have to be neutral and non-personal. And no more than ONE per wall. If you can live without window coverings take them down, unless they are very neutral and add to the room. You can put 2-3 magazines or coffee table type books on the coffee table. Stack them neatly. Your house should look staged by now.
For every Sunday Open House and all other showings, the house has to be cleaned and spotless. Tell your Realtor to always give you a 24 hour notice for any other showings. It should be devoid of cooking odors, pet smells; dirty laundry in the hamper smells too. Dust and polish the furniture clean off any fingerprints anywhere, Swiffer the floors or vacuum if you have carpet. Put the new bed coverings on the bed. Kitchen cabinets have to be spotless. The stove has to be clean. The refrigerator should not have any fingerprints on the door. And of course you don’t have anything on the front of the refrigerator by now so keeping the front clean will be easy. No kitchen towels hanging around. The counters are clean. The bathroom needs to shine. Put the new towels out. There are a lot of convenience cleaning products that will make this easier on you. While you’re doing this keep telling yourself about all the money that will be in your pocket by not having to move out and stage. When you are done, spray the whole house with a light and almost odorless room deodorizer.
Now go out and enjoy the rest of your day! Your property will sell more quickly.
With your Realtor, go through your home and let her tell you how and what you need to do. You also might want to go around to Open Houses that are staged to get ideas of how your home should end up looking. You can make it appear staged without actually going through the expense and having to move out while it’s on the market.
First you will have to de-clutter. Prospective buyers have to imagine themselves living there with their stuff, not with your stuff. Hopefully you will be moving soon anyway and if you do all this right you will be. So put all those tchotchkes in a box tape it up and start stacking them in a storage area. This means pictures too. Anything that personalizes the property as yours pack it up! If it’s an item that reminds you of a person, place or thing, pack it up! If you have books on bookshelves take 2/3 of them away. Keep the pretty ones. The rest are too personal. Pack ‘em up! Leave room on the shelves. The less you have laying around the easier it will be to keep it clean and spotless (I will get to that later) Once the clutter is all picked up you are ready for the next step.
Take a good look at your furniture. Is any of it looking shabby? Do you have a futon in that back bedroom that the slipcover is slipping off? Are the cushions on the couch and chairs saggy and worn? Can you have the covers dry cleaned or washed? Will just turning them make it look better? Do this with your Realtor, you need an objective eye when making these assessments. Now, what can you put in storage to make the rooms look more spacious? If you have furniture that is too big for the room it is especially important. If it’s a large sectional, get rid of one of those sections. For instance, in a living room you only need a sofa, a chair, a coffee table, an end table and a lamp and possibly a floor lamp. Buy a few new throw pillows, keep it neutral.
Do the same for the bedrooms. One bedside table with a lamp is enough. One dresser or bureau might be allowable if the room is big enough. Pack the clothes in boxes, label them carefully and add them to your storage area. Nothing should be left on the surfaces. You will need to purchase a new bed set; duvet, pillow shams, a couple of throw pillows. Ask your realtor for advice.
If you have a home office again, de-clutter, only the essentials get to stay. Pack it up label the boxes carefully and put them in your storage area in case you need something from them.
Now the kitchen, this is usually the one a lot of people have the most trouble with. Because home means comfort and comfort is centered on food and the place where it is prepared and eaten. It’s the heart of the home. First of all, the kitchen has to be cleaned. Tooth brushed clean. Walls cleaned, floors are spotless. If you have linoleum on the floor and it’s worn it needs to be replaced. You might have to hire some very obsessive compulsive cleaning person to help. All the fronts of the cabinets have to be spotless and cleaned. If you have cabinets with glass doors take out 2/3 of the stuff. Again, pack and label the boxes put in your storage area in case you need something. Hanging pots need to be put away, it’s too much clutter and again it personalizes the property too much. Prospective buyers have to imagine themselves living there with their stuff, not with your stuff. Counter tops should be bare with the exception of maybe a couple decorative neutral pieces. While you are living there, it will need to be devoid of cooking odors.
Bathrooms have to be spotless. If you have a shower curtain replace it. Buy a new set of towels to put up for Open Houses. If the vanity is old and worn replace it. You don’t have to remodel the bath and you don’t have to spend a lot of money. Just go to Home Depot and buy a new sink or vanity that is more current. If you need a new mirror get that too! This is all easy stuff and fun! A handy man can install them for you or you can do it yourself. It’s not hard.
If you own a single family house rather than a condo you may have to consider having the exterior painted. Again, have your Realtor give you an honest assessment. And don’t go crazy with some color scheme. Realize you are not going to be living there; it won’t be your home anymore. You need to make it neutral so buyers can see themselves owning the property. This sounds like a huge investment, but it has a huge return on your investment.
If you can have all the rooms re-painted then you should definitely do it. The smell of fresh paint has a psychological effect on buyers. Fill all the nail holes where pictures were hanging. If you recently painted, like within the last 2-3 years, you can go around the house with a paint brush and the paint from each room and lightly feather over any spots, dings, gouges and nail holes that you patched. You could hire a handyman to do this. Your Realtor should know someone. On all the baseboards, door and window casings do the same thing with the trim color on any dings or paint chips. If you don’t have the trim color you can take a sample to any paint store and they will match it.
Now for the cleaning. You might want to hire someone to do this but it has to be someone that knows how to clean a property for the market. Windows need to be washed, preferably both inside and out if possible. Windows are very important. They have to be free of any paint on the glass if the room has been painted recently. Floors need to be spotless. If they are carpeted, the carpet needs to be cleaned. If the carpet won’t get clean then you have to replace it. If you have hardwood floors they need to be cleaned and shiny. If they need a coat of urethane to make them that way, then have it done. It’s a small expense with a bigger return on your investment.
Now your house is almost ready! Now you can put a very few accent pieces and hang a couple of pictures on the walls. Don’t go crazy. They still have to be neutral and non-personal. And no more than ONE per wall. If you can live without window coverings take them down, unless they are very neutral and add to the room. You can put 2-3 magazines or coffee table type books on the coffee table. Stack them neatly. Your house should look staged by now.
For every Sunday Open House and all other showings, the house has to be cleaned and spotless. Tell your Realtor to always give you a 24 hour notice for any other showings. It should be devoid of cooking odors, pet smells; dirty laundry in the hamper smells too. Dust and polish the furniture clean off any fingerprints anywhere, Swiffer the floors or vacuum if you have carpet. Put the new bed coverings on the bed. Kitchen cabinets have to be spotless. The stove has to be clean. The refrigerator should not have any fingerprints on the door. And of course you don’t have anything on the front of the refrigerator by now so keeping the front clean will be easy. No kitchen towels hanging around. The counters are clean. The bathroom needs to shine. Put the new towels out. There are a lot of convenience cleaning products that will make this easier on you. While you’re doing this keep telling yourself about all the money that will be in your pocket by not having to move out and stage. When you are done, spray the whole house with a light and almost odorless room deodorizer.
Now go out and enjoy the rest of your day! Your property will sell more quickly.
Tuesday, January 26, 2010
Ten Cities To Go From Renting To Buying
Real Estate
Francesca Levy, 01.21.10, 04:50 PM EST
In these metro areas, now is a good time to make the jump to homeownership.
The U.S. government has pushed hard to make homeowners out of one-third of Americans who still rent their homes. It introduced and later extended a tax credit for first-time home buyers, and has kept federal interest rates at their lowest levels since the 1940s.
Market conditions are such that now is a particularly good time for some renters to take the hint.
In Portland, San Francisco, Minneapolis and Washington, D.C., the premium to buy--the spread between what you'd spend on renting and what you'd pay each month for a mortgage--is far narrower now than its 15-year average. And economists predict a significant home-price hike in five years. So upgrading will cost much less than usual, and home buyers are likely to get a good return on their investment.
Note that buying isn't necessarily cheaper than renting in these metro areas. In fact, it often remains a more expensive proposition. But for those determined to own, that investment is a better one now than it normally is.
Take San Francisco. To live here has always required a hefty bump in monthly costs from renting; it's normally an incredible 296% more expensive to buy than lease a home, and the city's residents know this. That's why 42% of them stick to renting. Even though in the third quarter of 2009 the premium was still in the triple digits--233%--it had shrunk by 63 percentage points from the above 15-year average. As with the other cities we've highlighted, you're not getting nearly as good a deal by renting as you might have just a few years ago.
"Rents are falling, but not nearly as rapidly as home prices," says Ron Witten, founder of Dallas-based Witten Advisors, an apartment market consulting firm. "Part of the reason is a shift away from home ownership toward renting," he says, in part because mortgages have become harder for many to obtain.
Behind the Numbers
To find cities where it's a good time to go from renting to buying, we used data from Witten Advisors, which calculated the premium to buy for 42 Metropolitan Statistical Areas across the country using data from the U.S. Census, the National Association of Realtors and a blended average of fixed- and adjustable-rate mortgages from the Federal Housing Finance Agency (which oversees and regulates lenders). We compared the premium in the third quarter of 2009 with the average premium over the last 15 years to find the biggest drops.
We also wanted to pinpoint markets where home buying is a smart investment, so we factored in the five-year forecast in the S&P/Case-Shiller Home Price Index from Moody's ( MCO - news - people )Economy.com. The cities on our list have some of the biggest discounts on the premium to buy coupled with big projected increases in home prices over the next five years.
One major market we didn't look at is New York City, another spot where rents have softened less than home prices. Witten Advisors doesn't track the metro area because accurate historical data on rental costs there is exceedingly difficult to obtain.
Quality of Life, at a Discount
Portland, Ore., makes our list for much the same reason that San Francisco does: It's a picturesque, culture-driven city with good local services and amenities. The city is still not particularly cheap for buyers--but it's cheaper than normal.
A family hoping to put down roots there would normally pay a 62% premium to go from renting to buying. In the third quarter of 2009, however, that premium shrank by 16 percentage points. At the same time, Moody's Economy.com anticipates that home prices will jump 19% over the next five years. That's partly because, like San Francisco, Portland has strict government limitations on building and a coastal location that keep sprawl in check.
"Portland has one of the most controlled environments in the country in terms of development rights," says Stuart Gabriel, director of the Ziman Center for Real Estate at the UCLA Anderson School of Management. "Those supply constraints will push prices up."
Jobs Stability
The presence of jobs--along with strong industries that will keep generating new ones--is a big factor in keeping demand for homes, and therefore home prices, high. The weak national economy has helped reduce the premium to buy for the time being, but where the labor market is relatively healthy, home prices are predicted to shoot up.
In Minneapolis, for example, where large companies including Target ( TGT - news - people ) and General Mills ( GIS - news - people ) have their corporate headquarters (and there's a large university system), home buyers will only pay 14% more than if they were renting (24 percentage points lower than average), and home prices should climb by 15% in five years.
Similarly, in Washington, D.C., government jobs are plentiful, and anticipated to stay that way. The 6.1% unemployment rate here is well below the national average, which is partly why Moody's anticipates a five-year jump in home prices of 15%. And, at the moment, the premium to buy is 20 percentage points lower than its usual 57%.
Of course, whether buying or renting is best is ultimately an individual choice, and one driven by a lot more than map coordinates. When subprime lending was rampant, many without the means to buy were encouraged to do so anyway--and it's no secret how that turned out.
"If there's anything we should have learned from this housing cycle, it's that the decision to buy or rent ought to be a personal lifestyle decision," says Witten. "In part, it's a question about, 'Do I want to be a homeowner' in general, and specifically, 'Do I want to be a homeowner now, with this economic uncertainty?'
Francesca Levy, 01.21.10, 04:50 PM EST
In these metro areas, now is a good time to make the jump to homeownership.
The U.S. government has pushed hard to make homeowners out of one-third of Americans who still rent their homes. It introduced and later extended a tax credit for first-time home buyers, and has kept federal interest rates at their lowest levels since the 1940s.
Market conditions are such that now is a particularly good time for some renters to take the hint.
In Portland, San Francisco, Minneapolis and Washington, D.C., the premium to buy--the spread between what you'd spend on renting and what you'd pay each month for a mortgage--is far narrower now than its 15-year average. And economists predict a significant home-price hike in five years. So upgrading will cost much less than usual, and home buyers are likely to get a good return on their investment.
Note that buying isn't necessarily cheaper than renting in these metro areas. In fact, it often remains a more expensive proposition. But for those determined to own, that investment is a better one now than it normally is.
Take San Francisco. To live here has always required a hefty bump in monthly costs from renting; it's normally an incredible 296% more expensive to buy than lease a home, and the city's residents know this. That's why 42% of them stick to renting. Even though in the third quarter of 2009 the premium was still in the triple digits--233%--it had shrunk by 63 percentage points from the above 15-year average. As with the other cities we've highlighted, you're not getting nearly as good a deal by renting as you might have just a few years ago.
"Rents are falling, but not nearly as rapidly as home prices," says Ron Witten, founder of Dallas-based Witten Advisors, an apartment market consulting firm. "Part of the reason is a shift away from home ownership toward renting," he says, in part because mortgages have become harder for many to obtain.
Behind the Numbers
To find cities where it's a good time to go from renting to buying, we used data from Witten Advisors, which calculated the premium to buy for 42 Metropolitan Statistical Areas across the country using data from the U.S. Census, the National Association of Realtors and a blended average of fixed- and adjustable-rate mortgages from the Federal Housing Finance Agency (which oversees and regulates lenders). We compared the premium in the third quarter of 2009 with the average premium over the last 15 years to find the biggest drops.
We also wanted to pinpoint markets where home buying is a smart investment, so we factored in the five-year forecast in the S&P/Case-Shiller Home Price Index from Moody's ( MCO - news - people )Economy.com. The cities on our list have some of the biggest discounts on the premium to buy coupled with big projected increases in home prices over the next five years.
One major market we didn't look at is New York City, another spot where rents have softened less than home prices. Witten Advisors doesn't track the metro area because accurate historical data on rental costs there is exceedingly difficult to obtain.
Quality of Life, at a Discount
Portland, Ore., makes our list for much the same reason that San Francisco does: It's a picturesque, culture-driven city with good local services and amenities. The city is still not particularly cheap for buyers--but it's cheaper than normal.
A family hoping to put down roots there would normally pay a 62% premium to go from renting to buying. In the third quarter of 2009, however, that premium shrank by 16 percentage points. At the same time, Moody's Economy.com anticipates that home prices will jump 19% over the next five years. That's partly because, like San Francisco, Portland has strict government limitations on building and a coastal location that keep sprawl in check.
"Portland has one of the most controlled environments in the country in terms of development rights," says Stuart Gabriel, director of the Ziman Center for Real Estate at the UCLA Anderson School of Management. "Those supply constraints will push prices up."
Jobs Stability
The presence of jobs--along with strong industries that will keep generating new ones--is a big factor in keeping demand for homes, and therefore home prices, high. The weak national economy has helped reduce the premium to buy for the time being, but where the labor market is relatively healthy, home prices are predicted to shoot up.
In Minneapolis, for example, where large companies including Target ( TGT - news - people ) and General Mills ( GIS - news - people ) have their corporate headquarters (and there's a large university system), home buyers will only pay 14% more than if they were renting (24 percentage points lower than average), and home prices should climb by 15% in five years.
Similarly, in Washington, D.C., government jobs are plentiful, and anticipated to stay that way. The 6.1% unemployment rate here is well below the national average, which is partly why Moody's anticipates a five-year jump in home prices of 15%. And, at the moment, the premium to buy is 20 percentage points lower than its usual 57%.
Of course, whether buying or renting is best is ultimately an individual choice, and one driven by a lot more than map coordinates. When subprime lending was rampant, many without the means to buy were encouraged to do so anyway--and it's no secret how that turned out.
"If there's anything we should have learned from this housing cycle, it's that the decision to buy or rent ought to be a personal lifestyle decision," says Witten. "In part, it's a question about, 'Do I want to be a homeowner' in general, and specifically, 'Do I want to be a homeowner now, with this economic uncertainty?'
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