Short Sales: Patience is a Virtue!

This is what waiting for a short sale looks like; a big void.  So, what does a buyer do?  Short-sales are definitely an attraction:  priced below market, sellers who have already dealt with the loss and are, generally making peace with the situation, many are vacated properties.  But, the waiting!  And, waiting!  And, even more frustrating: the lack of communication!  There is no transparency.  You submit an offer and hope the other agent is doing their job.  When I am the listing agent on a short-sale transaction, I do purposefully try to engage the bank into disseminating knowledge (as they have it….and, remember we are working with a bureaucracy and one that is currently overwhelmed).  As the listing agent, I also share any updates with the cooperating Broker.  This helps mitigate the waiting for the buyers involved.  If you’ve decided that a short-sale will offer an opportunity, I would suggest a boat-load of patience, a reasonable amount of resiliency and an accommodating time-line.  Otherwise, the opportunity becomes a demon! 

PS:  don’t be afraid to let your offer be in “back-up” position on a short-sale, as the attrition rate is notorious (we all have a limit to our patience)!!!

Coupon for Money Off the 2009 Street of Dreams Tour in Portland Oregon

Here is a coupon for $2 of tickets to the Street of Dreams if you would like to visit or share with a friend!

The 2009 NW Natural Street of Dreams “Views of the Pearl” opens August 1 and showcases four of Portland’s premiere condominium home developments, featuring nine incredible penthouses ranging in price from $1 to $2.5 million. With a focus on LEED standard and eco-friendly materials, the dream condos include the latest in home innovations and design, including wrap around balconies and hot tubs with a stunning city view. New to the show is the Pearl Pass, which is not only your ticket to the show, but also a savings card to over 80 Pearl area businesses.  Click on the link below, enter “2off” at check out for $2 savings on your 2009 Pearl Pass.  Enjoy the show.

http://www.streetofdreamspdx.com/info-and-tickets/info-and-tickets.php

First-Time-Buyer ADDITIONAL Tax Credit Available!

EFFECTIVE IMMEDIATELY … First-Time-Buyers who purchase within Portland city limits may be eligible for a tax credit in ADDITION to the federal $8000 credit.

The PDC (Portland Development Commission) is offering a “Mortgage Credit Certificate”, which is a dollar-for-dollar tax CREDIT off the borrowers Federal Income Tax.  The credit amount is 20% of the amount the borrower pays annually in mortgage-interest.  For example, if the interest portion of their payments totals $10k for the year, then they would get a $2000 credit.  The remaining 80% would still be a write-off as normal.

Best part … this is an ANNUAL CREDIT … which means the borrower can potentially saves thousands off their taxes for every year they continue to have the loan and live in the home.  Subject to income limitations, but those are quite generous, and a few other details, which I can explain once you have a client ready to go.

No one is sure how long this program will be available, but the educated guess is through the end of the year, and then it will depend on the PDC board renewing it.  It’s a great deal for a buyer … this will literally put around $10k or more in the buyers’ pockets the first year they buy the home, and a few thousand more each year thereafter.  This can be used with any kind of FHA or Conventional loan.

Income limits: 

1-2 person household  -  $70,000

3+ person household  -  $80,500

Must be within city limits of Portland

Non-homeowner for last three years

Remember the federal “First-Time Buyer” credit is applicable to homes closed by December 1^st, 2009.  Please don’t hesitate to call or write for more information AND please pass the information on to anyone who might be considering purchasing their first home (OR, their first home in 3 years)!!!

Loan Modifications…Be Careful Out There!

As a follow up to my discussion “What If You Owe More on Your Property Than it is Worth in Today’s Market?”, a savvy reader wrote regarding loan modification companies.  She had been offered a “negotiated loan modification” with charges such as $3000 & $4000!!!  Be very careful out there.  A lot of those companies are not legitimate and will take your money with no resolution.  I would be VERY reluctant to pay upfront for such services.  You can call your lender and ask for a “loan modification packet” or go to http://www.makinghomeaffordable.gov to see if you will qualify for a modification.  Distressed homeowners will often find that you garner no attention from the lender for a modification until you are already late on payments and you want to proceed carefully so as to not let the non-payment go on so long and risk foreclosure with no chance of trying to negotiate a short-sale! 

Treasury Secretary, Tim Geithner and HUD Secretary, Shaun Donovan gave us the “Making Home Affordable” program (but, they may have been a bit optimistic).  The government promised to pay lenders $1,000 for each loan modified, but that hardly covers the administrative costs, and seems little incentive to a mortgage holder whose potential for loss is many times that.  And, even if you are not a proponent of handouts or bailouts, the federal, state and local governments will lose much more if millions of homes are allowed to suffer foreclosure!

In the first quarter of 2009, less than 200,000 loans were modified, and to date, less than 300,000 homeowners have even been offered a loan modification.  To really make a difference, the banks must be willing to significantly lower the outstanding loan balance; merely extending the terms on a loan that far exceeds the  value of a home won’t work.

Please don’t hesitate to call or write if you have questions.

What if You Owe More on Your Home than it’s Worth?

Whether you live in Portland Oregon or elsewhere, our present economic situation is presenting more obstacles than only 401Ks or IRAs that’s are not worth what they once might have been!  Homeowners are challenged by the mere fact that they simply owe more on their house than it is currently worth in today’s market.  So, what are the options for that homeowner who must sell due to changes in employment, changes in family dynamics or life situations?  First and foremost, know you are not alone!!  Who saw this coming?  I think during every real estate market frenzy, we know that a correction is imminent.  I’ve seen multiple markets during my 24 years tenure in this Portland real estate market.  The severity of this particular “correction” is what makes it special.  The complexity of economic conditions and contributors to this market environment also make it different!  We can go on and on about exactly what elements of greed deserve the most blame but that won’t help a homeowner presently struggling with the aftermath. 

I’ve had multiple clients attempt loan modifications without any cooperation from their various lenders.  So, where do you go from there?  One possibility is to put the home on the market and attempt to negotiate with the lender or lenders involved to sell short of what is actually owed on the home.  This takes some extra paperwork and extreme patience.  But, this type sale can minimize the damaging impact to your credit and can lessen your financial exposure and liability.  A foreclosure can remain on your credit for up to seven years while a short sale usually gets reported as a “settled debt” and is significantly less damaging.  With a short sale, your FICO score will not be as negatively impacted as it would be with a foreclosure, and you will be able to get into a new home sooner.  As with foreclosure, there are several potential tax and liability considerations when doing a short sale or loan modification, however, they are typically less severe than they would be with a foreclosure.  Seeking qualified advice from your CPA or tax attorney is suggested.

Why would a lender agree to a short sale?  In most distressed mortgage situations, foreclosure is a last resort for all parties involved.  Both the homeowner and the lender usually want to avoid foreclosure at all costs.  That is why lenders have come up with various alternatives to foreclosure.  A short sale gives the lender the ability to cut its losses upfront, thereby avoiding the expense and time of a foreclosure and potentially greater losses.  Lenders want to make loans; they do not want to be in the business of owning and managing real estate.  In may cases, a short sale offers a better return on the lender’s investment than a foreclosure.

As a seller, you must first authorize your Real Estate agent to speak and negotiate on your behalf.  Next, some time should be spent composing a sympathetic “hardship letter” to explain the circumstances that force the sale.  This is your opportunity to appeal to them.  You will possibly be asked to corroborate your hardship with financial statements and other verifications.  Your Realtor should be experienced in the procedures and able to be your guide throughout the process.

Next will be the really hard part; that is divorcing yourself from the transaction and your attachment to the home or the “value” of the home.  This is going to be a sale that “sells short”.  The ultimate price that ”our present real estate market” will accept is not a reflection of the quality of the home or love and attention you once gave your home.  And, it is not a reflection on you, as a person.  You are simply another person who is traversing a new terrain.  One that, very often, was not precipitated by you…rather one that was created by outside circumstances!

Slight Increase in Pending Home Sales Index

The “Pending Home Sales Index”, a forward-looking indicator based on nationswide contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.  To understand how this home sales index is calculated go to: http://www.realtor.org/research/research/phsdata

But, is this an indication of a recovery in the Portland home selling marketplace?  Homes ARE selling if they are priced to suggest a “steal or a deal” because homes that are NOT distressed must compete against homes that ARE distressed properties (meaning that sellers must simply sell for less than is currently owed on the property OR the property is bank-owned and has already been foreclosed).  But, if you subscribe to the theory that all sales are good sales because it continues to lessen the inventory then this is a positive indicator (or, at least, not bad news). 

Here are the 2009 Portland Oregon monthly stats for lockbox activity (monitors the number of home showings by Realtors in the Portland area) showing a definite spike in May and slight decrease in June (schools out and family vacations???)

Monthly Stats for lockbox activity for Oregon