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Open houses can be a wonderful way to find your next house. They can be just as helpful in gathering intelligence about a neighborhood, getting a feel for its housing stock or simply scoping out real-estate agents that you might like to work with.

But what should you ask when you pay a visit? In this month’s Buying Advice, we consulted agents and other real-estate experts for their insights on how to navigate open houses.

We’ll also update you on the latest housing and mortgage stats, and see how most people are feeling about the housing market’s prospects. And real-estate author and blogger Ilyce Glink will answer one reader’s question about whether he can legally have two primary residences.

Open-house questions
If you play your cards right, an open house can tell you a lot more about a property than its floor plan or the condition of its floors. The key is asking the right questions, agents say. (Or if you’re looking with your agent, making sure they do it for you.)

Here are some questions to ask the listing agent and how these questions might help you in your purchase of the home:

Have you had any offers on the property? That lets you know if you have competition for the property, says Kim Drusch, an agent with Century 21 Award in San Diego. You’d also want to know if the sellers had rejected any offers and why, agents say. It could help you better craft an offer that will meet with their approval.

Has this house been in escrow? If it has, and didn’t sell, you’d want to know why. Was it an appraisal issue? Did a home inspection turn up some major damage? If it has been in escrow, ask if any inspections were done on the house. If there were, ask for copies of these reports, so you know what you’re dealing with, and what kind of secondary inspections you might need should you decide to make an offer.

How long has the property been on the market? If it’s getting a little stale, it might be ripe for a lower offer, experts say. Likewise, find out if there’s been a price reduction and when it happened.

Why are the owners selling? The agent showing the house is likely to remain mum on this one. But, then again, she might also let it slip if they are moving soon, are under financial pressure or are building another house and might need more time in the house if she’s a little desperate to move the property. Any information you can glean can help you decide how much to offer, when to close, etc.

Are there any liens on this property? You don’t want any surprises, so make sure there aren’t any construction liens, tax liens or other claims on the property resulting from unpaid debt, such as unpaid homeowners association dues.

Is the home going to meet a lender’s appraisal expectations? Do you have comparable sales in the last 90 days? These days, with prices on the decline, and more and more properties getting taken back by banks, appraisal at the listing price isn’t always a sure thing. Take a look at the recent comps and have your agent check pending sales to make sure you won’t get stuck once you’ve starting spending money on inspections and other aspects of the process.

Are there any other costs of ownership? Here again Drusch says you want to make sure there’s nothing to surprise you after closing.  If it’s in a condominium complex or other planned community, ask about association dues and additional taxes or assessments, especially if it’s a newer community. And if there is a homeowners association, get its phone number and call it to make sure there aren’t any rules that conflict with your lifestyle, pets, etc. You don’t want to find out, after the fact, that your husband can’t park his work truck in the driveway of your new home, Drusch says.

Have your agent follow up with the listing agent via fax or email to get it all on paper.

“Make sure everything is in writing,” Drusch says. And, as always, make sure you have your own home inspection done, even if you have been assured there are no problems with termites, plumbing, etc.

Home-sales update
Existing-home sales dipped 0.8% in April from the previous month and 12.9% from the previous year, when the homebuyer tax credit was in effect, according to data from the National Association of Realtors. The national median home price declined 5% from last April to $163,700.

Lawrence Yun, the NAR’s chief economist, says tight credit and low appraisals are putting the brakes on many home purchases.

“Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 25% to 20% due to the very restrictive loan-underwriting standards,” Yun said.

Moreover, distressed homes, which trade at double-digit discounts to traditional listings,  are still weighing heavily on the market. Distressed homes made up 37% of sales in April, down from 40% in March, but well above the 33% posted at the same time last year.

Investors are the most excited about the still-floundering market. All-cash deals accounted for 31% of transactions in April, down from a record 35% in March.

Mortgage rates drop
The one bright spot for buyers is that mortgage rates continue to drop, increasing affordability. Fixed-rate mortgages declined for the fifth straight week, as of May 19, Freddie Mac said in its Primary Mortgage Market Survey, with a 30-year fixed averaging 4.61% and the 15-year averaging 3.8%.

Economists versus consumers: The outlook
Just don’t look for that investment to appreciate in value immediately. Economists don’t predict a return to home-price gains until early to mid 2012.

Fannie Mae, for one, expects the median home price to decline 6% in the second quarter of this year from the same time in 2010, with those losses slowly tapering off this year, until the market hits bottom in the first quarter of 2012.

Analysts at J.P. Morgan expect an additional 6% decline in prices from where the market stands today.

But perhaps most bearish are consumers themselves.

In a joint housing survey conducted by Trulia and RealtyTrac, released in mid-May, 54% of those polled said they don’t expect the housing market to recover until 2014 or beyond. Twenty-four percent expect a recovery in 2013.

It’s clear, says Fannie’s chief economist Doug Duncan, that despite low prices, low interest rates and improving job numbers, consumer attitudes have yet to rebound in a way that will really push the needle up on home sales.

“In spite of the positives surrounding the housing market, we see that consumers are still hesitant to take on a large financial obligation,” Duncan says.

Still, he says he expects home sales to rise some this year, as the economy gets on surer footing.

And for many, it might begin to make more sense to buy. According to Trulia’s most recent data, it is now more affordable to buy a home than rent a similar home in 78% of major U.S. cities.

You can read actual question from other readers at:  http://realestate.msn.com/june-buying-advice-what-questions-should-you-ask-at-the-open-house?page=2

Some homeowners who are “underwater,” or owe more on their mortgage than the home’s current value, are turning to “strategic defaults” in which they simply walk away from mortgage debt. But financial experts warn the cost of skipping out on mortgage debt can be high. The American Bankers Association recently informed homeowners about the consequences of strategic default, including the possibility of the bank obtaining a judgment to pursue the homeowner’s assets, such as bank accounts, cars and investments.  Here are four dangers of which homeowners should be aware and more information on the strategic-default environment.

1. Wrecked credit

Regardless of whether a foreclosure is because of a strategic default or other circumstances, it damages a consumer’s credit score. “A foreclosure is one of the stronger predictors of future credit risk,” says Craig Watts, public-affairs director of FICO, a credit-rating company. Foreclosures remain on a credit report for as long as seven years, with the impact gradually lessening over time. Watts says FICO scores “generally begin to recover after a couple of years,” assuming the consumer stays current on all payments and other credit accounts. He says the impact of a foreclosure on a credit score depends on other factors in the borrower’s credit history. The ABA says a foreclosure drops a FICO score by 100 to 400 points.

2. Difficulty getting new mortgage

A voluntary foreclosure also can affect a homeowner’s ability to qualify for a new mortgage for years to come. Peter Fredman, a Berkeley, Calif., consumer attorney, says Fannie Mae and Freddie Mac will not approve a mortgage for four years after foreclosure, while the ABA says it can take three to seven years to qualify for a new mortgage. In addition, Fannie Mae this past summer announced a tough new sanction on people who deliberately default on their mortgages. These borrowers will be ineligible for a new Fannie-backed mortgage for seven years after the foreclosure date.

3. Taxes still due

Tax liability is another potential danger of defaulting. Although the Mortgage Forgiveness Debt Relief Act of 2007 offers protection from federal taxes after a foreclosure through 2012, state taxes still may be due on unpaid debt.

4. Deficiency judgment

A lender can also pursue the remaining debt from an unpaid loan by obtaining a deficiency judgment against the delinquent borrower, or it may work with a collection agency to recoup losses. Ethical questions also surround strategic defaults. A survey by Trulia.com and RealtyTrac found that 59% of homeowners would not consider defaulting, no matter how much their mortgage was underwater, although the other 41% of homeowners said they would consider a default.

Less risky in some states

Despite the potential negative consequences of a strategic default, the move is less risky in some states than in others. “The first question for anyone considering a strategic default is whether the homeowners will be liable for the debt anyway,” Fredman says. “Each state has different rules.” Nonrecourse laws protect homeowners in some states. According to research from the Federal Reserve Bank of Atlanta, the 11 nonrecourse states are Alaska, Arizona, California, Iowa, Minnesota, Montana, North Carolina, North Dakota, Oregon, Washington and Wisconsin. When a borrower defaults in one of these states, the lender can take the home through a foreclosure but has no right to any other borrower assets. Home-equity loans are ineligible for this protection unless they were used as part of the home purchase. In some areas, lenders are so overwhelmed with defaulting customers that homeowners can live in their homes for free for a year or longer before the foreclosure is complete. The average length of time from default to eviction is 400 days in California, Fredman says.

Price of freedom

The potential consequences of strategic default cannot deter some homeowners from taking the plunge, says Frank Pallotta, executive vice president and managing director of the Loan Value Group in Rumson, N.J. “While everyone understands the credit-score impact of a strategic default, most borrowers don’t seem to care,” Pallotta says. “They think a 200-point hit on their credit score cannot offset the benefit of living for as long as 18 months rent- and mortgage-free. They see strategic default as a form of financial freedom, especially if they live in a nonrecourse state and know someone who has done this.” Fredman, who developed the Should I Pay or Should I Go online calculator to help consumers evaluate a strategic default, says homeowners considering a strategic default should research tax laws and state regulations about loan defaults. Even nonrecourse states’ laws can affect defaulting borrowers, he says. “I also think everyone should consult an attorney and probably an accountant, too, because the relative cost of these professionals is not nearly as high as the potential cost of making a mistake,” he says.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=25923795

Americans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

Rising foreclosures

The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers. While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Freddie Mac

The Federal Home Loan Corp., or Freddie Mac, owned approximately 45,000 multifamily and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties were used as collateral for loans owned by the company, or when owners just transferred the property to Freddie Mac without going through foreclosure. Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful; the company’s average holding period for real estate is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single-family homes at the end of 2009, with a value of $8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% of its inventory in California, Nevada, Arizona and Florida. Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company’s official website to sell homes is called HomePath, where buyers can look up inventory near their location.

Other agencies

Another source of homes owned by the government is the Department of Housing and Urban Development. HUD obtains its properties through foreclosure auctions on Federal Housing Administration-insured loans. HUD has a website at hud.gov/homes. Next up is the Federal Deposit Insurance Corp., which owns its inventory through its role in seizing failed banks. The FDIC owns single-family homes but also has a large number of other properties, including industrial and commercial properties and raw land. The Veterans Affairs Department and the Agriculture Department also play roles in financing and guaranteeing home loans, so both own single-family home and other properties. Buyers can look for their dream home through these agencies as well.

Buyer beware

Buyers shopping for homes from the government should be aware of the disadvantages of the process.  Many agencies offer properties “as is,” with no warranties on their condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24796144

A new federal program, Home Affordable Foreclosure Alternatives, encourages banks to accept short sales by offering them financial incentives to do so. It offers sellers incentives, too.

Homeowners win because:

• They won’t get stuck with a deficiency judgment. Under the program, homeowners are released from all obligations.

• They can receive $3,000 in relocation expenses.

• They can’t be charged any fees to participate.

Creditors win, too, because they don’t inherit a vacant home to maintain. As big as the losses in short sales can be, the losses from foreclosure can be even bigger — by some estimates, as much as 60% of what’s owed on the mortgage.

Secondary lenders, who often stand to get nothing in foreclosures, can receive up to $6,000.

You may qualify for the foreclosure-alternatives program if:

• You have tried unsuccessfully to get a mortgage modification through the Home Affordable Modification Program.

• The property is your principal residence.

• You got your first mortgage loan before Jan.1, 2009.

• You are behind on your mortgage or will be in the foreseeable future.

• You owe no more than $729,750.

• Your total monthly mortgage payment is more than 31% of your income before taxes.

The foreclosure-alternatives program is set to expire Dec. 31, 2012. Some critics predict that it will be as disappointing as the loan-modification program, which was launched in March 2009. Out of millions of distressed homeowners, just 170,000 had received permanent modifications as of the end of February, according to the Department of the Treasury and HUD. (Many more modifications are being offered or are in the trial phases.) The median decline in monthly mortgage payment was about $500.

Will the new program be any better?

“It’s half right,” says Mary Tootikian, the author of “Stunned in America: Sub-Crime Mortgage Crisis.” “The intent of it is good.”

She worries, however, that the new program’s application process will allow lenders to find out borrowers’ incomes and assets. “After they go through this fact-finding mission and they find out you have assets to go after, they don’t have to let you do a short sale,” she says.

Arian-Pace, the Florida attorney, is more optimistic. “The frustration of short sales is the timing of it all, getting banks to approve it,” she says. “You often lose the buyer in the process. I’m hoping it’s a step in the right direction. Really, it’s going to come down to how the banks implement it.”

Read entire article at: http://articles.moneycentral.msn.com/Banking/HomeFinancing/short-sales-are-the-new-foreclosure.aspx?page=2